Court Opinion

ID: 3291685
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:07:46.867218+00
Date Added: 2024-06-11T12:17:08.081630
License: Public Domain

I concur in the judgment. The appeals are presented without any bill of exceptions, and therefore without any specification of errors, other than such specifications as may be found in the briefs.
In the very extensive opening brief on behalf of defendants, a reader may soon discover that defendants are intending to attack the court's findings of fact, or some of them. For it is said, that "the judgment entered is not sustained by the evidence and is against the weight of the evidence". *Page 579 
Probably the writer of the brief intended to assert that the findings of fact (on which the judgment rests) are not sustained by the evidence, and are against the weight of the evidence. The findings of fact are contained in nineteen separate paragraphs. To which ones, and to what parts, of these nineteen paragraphs are defendants directing their objections? And as to which ones is it claimed that they are wholly without evidence to sustain them? If in reality, defendants are arguing only that they are against the weight of the evidence, then in that respect they are asking the court of appeal to determine facts by passing upon the merits of conflicting evidence. But the courts of appeal will not thus usurp the functions of the trial court. In order to arrive at the merits of the appeal of defendants, in so far as those merits depend upon evidentiary matters, it is essential that there be some specification, directing attention to the particular facts found, as to which it is contended that there is no evidence legally sufficient to sustain them. There are no such specifications. Not only do the rules of practice require them, but the heavy burdens of the court make it unreasonable for a litigant to expect that the court will search the record to find errors therein. I shall assume, therefore, in this case, that the evidence is sufficient to sustain each and every finding of fact.
The next one of the principal grounds of appeal of defendants is found in the statement that "the judgment is against the law". This I interpret to mean that the facts found by the trial court do not legally justify the conclusions of law which the court announced, and which were carried into the judgment.
It was found by the court that on certain dates between February 5 and May 1, 1925, the defendants became indebted to the plaintiff for moneys had and received by them to the use of the plaintiff in certain sums amounting in all to $8,323, all of which remains due, owing and unpaid; that between October 29, 1924, and May 2, 1925, the defendants, without authority so to do, pretended to act as the fiscal agents of the plaintiff in the sale of its capital stock, and that they did, during said period, sell capital stock of the plaintiff corporation of a stated value, of which they have accounted to the plaintiff for all except the sum of $8,323; that the defendants then and there were officers of *Page 580 
said corporation and constituted a majority of the board of directors thereof, and by virtue thereof controlled said corporation, and did cause to be paid a commission to themselves of twenty per cent of the amounts received by said corporation on each of said respective sales, said commissions being paid at the time that each of said respective sales were made. It is further found that the defendants have failed, neglected and refused to pay to the plaintiff the sum of $8,323, or any part thereof, and that the same is due, with interest, etc. It is further found that it is untrue that the plaintiff acquiesced in, accepted and has retained the benefits of all of the stock sales in said plaintiff corporation made by the defendants; that it is true
that all moneys derived from said stock sales were paid to the plaintiff corporation by the defendants or by the subscribers to said stock; that it is untrue that the plaintiff has kept and retained all of said moneys so received by the defendants from said stock sales above mentioned; that it is untrue that the plaintiff at all times knew that the defendants and each of them were, or that they believed themselves to be the lawfully authorized fiscal agents for said corporation; that it is untrue that said plaintiff corporation at no time prior to the receipt by the defendants through the mail of a purported notice of rescission of said alleged agreement for said fiscal agency informed the defendants or made known to the defendants that plaintiff did not consider them its fiscal agents; that it is true that said stock sales were made in good faith by the defendants and that it is untrue that the defendants are entitled to any commissions for sales of stock of the plaintiff corporation made by the defendants between October 29, 1924, and May 2, 1925; that it is untrue that the plaintiff is estopped from setting up or urging the invalidity of any agreement or agreements with the defendants as the fiscal agents of plaintiff corporation; that it is true that between the twenty-ninth day of October, 1924, and the second day of May, 1925, defendants pretended to act as the fiscal agents for the plaintiff corporation and being without legal authority so to do, and at the time when the defendants L.S. De Besa and H.C. Maynard were officers and directors of the plaintiff corporation, made stock sales in the plaintiff corporation amounting to $50,635, and caused the purchase price of said stock to be paid to the plaintiff corporation, and that concurrently *Page 581 
with each respective sale of said stock said defendants acting in the capacity of officers of the corporation caused to be paid to themselves, or their agent or nominee a commission of twenty per cent of each of said respective sales, which said commission said defendants were not authorized to pay.
