Remillard Brick Co. v. Dandini

• Decision Date: 26 July 1950
• Citation: 220 P.2d 927,98 Cal.App.2d 617
• Court: California Court of Appeals Court of Appeals
• Parties: REMILLARD DRICK CO. v. DANDINI et al. Civ. 14281.

Page 927

220 P.2d 927

98 Cal.App.2d 617

REMILLARD DRICK CO. v. DANDINI et al.

Civ. 14281.

District Court of Appeal, First District, Division 1, California.

July 26, 1950.

Rehearing Denied Aug. 25, 1950.

Hearing Denied Sept. 21, 1950.

Johnson, Harmon, Stirrat & Henderson, San Francisco, for appellant.

Leo R. Friedman, San Francisco, for respondents.

Eugene K. Sturgis, Oakland, for respondent Remillard-Dandini Co.

SCHOTTKY, Justice pro tem.

This is an appeal from an order of the superior court denying the motion of plaintiff and appellant to set aside a satisfaction of judgment. The judgment was entered on October 14, 1943, an amendment thereto was entered on November 2, 1943, and the satisfaction of judgment was filed on February 3, 1948, pursuant to a resolution of the board of directors authorizing its entry. The action in which the judgment had been entered was a derivative suit filed by plaintiff Remillard Brick Company, a stockholder in the Remillard-Dandini Company, and the judgment was given in favor of the Remillard-Dandini Company against its president and manager, A. O. Dandini.

Appellant has also filed under Rule 23(b) an application for leave to produce additional evidence before this court, which application was argued concurrently with the hearing on the merits and ordered submitted at the same time. We have considered said application and have concluded that the instant case is not one in which such an application should be granted, and that said application for leave to produce additional testimony is therefore denied.

The motion to set aside the satisfaction of judgment was made on the grounds that the satisfaction was obtained by fraud and collusion, was without consideration, was voluntary, was against the interests of the defendant Remillard-Dandini Company, and was being sought for the purpose of abandoning the rights and interests of the company in the creditors' suit for collection of the judgment then pending in action No. 196,654.

On appeal it is contended by the appellant that the order of the lower court refusing to set aside the satisfaction of judgment should be reversed on the grounds that it was a fraud upon the company perpetrated by the majority directors in that: (1) It was an attempted dismissal of the creditors' (minority shareholder's) suit to collect the judgment in the company's favor, and was against the best interests of the company; that A. O. Dandini's right to credits under the 1935 contract was not adjudicated in the earlier fraud action; that that question is not now res judicata; and (2) the satisfaction was without consideration.

Before discussing the points raised on this appeal we shall summarize briefly the factual situation as disclosed by the record. Other background facts are set forth in Dandini v. Dandini, 82 Cal.App.2d 263, 186 P.2d 41, involving some of the same parties, and, to some extent, the same basic transactions here involved. In that action this court affirmed a judgment in favor of defendant A. O. Dandini in a suit to annul an assignment by him of 253 shares of Remillard-Dandini Company stock.

Originally the Remillard Brick Company (Lillian Remillard Dandini) owned one-half, or 150 shares, of the stock of the Remillard-Dandini Company (hereinafter referred to as the 'company'). The defendant A. O. Dandini was given the other one-half of the stock at the time the company was organized. A contract was also executed at that time (1935) whereby A. O. Dandini was to be the president and manager of the company for five years, at a compensation of $300 per month, plus a commission. The contract provided:

'(1) The company will employ the manager to manage generally its business, subject only to the control of the Board of Directors, for the period beginning July 1, 1935, and ending June 30, 1939, and will pay to the said manager the sum of Three Hundred Dollars ($300.00) per month and will credit to the account of the manager each month an amount equal to seventy-five cents per thousand of brick sold, such payment and credit being in full compensation for services to be rendered consequent upon such employment.

'(2) The manager accepts such employment and will well and faithfully serve the company in the capacity of general manager during the period and for the compensation hereinbefore specified. * * *

'(5) The compensation hereinbefore provided of seventy-five cents per thousand is to be credited to the account of the manager on the books of the company but no such credits shall be payable to the manager, nor shall there be any payments on account of such credits, at any time that the company is in arrears in payments to its creditors or if the making of payments on account of such credits shall reasonably jeopardize the ability of the company to meet its debts and obligations as they fall due.'

