Remillard Brick Co. v. Remillard-Dandini Co.
| Decision Date | 26 February 1952 |
| Docket Number | REMILLARD-DANDINI |
| Citation | 241 P.2d 66,109 Cal.App.2d 405 |
| Court | California Court of Appeals Court of Appeals |
| Parties | REMILLARD BRICK CO. v.CO. et al. Civ. 14814. |
Johnson, Harmon & Henderson, San Francisco, for plaintiff-appellant.
Leo R. Friedman, San Francisco, for defendants-appellant.
These appeals present another round in the legal battles between the members of the Dandini family, their successors in interest, and the corporations they control or have controlled. Two of these controversies have already been before this court. Remillard Brick Co. v. Dandini, 98 Cal.App.2d 617, 220 P.2d 927; Dandini v. Dandini, 82 Cal.App.2d 263, 186 P.2d 41. According to the briefs and pleadings, other actions are pending in the trial court or are on appeal.
The present controversy involves four corporations and several members of their boards of directors. The corporations are:
1. Remillard Brick Company, the plaintiff, which is wholly owned by Lillian Dandini.
2. Remillard-Dandini Company, one of the defendants, on whose behalf this action was brought. This company has 403 shares of stock, 150 shares of which are owned by the Remillard Brick Company, and 253 shares owned by the Sesennas (successors to A. O. Dandini, divorced husband of Lillian Dandini) and which were controlled by defendants Stanley and Sturgis, who at all times here involved had the Sesennas' proxy to vote the stock and a contract to buy it. The directors of the Remillard-Dandini Company at all times here involved were defendants Gatzert, Stanley and Sturgis, and Lillian Dandini and her lawyer Johnson.
3. San Jose Brick & Tile, Ltd., is the other defendant on whose behalf this action was brought. All of the stock of this company is owned by Remillard-Dandini Company. Its board of directors consists of Gatzert, Stanley, Sturgis, Den-Dulk, a law partner of Sturgis, and Davis, an employee of Remillard-Dandini Company. The San Jose Brick and Remillard Dandini compaines are engaged in the manufacture of bricks. Their legal positions are substantially similar, and they will be referred to hereafter as the manufacturing companies.
4. Remillard-Dandini Sales Corporation, and defendant, was organized and is wholly owned, controlled and operated by Stanley and Sturgis.
Stanley was president and general manager of both manufacturing companies, full-time positions, for which he received $400 per month from each for his services. Sturgis was secretary and secretary-treasurer of the two companies, part-time jobs, for which he received $125 a month from each company.
Thus, Remillard Brick Company, the plaintiff, is wholly owned by Lillian Dandini, is a minority stockholder in one of the manufacturing companies, which, in turn, owns all of the stock in the other manufacturing company. Gatzert, Stanley and Sturgis are majority directors of the manufacturing companies, and Stanley and Sturgis wholly own the sales corporation.
This action was brought by Remillard Brick Company to recover, on behalf of the two manufacturing companies, profits made by the sales corporation and Stanley and Sturgis, from the sale of bricks manufactured by the two manufacturing companies. The first amended complaint states three causes of action:
(1) To have certain contracts entered into in 1948 between the sales corporation and the two manufacturing companies declared void, and to recover on behalf of the manufacturing companies all profits made by the sales company from these contracts. By stipulation at the trial the allegations of the complaint on this issue were made applicable to similar contracts entered into in 1949, after the original complaint was filed;
(2) Pursuant to sections 810 and 811 of the Corporations Code to oust Stanley, Sturgis and Gatzert, as directors of the two manufacturing companies, and
(3) To recover for Remillard-Dandini Company from Stanley and Sturgis and Gatzert certain fees paid to Sturgis by that company for services which it is claimed were not for the benefit of Remillard-Dandini Company, but were paid for personal services rendered for A. O. Dandini, former director and president of that company.
The facts as found in the record and set forth in the findings are as follows: The Remillard-Dandini Company was incorporated in 1935 and from that year until 1939 made profits that averaged about $2,500 per year. In 1939 this corporation acquired the other manufacturing company, San Jose Brick. From 1939 until 1946, and particularly after 1941, the profits of both companies increased, and in 1946-7 the two companies showed a net profit, before taxes, of over $45,000.
