Sumner v. Flowers

MOORE, P. J.

The question posed is whether parol evidence may be received to show that a signatory to a contract was in fact the agent of a fully disclosed principal.

Appellants Sumner and Farber and respondent Furnish, prior to August 11, 1941, were associated on the staff of Madison Hospital, Los Angeles. Sumner was a business administrator, Farber an osteopathic doctor, and Furnish, a medical physician. After lengthy consultation, the three men

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on August 11, 1941, purchased the Pioneer Hospital of Los Angeles and took title in the name of defendant Flowers, as nominee of the purchasers. Thereafter, they caused the Park-view Hospital Inc. to be organized and its 300 shares to be issued as follows: 100 shares to Farber; 100 to

Sumner;

100 to Furnish. For personal reasons, Dr. Furnish requested that his shares remain temporarily in the name of Miss Flowers, his confidential secretary. His associates acceded to Dr. Furnish’s request and on September 14, 1941, they executed a writing whereby it was agreed that no party could alienate his shares without the permission of his fellow stockholders. The shares representing the Furnish interest were factually issued to Miss Flowers, although they were then and continued to be the property of Dr. Furnish. After issuance of the shares, they were delivered by the owners to Nathan Kates to be by him held in escrow until September 23, 1944. On that date, Kates released certificate number 4 for 100 shares in the name of Flowers who on October 3, 1944, endorsed the certificate to Dr. Furnish. At that time and continuously to a date in 1945, Miss Flowers was the employee and confidential secretary to Dr. Furnish. Immediately upon the incorporation of the Parkview Hospital, Dr. Furnish became its medical director and remained in that position until December 31, 1951. Prior to that date, dividends were paid to Furnish and he was credited with accounts payable equally with Sumner and Farber. On several occasions after 1944, Furnish requested the corporation to issue a stock certificate in his name as owner of the shares standing in the name of Miss Flowers. These requests were refused.

On August 17, 1951, Furnish served a notice on the corporation for a full accounting and for the issuance of a new stock certificate in his name. This notice was pursuant to sections 3011 through 3016 of the Corporations Code. These sections enumerate the penalties for a corporation’s failure not to issue the proper stock certificate to a shareholder and the penalties for not furnishing a financial statement every six months to stockholders who own more than 10 per cent of the outstanding stock. On September 6, 1951, appellants sued for declaratory relief asking that the exact rights of all parties concerned be clarified by the court and demanded specific enforcement of the written contract. Appellants pleaded that Flowers had forfeited all rights in the corporation by assigning stock certificate number 4 to Furnish, contrary to the stock agreement. That instrument provided that