A similar contract was entered into on July 1, 1939, with the amounts changed to $400 and fifty cents respectively, and to run for five years.

On August 18, 1939, a complaint was filed by the plaintiff as a shareholder in the company against A. O. Dandini, Tobin, Caneli, and Costa, the then directors of the company, and against the company, to recover certain sums of money from the defendants based (1) upon the alleged misappropriations of funds by A. O. Dandini, and (2) to set aside as fraudulent, certain stock issued to Dandini. The fourth amended complaint, on which the case was tried, alleged misappropriations by Dandini from 1935 through August, 1939; that such misappropriations were continuing; and that the defendant directors were grossly negligent in their duties in not ascertaining or preventing the misappropriations and in voting for the 1939 contract. The third cause of action alleged that the defendants issued to Dandini 100 shares of the capital stock of the company without consideration, and that such was a fraud upon the company in that the stock was issued to Dandini in payment of amounts claimed due him under the contract and it was represented to the Corporation Commissioner that there 'was due and owing' by the company to Dandini such sums, and that the issuance of the stock to him would be a convenient way of discharging such obligation, when actually the defendants knew that the company was in arrears in payments to its creditors and that such sums were therefore not then payable, and that the company was thereby damaged in the sum of $10,000.

The court at the trial of this fraud action found and concluded the contracts to be as alleged; that Dandini served as general manager of the company from July 1, 1934, to August 1, 1942; 'That commencing on or about September 9, 1935, while said A. O. Dandini was acting as manager of Remillard-Dandini Company under the contract dated September 12, 1935, as hereinabove set out in full, and while he was serving as a director, president and manager of the Remillard-Dandini Company, said A. O. Dandini, in violation of his duties as manager, president and director of said company misappropriated and converted to his own use the funds and assets of the Remillard-Dandini Company in the sum of $51,404.04; that $8,004.89 of said $51,404.04 was so misappropriated and converted by said A. O. Dandini prior to August 18, 1936, and is barred by Section 338, Subdivision 4 of the Code of Civil Procedure [statute of limitations]; that the remainder of said sum, to wit, $43,399.55 was so misappropriated and converted by A. O. Dandini after August 18, 1936; that of said $51,404.04 so misappropriated by A. O. Dandini $37,781.31 thereof was so misappropriated prior to August 1, 1939, and $13,619.73 misappropriated from August 1, 1939 to July 8, 1942.'

The trial court in the fraud action found that the 1939 contract had been entered into by the directors after a warning by Lillian R. Dandini of the misappropriations, that the directors knew or should have known of them, that entering into the contract was gross and wilful negligence and a fraud on the company, and that Dandini was entitled only to the reasonable value of his services ($400 per month) after August 1, 1939. As to the third count of the complaint the court found that under the 1935 contract and up to December 31, 1938, the credits of Dandini amounted to $38,399, and that by contract of February 14, 1939, Dandini was given and accepted 100 shares of the value of $10,000 in satisfaction of such claim. The contract was entered into by the company at a board of directors meeting at which Lillian Dandini was not present, and was voted on by Caneli, Costa and Tobin. After receiving the authorization of the Division of Corporations the 100 shares were issued for a purported claim of $43,099 ($4,700 interest) when actually 'none of said $38,399.00 was due or payable to A. O. Dandini and it was not at said time ascertained if it would ever be due or payable to him, that none of said alleged interest was due or payable either on a contingent basis or otherwise.'

The court also found that '* * * the issuance of said shares of stock to A. O. Dandini was a fraud upon said Remillard Dandini Company and should be annulled * * * and the said compromise being ordered to be annulled, said credits are ordered to be replaced on said books, said credits being in the sum of $38,399.11 * * *.'

The court then found that such stock had been transferred by A. O. Dandini to third persons who were not represented in that suit and therefore the bona fides of the transfer was not adjudicated in that suit. The court directed that $10,000 for attorneys' fees and $1,800 expended for an audit of the Remillard-Dandini Company books by the brick company were to be paid out of the money recovered from A. O. Dandini.

Thus under the judgment of October 14, 1943, and the amendments thereto of November 2, 1943, Dandini was to pay to the company $43,399.55 and return the 100 shares of stock or pay $10,000 additional, their reasonable value. Interest of seven per...