Burge v. Midway Pacific Oil Co.

The defendant corporation is, and at all times referred to in this action was, engaged in business as the owner and operator of oil properties. In April, 1910, the plaintiff then claiming to be the owner of a placer mining claim (oil property) in Kern County, entered into an

■ The answer of the defendant rests upon its claim that said shares were issued without consideration, and that they were not issued for money paid, labor done or property actually received by the defendant, and that the issuance thereof was void. 'The record shows that in a certain action of the United States of America against Brookshire Oil Co. and others in the United States District Court for the Southern District of California, and in which both plaintiff Burge and the defendant Midway Pacific Oil Co. were defendants, a final decree was entered on the twenty-fourth day of December, 1919. It was therein decreed that neither of the defendants “had at any time, or has, or have now,” any estate, right or title in or to the property described in said decree. The property so described included the property covered by the Atwood contract and by the mortgage made by defendant to plaintiff herein. In December, 1920, the board of directors of defendant passed a resolution declaring the cancellation of said shares of stock issued to plaintiff Burge, but did not take any proceedings in court to establish the cancellation thereof. In the present action judgment has been entered quieting plaintiff’s title to said forty thousand shares of stock, and declaring that plaintiff is entitled to share with other stockholders in any dividend paid or to be paid and in any dividend of the capital assets of the corporation, in accordance with his ownership of said stock. From this judgment the defendant appeals.

Under the provisions of the Constitution (art. XII, sec. 11) the' issuance of said stock to plaintiff was void unless so issued “for money paid, labor done, or property actually received.” We are of the opinion, however, that the evidence' is sufficient to sustain the findings, notwithstanding the above-mentioned failure in defendant’s title to the land conveyed by him to the plaintiff. So far as appears, the deed may have conveyed to defendant only the plaintiff’s right, title and interest in the land. Indeed, according to testimony of the witness Beazley, this was the fact. Plaintiff was the claimant in possession, and it is not shown that he was not making his claim in good faith. We have before us no evidence showing what fault or failure to meet legal requirements caused the claim to be lost. In the brief of-appellant it is asserted that the claim was annulled on grounds of fraud, but there is no evidence in support of that assertion. By means of plaintiff’s conveyance defendant obtained actual possession of the land, and thus was enabled to take from the land large quantities of oil. While thus in possession and while obtaining value from the land, defendant’s obligation became, or was about to become, due. So far as appears, both parties at that time believed that the obligation was enforceable. It was under these circumstances that appellant transferred the shares of stock to plaintiff, and by that means obtained his agreement to postpone maturity of the contract, and (later) of the note and

In the case of O’Sullivan v. Griffith, 153 Cal. 502 [ 95 Pac. 873 , 96 Pac. 323 ), plaintiff sued to recover two thousand seven hundred dollars alleged to <be due as the purchase price of all the right, title and interest of plaintiff in certain street railroad franchises. The defendant alleged in his answer that because of the fact that “the proceedings by which the alleged franchises were granted to the original grantees were so defective in several particulars that they were wholly void and that, in consequence, the grants of the franchises were void, or, in other words, that the grantors of the defendant had no title to the franchises they attempted to convey to Griffith, that he received nothing for the transfer, and hence, that there was no consideration.” Following a thorough consideration of the point involved, including a review of the authorities, the Supreme Court reached the conclusion that, in the absence of fraud or mistake, a simple grant whereby the grantor purports to convey only his right, title and interest is a mere deed of quitclaim and “the grantee is not relieved from the obligation of paying the purchase price merely because the grantor had no title to the franchises.” (Syllabus.)

The judgment is affirmed.

Houser, J., concurred.

York, J., absent.

All the Justices concurred.