It was upon the basis of the foregoing findings of fact that the court reached its conclusion that plaintiff is entitled to the judgment as entered against it in said sum of $8,323, with interest as computed thereon.
Under defendants' general assignment of error in their statement that "the judgment is against the law", their first specification (Opening Brief, p. 214) is that "the action of the lower court in admitting the minute book and the minutes of plaintiff in evidence in support of plaintiff's case is contrary to law". This point is not relevant to the principal proposition, but is a misplaced argument on an assignment of error somewhat informally made near the beginning of their brief, viz., that the court erred in overruling objections to the introduction of the minutes as evidence. Defendants (at pages 24 to 47) have quoted from the record some of the evidence, including a part of the minutes, and the objections made and the rulings thereon.
For a correct appreciation of the merits of the objections made to the admission in evidence, of the said minutes, it is well to have in mind that the evidence had shown (and the court by its findings found it to be true) that the control of the board of directors of plaintiff passed on the fifteenth day of May, 1925, from the defendants to directors appointed by them from among stockholders who had theretofore purchased stock in said corporation from the defendants. Although it was thus proved and established that the new directors were substituted into the board of directors or added to the board by action of the original directors themselves, it was not shown or found that the new directors were in any sense representatives of the defendants. On the contrary it appears that the newly constituted board of directors was composed of the same persons who on behalf of the corporation have been directing the prosecution of this action. It was by reason of this change in the control of the board of directors that the court found that the plaintiff is estopped to demand and receive from the defendants *Page 582 
the commissions which it paid to the defendants on sales made on and after May 15, 1925.
Overruling objections on the part of the defendants, the court received in evidence the minutes containing a resolution of the board of directors of the plaintiff adopted at a meeting held on the fifteenth day of May, 1925, as well as other minutes of later dates. Even if these rulings of the court were erroneous, I think that there was no resulting injury to the defendants.
Appellants (defendants) stress the proposition that the burden rested upon the plaintiff to prove its case. That is so, subject to the rule that the burden is upon the defendant to prove the facts of its affirmative defenses. In this action it is established, beyond controversy, that the defendants, at the time when they claim to have been authorized to charge and collect the commissions covered by the judgment against them, were the owners of all of the issued stock. But in addition, they were both promoters and directors of the corporation. Thus they became trustees, not merely for the corporation as originally constituted, but also for the stockholders who were induced to come in, and whose payments into the treasury constituted the very fund out of which the commissions were paid. (WesternStates Life Ins. Co. v. Lockwood, 166 Cal. 185, 190-195 [135 P. 496].) The contract to pay commissions was in effect a contract made by defendants with themselves, but in violation of a trust. Such contracts are said to be invalid, as being contrary to public policy. There is some confusion in the decisions, as to whether they are void, or only voidable. It seems to me that a contract may be void, or only voidable, according to the attendant facts. In the case at bar, the contract at the time when it was made was prima facie void. For the contract itself contemplated the existence of other stockholders who on purchasing stock would instantly be entitled to protection against a contract thus made.
It is true that a corporation has power to enter into a contract with a promoter or director, whereby a right to commissions for agency services may be acquired. But that power must be exercised by authorized persons. A director is without authority to act for the corporation in a contract with himself. As to that transaction he must be regarded as not a director. On application of this rule to the instant *Page 583 
case, and particularly to the commissions included in the judgment against defendants, it appears that there was never any act of the corporation authorizing the payment of those commissions. There being no contract, there was nothing in existence, and there was nothing capable of ratification.
I think that the judgment is also sustainable as against the cross-appeals. The facts, as set forth in the findings, are sufficient to create an estoppel against recovery from defendants, of commissions for services rendered by them after the entire situation with respect to those matters had become well known to the entire body of directors and stockholders.