Rozecrans Gold Mining Co. v. Morey (1896) · DecisionDepot

Rozecrans Gold Mining Co. v. Morey

Name: California Superior Court Tentative Rulings
Creator: DecisionDepot
License: https://creativecommons.org/licenses/by-nc/4.0/

California Supreme Court Jan 23, 1896 No. Sac. No. 12Published

Before: Garoutte

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Holding. The court held that the defendant was neither a de jure nor a de facto director of the plaintiff corporation, and therefore owed no fiduciary duty to the plaintiff regarding the acquisition of the mining property.

Issues

Whether the defendant occupied a fiduciary position as a director or trustee of the plaintiff corporation at the time he acquired the property.
Whether the defendant was a de jure director despite not being a stockholder at the time of his election.
Whether the defendant acted as a de facto director of the corporation.

Disposition. affirmed

Quotations verified verbatim against the opinion

“Morey was neither a director de jure nor de facto.”

“He never did an act as a director. He never accepted the office. He was never consulted as a director by any officer of the corporation. He never held himself out as a director in any way”

Synopsis

Corporation—Directors must be Stockholders—Purchase oe Corporate Property—Trust.—Under section 305 of the Civil Code, a person not a stockholder in a corporation does not become a de jure director by being elected to that office, nor by retaining the possession of stock which is put in his name after such attempted election; nor does he become a de facto director if he never assumed to act or represented himself as a director, and repudiated the office after being notified of his election. Such a person does not, by purchasing the corporate property at an execution or tax sale, become charged as a trustee for the corporation.

Garoutte, J. This is an action in equity, involving the ownership of certain mining property. Plaintiff became financially embarrassed, and the property was sold under execution sales, and also sold for nonpayment of taxes. Deeds passed to Morey, the defendant, under these execution sales, and also under the delinquent tax sale. Plaintiff appeals from the judgment rendered against it, and also from the order denying its motion for a new trial.

There are many questions discussed by counsel in [115]their respective briefs, but at the threshold of the case a single matter presents itself, which, upon consideration, we think necessarily points the judgment. The regularity of the proceedings leading up to the execution sales and the tax sale are not attacked, but it is insisted that Morey during all these times was a director and trustee of the corporation plaintiff, and, as such director and trustee, all his dealings with the property of plaintiff must be held to have been for its benefit, and that, by reason of his fiduciary relation, whatever title to plaintiff’s property came to him is held as trustee for plaintiff. Of course, this principle of law is elementary, and must prevail here if the facts present those conditions. But we think they fail to do it, as may be readily seen from the following finding of fact made by the trial court. After hearing all the evidence the court found: “That on the nineteenth day of June, 3883, H. L. Robinson, owning the entire stock of the plaintiff, held a stockholders’ meeting for the election of trustees. That said Robinson conducted the election and cast a ballot for the election of five trustees, as follows: H. L. Robinson, sixty-four thousand shares, A. Everett Ball, E. D. Sawyer, E. W.'Scott, and 0. A. Darby, each sixty-four thousand shares. That none of said parties owned any stock of plaintiff except Robinson. That immediately after the election aforesaid a trustees’ meeting was held, and Sawyer, Scott, and Darby resigned; that thereupon E. S. Chester, James Blair, and H. S. Morey were elected to fill the vacancies caused by the resignations of Sawyer, Scott, and Darby. That at the time of said election the said Morey was not a stockholder, had no interest in the corporation, had no knowledge of the " meeting of the stockholders or trustees, or of his election, and in no manner consented to be elected or to act as trustee of plaintiff. That on the third day of July, 1883, a certificate of one share of the stock of plaintiff was issued to said Morey; that said Morey did not know of the issuance of said share of stock, paid nothing for the same, nor did he authorize it to be issued to him. That

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Upon an examination of the evidence we find this finding in all its material parts is fully supported; and such being the fact, the whole superstructure of plaintiff’s case must fall, for the foundation upon which it was built has been absolutely undermined and taken away. We think such is the necessary and only construction to be placed upon this finding. It discloses that Morey was neither a director de jure nor de facto. Morey was not a director de jure, for he was not a stockholder of the corporation when elected. Section 305 of the Civil Code declares that the directors must be selected from the stockholders, and also declares that directors must be holders of stock in an amount fixed by the by-laws of the corporation. Conceding that the by-laws of the corporation plaintiff fixed no amount of stock to qualify a stockholder for election as a director, still, under the provision of the code quoted, the director must be a stockholder. He must own stock in some amount, or his election is invalid. The fact that Robinson gave Morey one share of stock, weeks and perhaps months after the day of election, of which share of stock “Morey has had possession ever since,” entirely fails to meet the case, and is wholly lacking in curing the invalidities existing in his election. Neither is [117]Morey a director de facto. The rule of law for the protection of third parties as to the acts of de facto officers may well be doubted when applied between the corporation and its own illegal^ elected officers. It is said in Corey v. Curtis, 9 Nev. 839: “In order to protect third persons transacting business with such officers under such circumstances as to induce them to believe that they were dealing with legal officers, the law has reached out its strong arm to a dangerous extent upon the principle that, although not officers de jure, they were officers in fact, whose acts public policy required should be considered valid. Such a principle ought not to be extended to a case where the rights of the public are not affected, nor where all the parties interested have knowledge that the person pretending to be an officer is not an officer de jure; for in such a case the reason of the rule no longer exists, and the law should not be invoked for protection.” But, conceding this principle of law is a proper one to be here invoked, still there is nothing in this finding to indicate Morey to be a director de facto. Upon the contrary, the showing prevents the drawing of any such inference. He never did an act as a director. He never accepted the office. He was never consulted as a director by any officer of the corporation. He never held himself out as a director in any way, and, when notified of a rpeeting of the directors some ten years after his alleged election, he repudiated his office. It is not necessary to cite authorities as to who are and who are not officers de facto, for we apprehend that no legal precedent may be found which would justify us in holding Morey a de facto director, as tested by the facts of this case.

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