Vujacich v. Southern Commercial Co.
Before: James
Synopsis
Corporations—Liability of Directors for Misappropriation of Trust Funds.—Where a corporation, ostensibly organized to carry on a grocery and liquor business, has made a practice of receiving deposits from laborers for safekeeping and using such deposits in its business, the directors may be held personally responsible for the misappropriation, even though they may not have had actual knowledge thereof.
Id.—Presumption op Knowledge by Directors.—Where the business of receiving deposits by a corporation is so general as it was with the corporation defendant, it must be presumed that the directors had full knowledge of the manner in which such moneys were kept or used; and unless a showing is made of some excuse, such as a protest ofiered by the director not consenting to the misappropriation and of steps taken by such director to prevent loss from accruing to the depositors, he becomes personally liable to the persons damaged.
Id.—Errors not Argued in Briep.—Alleged errors of the trial court in admitting and rejecting testimony, which are not the subject of argument by the appellants in their brief, may be disregarded by the appellate court.
Id.—Failure op Findings as to One Cause op Action.—Where a third cause of action set forth in a complaint alleges in another form the cause of action stated in the two preceding counts, and does not add materially to the statement of facts contained in other parts of the complaint upon which findings are made, the failure to find upon the third cause of action is not prejudicial error.
JAMES, J.
Plaintiff, on his own behalf and as assignee of a number of other persons, sued to recover the sum of $5,861.75 and to obtain certain injunctional relief, all of which was awarded to him by the judgment of the trial court. Defendant Southern Commercial "Company was organized as a California corporation in the year 1904, with defendants J. L. Hansard, John Galetich, Lewis Farmer, and R. E. Hansard as directors. These persons continued to be directors up to the time of the commencement of the action. The ostensible business of the corporation, as stated in its articles of organization, was to carry on a wholesale and retail business in the selling of groceries, provisions, wines, liquors, cigars, et cetera. A small store-room was kept on Commercial Street in the city of Los Angeles, containing a stock of merchandise of the value of about four or five hun
[441]
dred dollars. J. L. Hansard was the manager of the business and Lewis Farmer the secretary. John Galetich, another director, was also active in the handling of the company’s business at its store-room. Plaintiff and his assignors were Slavonian laborers and workmen, who from time to time deposited with defendant corporation their savings for safe keeping. The evidence shows that it was understood that this money was to be kept for the use of the depositors and it does not show that there was any understanding that the money so deposited might be used1 by the defendant in the transaction of its business. Deposits were made at different times by the laborers', so that at the time this action was brought the total sum of money deposited amounted to that for which judgment was secured. Shortly after the organization of the corporation manager Hansard went to Tennessee to establish a distillery. The money of plaintiff and his assignors, instead of being kept separately, was deposited generally to the credit of the defendant corporation in a Los Angeles bank and mingled with the other funds of the corporation. The distillery was established in Tennessee and the manufacture of whisky there commenced, and money was from time to time drawn from the account of defendant company to cover expenses incident to the distillery business. Some of the product of the distillery was sold from the store of the defendant in Los Angeles. Just prior to the commencement of this action demand was made upon the officers of the defendant corporation for the return of the money deposited by plaintiff and his assignors, which demand was refused, and upon investigation it was found that the company had no funds or property except of a mere nominal value located in this state. In the complaint in this action it was alleged that, with intent to defraud, the money of plaintiff and his assignors had been converted and used in the distillery business and that the title to the distillery had been kept in a name other than that of the Southern Commercial Company, all for the purpose of effecting a concealment of the property of the corporation and defrauding its creditors. By its judgment the trial court determined all of these issues in favor of plaintiff, and issued its injunction preventing defendants from transferring any of the property of the corporation and appointing a receiver to take posession of the
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