Toboni v. Pennington Millinery Co.

WOOD (Fred B.), J.

Plaintiff has appealed from two orders requiring her to furnish security to the defendants pursuant to the provisions of section 834 of the Corporations Code: A $500 surety bond to defendants Pennington Millinery Company, Sibyl E. Pennington Amante and Walter A. Spence, and a $500 surety bond to defendants Tom Cooney Company and Tom Cooney individually.

In support of her appeal plaintiff claims: (1) This is not a Corporations Code. (2) The affidavit of one Wright in support stockholder’s derivative suit within the meaning of section 834, of the Amante-Spence-Pennington Company motion for security is insufficient. (3) Defendants Tom Cooney and Tom Cooney Company have no right to security. Our examination of the record convinces us that none of these points is well taken. The orders should be affirmed.

[50]

(1)

This is a stockholder’s derivative suit. The provisions of section 834 of the Corporations Code are opplicable.

Although, plaintiff seeks damages for herself as well as for the Pennington Company, the gravamen of her complaint is a wrong done the corporation, a mulcting of its assets, a misappropriation of its business and properties by two of its directors, aided and assisted by Tom Cooney and the Tom Cooney Company, a business competitor of the Pennington Company. Plaintiff has merely a stockholder’s interest in the allegedly mismanaged and mulcted corporation. Although her shares may have greatly depreciated in value, the obligations allegedly violated by the defendant directors Amante and Spenee were duties which they owed directly and immediately to the Pennington Company.

*

It is for the corporation, in the first instance, to institute and maintain remedial actions. A stockholder may do so on behalf of the corporation only if its responsible officials refuse or fail to act. This is what makes such a stockholder’s suit “derivative.” The cause of action here pleaded, like those in

Campbell

v.

Clark,

159 Cal.App.2d 432 [324 P.2d 51], is “derivative in nature in that the gravamen of the complaint is injury to the corporation and to the whole body of its stockholders. . . .