Sarmento v. Bay City Land & Cattle Co.

ADAMS, P. J. Plaintiff, appellant here, brought this action against Bay City Land and Cattle Co., a California corporation, and nine individual directors and managing [344]agents of the corporation, to compel the directors to account to the corporation for the reasonable rental value of premises owned by the corporation during the period of time they are alleged to have leased such premises for a rental less than its reasonable rental value, which it is alleged constituted a fraud on the corporation, and to restrain and enjoin the directors from leasing land, improvements and equipment of the corporation except for the reasonable rental value thereof, and to have any and all leases theretofore executed by the directors for less than the reasonable rental value declared null and void, on the alleged ground that their execution was beyond the powers granted the directors by the articles of incorporation, and, therefore, ultra vires.

The trial court found against plaintiff and from an adverse judgment he has taken this appeal.

Appellant is the owner and holder of 160 of the 2,400 issued and outstanding shares of the corporation, which shares he acquired in the following manner. One Pete Ramponi originally owned the 160 shares and upon his death his widow succeeded thereto. Appellant married the widow and she transferred the shares to appellant who acquired them on October 22, 1945.

The corporation was formed about December 12, 1927. It owns approximately 960 acres of pasture land in Merced County. The primary purpose of the corporation was to acquire and use the land to pasture its own cattle and to rent pasture when there was enough pasture available. The land had to have water to produce pasture, which water was obtained from Grasslands Water Association. That association is made up of landowners in the area, each landowner being given one share in Grasslands for each acre of land owned. Grasslands obtains water from the Reclamation Bureau and delivers it to its shareholders, when water is available, for a price equal to the cost of the water and its delivery. Before 1948 the Reclamation Bureau charged 50 cents an acre foot for the water, but in 1948 raised the cost to $1.50 an acre foot. Water was not always available. Grasslands had a limit of $2.50 a year assessment on its shareholders. The respondent corporation and all other shareholders in Grasslands paid $2 a share per annum for water, and the cost of water to this respondent on 960 acres was $1,920 a year.