Pasadena Mercantile Finance Corp. v. De Besa

Plaintiff brought the within action to recover the sum of $21,600 paid by plaintiff to defendants as fiscal agents for plaintiff in the sale of its capital stock. The plaintiff corporation was organized October 29, 1924, and the first sale of stock was made about February 5, 1925. From the latter date until May 15, 1925, the defendants, together with one Hugh Kelley (these three owning a nominal amount of stock, which was all that had been issued), constituted the entire board of directors of plaintiff corporation. On May 15, 1925, a new board of directors was elected, defendants continuing to act as fiscal agents and continuing to sell stock under permit from the commissioner of corporations authorizing the payment of twenty per cent commissions.

At the time of the institution of the action an attachment was issued and levied upon property of the defendants, whereupon they filed with the sheriff a bond for the release of the attachment, signed by the interveners as sureties.

Findings of fact were made, from which the court made its conclusions of law to the effect (a) that plaintiff is entitled to judgment against defendants for the sum of $10,908.84, which included principal and interest; (b) that plaintiff is estopped to demand of and receive from said defendants the commissions paid to said defendants between the fifteenth day of May, 1925, and the fifteenth day of July, 1925, by reason of the fact that the control of the board of directors of said corporation passed, on said fifteenth day of May, 1925, from the defendants to directors appointed by them from among stockholders who had theretofore purchased stock in said corporation from said defendants, although no affirmative action was taken by said board of directors either appointing defendants as the fiscal agents of said corporation or ratifying any action taken by them as such fiscal agents; (c) that plaintiff is not entitled to judgment for the commissions paid to defendant De Besa between the fifteenth day of July, 1925, and the thirtieth day of July, 1925, because the stock sold between those dates was sold under the appointment of defendant De Besa as temporary fiscal agent of plaintiff.

Based upon the findings and the aforesaid conclusions, judgment was rendered for the said sum of $10,908.84, money had and received by defendants for the use and benefit of plaintiff between the fifth day of February and the second day of May, 1925, and that plaintiff take nothing as to the items of the claim for money paid subsequent to the second day of May, 1925.

Defendants appeal from said judgment and the whole thereof. Plaintiff appeals from so much of the judgment as denied to it the recovery of the sum of $1804 "had and received by defendants for the use and benefit of plaintiff between the 5th day of February, 1925, and the 2nd day of May, 1925, to-wit: on the 11th day of April, 1925", together with interest in the sum of $520.55; and from that part of the judgment which decreed that plaintiff take nothing as to the items of its claims sued upon for the period subsequent to May 2, 1925, that is to say, the items of its account arising between the second day of May, 1925, and the fifteenth day of July, 1925, totaling $8,322, with interest thereon.

Defendants contend that the judgment is not sustained by the evidence and is against the weight of the evidence, and that it is against law.

Plaintiff maintains that the court erred in disallowing the item of $1804 and the items of commissions paid between May 2 and July 15, 1925.

Defendants, as directors of plaintiff corporation, occupied a fiduciary relation to the corporation and its stockholders. [1] Having been entrusted with the management of the corporate property for the common benefit of the stockholders, directors, by their acceptance of office, preclude themselves from doing any act or engaging in any transaction in which their private interests conflict with the duty they owe to the stockholders, and from making any use of their power or of the corporate property to secure to themselves an advantage not common to all stockholders. (6 Cal. Jur. 1071.) [2] The contract made with themselves whereby they employed themselves as fiscal agents for the sale of capital stock of the corporation was void as against public policy, and, therefore, was not subject to ratification by the new board of directors which was elected on May 15, 1925.

[3] On the other hand, the new board of directors, when it came into being on May 15, 1925, having elected to allow the defendants to continue to act as fiscal agents, and having elected to accept on behalf of the corporation the benefits derived thereby, became liable to said defendants for the commissions earned by them subsequent to May 15, 1925.

The judgment is affirmed.