During these years neither of the manufacturing companies expended very much for capital improvements. From 1935 to 1948, Remillard-Dandini spent but $54,000 for these purposes ($18,000 of which was for a truck in 1936), while from 1939 to 1948, San Jose Brick expended but $21,000 for these purposes. The result was that the equipment in both manufacturing companies was, in 1948, antiquated, and of such a nature that neither company could operate in the winter months. A good deal of this run-down condition of the two manufacturing companies was undoubtedly due to the mismanagement and misappropriations of over $50,000 by A. O. Dandini, former husband of Lillian Dandini. (For this background see Remillard Brick Company v. Dandini, 98 Cal.App.2d 617.) A. O. Dandini transferred his controlling interest in Remillard-Dandini Company to the Sesennas. For this background see Dandini v. Dandini, 82 Cal.App.2d 263, 186 P.2d 41.
Stanley and Sturgis first tried to buy out the minority interest of Lillian Dandini. When she refused to sell, they stated that she would have to fight, and that they would run the company as they saw fit. Accordingly, in 1948, while acting as directors and officers of the two manufacturing companies, Stanley and Sturgis conceived the idea of separating the sales functions of the two companies from their manufacturing functions, by having the two manufacturing companies, by contract, transfer their sales functions to the sales corporation, wholly owned by them. On January 29, 1948, at a directors' meeting, Stanley and Sturgis proposed that they, as officers of the two manufacturing companies, be authorized by the respective boards to enter into contracts on behalf of the two manufacturing companies with the sales corporation to the end that the sales corporation would handle, exclusively, the promotion and sales of all products manufactured by the manufacturing companies. This resolution was formally adopted by the vote of Stanley, Sturgis and Gatzert. The minority directors, Lillian Dandini and attorney Johnson, voted 'no.' In February of 1948, Stanley and Sturgis, acting as officers of the manufacturing companies, caused certain contracts to be entered into between the manufacturing companies and the sales corporation. They acted also on behalf of the sales corporation. These contracts were one-year contracts. In 1949, a similar resolution was passed over the opposition of Lillian Dandini and Johnson, and in February, 1949, similar contracts were entered into for another one-year period. Both the 1948 and 1949 contracts were negotiated by Stanley and Sturgis while acting as officers for all of the contracting corporations. On February 10, 1948, the Sesennas, the record owners of 253 shares of stock in the Remillard-Dandini Company, filed a written consent to the 1948 contracts. A similar consent was filed in January, 1949, to the 1949 contracts. However, prior to the execution of the 1948 contracts, the Sesennas had given the sales corporation their proxy to vote their stock in the Remillard-Dandini Company. Also prior to the execution of the 1948 contracts, Stanley and Sturgis had entered into a contract to purchase the Sesenna stock. This contract to purchase included a provision that Stanley and Sturgis assumed the responsibility for any litigation involving the Remillard-Dandini Company. Thus, prior to the 1948 contracts, for all practical purposes, Stanley and Sturgis had complete control of the two manufacturing companies.
It should be here mentioned that, although the plaintiff alleged the existence of the proxy and the contract to purchase in its complaint, defendants Stanley and Sturgis, in their verified answer, denied the existence of the proxy and contract to purchase the stock. Sturgis denied the existence of the proxy and contract to purchase in his pre-trial deposition. Stanley, at the trial, at first denied the existence of the proxy and contract to purchase, but finally divulged their existence only after the trial judge had practically threatened him with contempt.
The contracts between the manufacturing companies and the sales corporation transferred to the latter full control over the sales of all products, including promotion of sales, manufactured by the manufacturing companies. The sales corporation agreed to sell all products manufactured by the two manufacturing companies 'that it is able to market and sell.' The sales corporation agreed to purchase all products manufactured by the manufacturing companies on such conditions and prices as sales corporation should judge to be fair and reasonable. A reasonable and fair price was defined as a price that would yield the manufacturing companies a gross profit, before taxes, of not less than $2.50 per thousand bricks manufactured and sold by the sales corporation. The contract was made irrevocable, except by consent of all parties, for one year. While the word 'guaranteed' is used in the contract in reference to payments to be made to the manufacturing companies, it is quite apparent from the entire agreement that the sales corporation was under no obligation to pay for bricks that it did not sell. The sales corporation at no time handled any...
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