Venables v. Credential Ins. Agency

• Decision Date: 13 April 1956
• Court: California Court of Appeals Court of Appeals
• Parties: Lessel VENABLES, Plaintiff and Respondent, v. CREDENTIAL INSURANCE AGENCY, Inc., George Yule, Phillip Greenfield and Marvin Rappaport, Defendants and Appellants. Civ. 21264.

Page 547

295 P.2d 547

140 Cal.App.2d 724

Lessel VENABLES, Plaintiff and Respondent, v. CREDENTIAL INSURANCE AGENCY, Inc., George Yule, Phillip Greenfield and Marvin Rappaport, Defendants and Appellants.

Civ. 21264.

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

April 13, 1956.

Paul Pearlin, Abraham Gorenfeld, Los Angeles, for appellants.

Trent G. Anderson, Jr., Los Angeles, for respondent.

DORAN, Justice.

Plaintiff, as a director and minority stockholder in the defendant corporation, filed the complaint herein against the corporation and the other directors, seeking a dissolution. The complaint alleged the existence of two factions which were deadlocked so that corporate business could nor be advantageously conducted, together with various wrongful acts on the part of the defendant majority stockholders. Plaintiff was a former employe of the corporation who had withdrawn from such employment about a year previous to the filing of the complaint.

The answer sets forth that the defendants, owning more than 50% of the corporate stock, desire to purchase plaintiff's stock, and to that and request the court 'to appoint three disinterested commissioners to appraise the fair value of plaintiff's shares, and for an order directing the sale by plaintiff to defendants pursuant to the provisions of sections 4658 and 4659 of the Corporations Code'. Thereafter each side submitted three names of proposed commissioners, from which list the trial court selected two names from plaintiff's list and one name from the defendants' list. Commissioners Bulkley and Tichner are managers of insurance company officers and Commissioner George Gish is a certified public accountant. Further proceedings for dissolution were suspended upon defendants posting a $20,000 bond.

The order appointing commissioners declared that 'The fair cash value of said shares * * * shall be the amount which a ready, able, willing and informed buyer would pay, and the amount which a willing and informed seller would accept for said shares in said corporation as a going concern, and not in liquidation thereof'. Pursuant thereto, the commissioners held hearings at which oral and documentary evidence was received and considered.

A written statement was thereafter made by the commissioners but was not filed within the specified time; plaintiff objected to further consideration but the trial court allowed the commissioners to file an amended appraisal report. The commissioners report recommends 'as a fair cash value of 188 shares held by the Plaintiff, the amount of $4,240.85, or $22.56 per share'. The report further states that the parties had agreed that the value of the Credential Insurance Agency's net assets, aside from goodwill, was $10,389.73.

As to goodwill, the report concedes that 'the figure used by most insurance agencies is one year's gross commission, based upon a three years average, * * * dependent upon members of the agency not competing for business with the agency. The absence of any agreement not to compete, has led us to believe that the Plaintiff has been placed in an enviable position towards obtaining some of the business * * *. Information submitted by Mr. Venables indicates that he is currently operating an Insurance Agency and has already succeeded in selling insurance to some of the accounts previously serviced by the Credential Insurance Agency'.

The commissioners concluded that since no dividends were paid, and there was no agreement not to compete and that Mr. Venables was in competition with the corporation, 'any goodwill left in the corporation is for all practical purposes non-existent. However, because of his prior connection with the corporation this commission feels that Plaintiff is entitled to a small amount of goodwill * * * in the sum of $513.01'.

Thereafter, plaintiff moved to strike the report and have the court fix a value, 'on the premise that the appraisers were confused * * * and that they did not make a fair appraisal'. Defendants moved to confirm the award. The trial court set aside the award of the Commissioners and rendered a memorandum decision fixing the value of plaintiff's shares at $62.50 per share, a total of $11,750.

In this memorandum the court notes that 'Since Venables left the employ of the corporation on October 1, 1953, important changes have been made in bookkeeping methods. It is difficult to reconstruct the...