Darden v. Reese

SHINN, P. J.

Action to set aside an execution sale of corporate stock in which the sale was vacated by the judgment and the purchaser of the stock and other defendants appeal from the judgment.

The judgment was based upon findings that the sale was made without the knowledge of plaintiff, the owner of the stock, was knowingly made for a grossly inadequate consideration, that defendant Brown was not a bona fide pur

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chaser of the stock, and findings of other facts from which the court concluded that defendant Eeese, the judgment creditor who caused the sale to be made, “was guilty of fraudulent conduct and great unfairness toward the plaintiff herein and the Lakeshore Beach Company,” of which he was the secretary. The questions on appeal are whether these findings are supported by the evidence and whether the conduct of Eeese furnished legal ground for vacating a sale made for a grossly inadequate price.

The Lakeshore Beach Company, a corporation, had issued 100 shares of its capital stock which was owned as follows: Charles S. Darden, 54 shares; Arthur L. Eeese, 36 shares; Mercer Eeese, 2 shares; Alonzo Adams, 2 shares; Clarence Jones, 1 share; and the estate of Sally Bichardson, 5 shares. Darden was the president of the corporation and exercised a controlling influence in the management of its affairs. Arthur L. Eeese was the secretary; Clarence Jones was the vice president, and A. A. Adams assistant secretary. All of these officers had offices in Los Angeles, but for some two years Darden had maintained his actual place of abode on the property at Elsinore. During that period he had received correspondence from Eeese and from Harold B. Pool, attorney for Eeesé, at his Elsinore address, as well as at his Los Angeles address. For more than 20 years the corporation had owned 47 acres of land in the vicinity of Lake Elsinore, in Eiverside County, which had been improved with numerous buildings and was operated for recreational purposes. The project had not been a profitable one. There had long been dissension among the stockholders, manifested by the activities of Arthur L. Eeese, who had instituted suit in 1939 to dissolve the corporation, had demanded of the directors that they terminate a lease of the property which had been given to Darden, and had instituted suit for a cancellation of the lease, all against the wishes of the other members of the board of directors. By the terms of the lease, which was executed in 1937, Darden had agreed to pay, among other things, all assessments and taxes against the real property of the corporation, and had been in possession, managing the property, pursuant to the lease. He failed to pay the taxes, Eeese paid them, made demand upon the corporation that it sue Darden upon his obligation, and when the board of directors refused to institute action the same was instituted by Eeese as a stockholder on behalf of the corporation. The purpose of this suit was to force compliance with the terms of the lease or