Loeb v. Berman

California Supreme Court Apr 3, 1933 No. Docket No. L.A. 13996.Published

Before: Preston

AI Brief

AI-generated · verify before citing

Holding. Stockholders who initiate a derivative action on behalf of a corporation are not aggrieved parties entitled to appeal from court orders once the corporation or its receiver has intervened and assumed control of the litigation. Because the cause of action belongs to the corporation, the stockholders become supernumerary parties upon the corporation's appearance.

Issues

Whether stockholders who initiate a derivative action have standing to appeal orders after the corporation or its receiver has assumed control of the litigation.
Whether stockholders in a derivative action are 'aggrieved parties' within the meaning of the statute governing appeals.

Disposition. dismissed

Quotations verified verbatim against the opinion

“being satisfied that appellants are riot aggrieved parties within the meaning of the statute governing appeals, we rest our action upon a brief discussion of this question alone.”

“The cause of action, if any, was in favor of the corporation alone and not in favor of the stockholders in their capacity as such.”

“when the corporation, acting in good faith, by its cross-complaint declared upon the same cause of action set forth in the complaint of the stockholders, the stockholders from that moment on became supernumerary parties.”

PRESTON, J.

Motion to dismiss appeal taken from certain orders entered in the minutes of the court in the above-entitled cause on August 9, 1932. Several grounds are urged for the dismissal but, being satisfied that appellants are riot aggrieved parties within the meaning of the statute governing appeals, we rest our action upon a brief discussion of this question alone.

The Sunset Pacific Oil Company, a corporation, is the successor of the Julian Petroleum Corporation. Appellants, a portion of a group of stockholders of said corporations, urged that- a cause of action existed against Jacob Berman and a vast number of other persons, growing out of alleged issuance and sale to the public of spurious stock certificates

[718]

in said Julian corporation, which produced great profit to the wrongdoers at the expense of the corporation. Accordingly, they demanded of the said renamed corporation that it sue said parties for an accounting as to these profits. The corporation at first failed to act on this demand and appellants, together with two other stockholders, on October 8, 1929, instituted on behalf of the corporation an action against said parties in the Superior Court of the County of Los Angeles for the purpose of regaining for the corporation said alleged profits. The corporation itself was made a party, but no relief against it was sought nor was any director or other officer thereof made a party. On May 2, 1930, however, the corporation reconsidered its decision and filed a cross-complaint in said action, urging the same cause of action and seeking relief against the same defendants as were said stockholders, but asking no relief against the plaintiff stockholders themselves or any of them. It is thus seen .that the corporation in effect moved to supplant the plaintiffs and, if it did in fact do so, their appeal here must be dismissed. No affirmative relief was asked by the corporation in its cross-complaint against any of the stockholders thereof. The ease in its legal essence became one by the corporation itself against the other defendants.

The later developments are that while this action was pending and undetermined, to wit, on August 28, 1931, in an action then pending in the United States District Court for the Southern District of California, styled

Loeb v. Berman

AI Brief

PRESTON, J.

More from California Supreme Court

Related research

AI Brief