Beraksa v. Stardust Records, Inc.

This is an appeal by John E. Crooks and George W. Creveling, who, as defendants and cross-defendants, have had judgment rendered against them for various amounts on at least six different theories. We have concluded that the judgment should be affirmed.

A brief sketch of the plot forming the background of the case may contribute to an understanding of the problems presented by the appeal. There was, in the City of Long

Baye died October 16, 1959, and four days later Creveling, acting on the premise that as pledgee of the stock he was privileged to do so, joined with others to hold a stockholders’ meeting, at which they elected defendant Crooks and two others as the board of directors of Stardust. The same day Crooks was elected president of Stardust by vote of the new directors.

Just a little more than a month after he began acting as president, Crooks executed, on behalf of Stardust, an option agreement, a receipt, an agreement for sale of inventory, and an employment agreement, all steps in the transaction whereby plaintiffs acquired an option to purchase from Stardust its Flame Boom, including the furniture, its general on-sale liquor license and its other assets. Plaintiffs paid Crooks —for Stardust—$8,000 for the option, and plaintiff Steve Beraksa was employed to manage the business.

Plaintiffs entered into possession of the Flame Boom on December 1 and undertook its operation. Advised by the Alcoholic Beverage Control Board that the attempt to sell to the plaintiffs the alcoholic stock on hand was ill-advised, to say the least, on December 9 Crooks, as president of Stardust, sent plaintiffs a telegram canceling the sale of the wet goods. Then Donna, the widow of Charley Baye, having been appointed administratrix of his estate, and one or two others, called a meeting of the stockholders of Stardust, replaced Creveling’s board of directors with a new board which straightaway elected Donna president of the corporation. On January 8, 1960, a demand was made by the Stardust upon the plaintiffs to surrender posession of the Flame Boom. They complied with the demand two days after it was made and found themselves out $8,000 and out of the Flame Boom.

The plaintiffs immediately (January 15) brought this action by filing a complaint drafted in five counts. Defendants Crooks and Creveling joined in an answer, admitting, generally, the facts beginning with the option transaction, which we have narrated and which the complaint set forth. They

The trial was before the court without a jury and upon findings of fact and conclusions of law a judgment was entered with these provisions in plaintiffs’ favor: (a) an award of $8,000 against Creveling and Crooks, jointly and severally; (b) an additional award of $1,000 against Crooks; (c) one for the same amount against Creveling; and (d) one against Stardust for $959.23. In favor of the cross-complainant Stardust the judgment gives recovery of: (e) $1,500 against Crooks and Creveling, jointly and severally; (£) $500 against Crooks; and (g) a like amount against Creveling.

The judgment was a straight money judgment and did not declare the rights and duties of the parties. The disputes between the parties were resolved in the findings and conclusions, however, and must be read as a part of the judgment, filed the same day, to ascertain the basis for the judgment.

We must look to two separate causes of action to appraise the judgment’s final award, that of $8,000, to plaintiffs against Crooks and Creveling. Its basis as to Crooks is that plaintiffs paid him $8,000 under the various instruments that he had executed in his role as president of Stardust; that he was not its president and had no authority as its agent to receive the $8,000; the plaintiffs were out that sum without any return.

This award is upheld by the facts found, and they are supported by the evidence. At the beginning of events Crooks was neither a shareholder nor an officer of Stardust. But for Creveling’s “election” of the board of directors that voted Crooks in, Crooks had no standing whatever in the picture other than as Creveling’s attorney and the attorney for Donna Raye in her petition to be appointed administratrix. But Creveling had no legal right to elect the directors. They, then, were not de jure directors and have no history of activities as directors that would throw the cloak of “de facto” over them as they voted for Crooks as president. He, therefore, never became the de jure president of Stardust, and his entry into the office lacked that “color of title” that is essential to the “de facto” status that is claimed for him.

To be sure, Raye, the original holder of the 200

Several principles that should be kept in mind are recognized in John Paul Lumber Co. v. Agnew (1954) 125 Cal.App.2d 613 , 619 [ 270 P.2d 1044 , 1048-1049], One of these is that whether one who is not a de jure officer is a de facto officer is one of fact for the trial court to decide. Another, that a solitary exercise of power, even under color of title, does not make one a de facto officer. A mere usurper, not acting under any color of office, is not a de facto officer. It was held in Potomac Oil Co. v. Dye (1910) 14 Cal.App. 674 , 681 [ 113 P. 126 , 130], that a secretary elected by a board of directors that had been superseded could not be a de facto secretary; he “did not acquire even a color of right to the office. . . .” Applying these principles it is clear that Creveling, whose only acts were to

The second cause of action was in the form of the common law action for money had and received. Not only were its allegations found to be true, as to Crooks, but more specific findings established that the $8,000 had been paid to Crooks and not to Creveling, and the “money had and received” averment was specifically found to be “false and untrue” as to Creveling. We must look elsewhere than the facts considered up to this point, therefore, for the basis of the $8,000 award against Creveling. It is to be found in the fifth cause of action.

To affirm the award we must overlook some irregularities, but at this stage of the proceedings we think it proper to do so. To begin with, the fifth cause of action did not plead the existence of the various written instruments that were, by reference, made a part of the first count, and, by reference, also a part of the fourth' cause of action. The pretrial agreement, however, established these as facts in the case. Again, the fifth cause of action, which is one for fraud on the part of both Creveling and Crooks in representing that Crooks had the authority to execute “the aforesaid instruments,” includes in its allegations that Creveling told them that he “was the sole and lawful owner of all of the issued and outstanding stock” of Stardust, and this was found to be true in the findings, and again in the conclusions. But the evidence fails to support this allegation; on the contrary, plaintiff Steve Beraksa testified that he was not told this. However, in the pretrial statement we find it to be stipulated that “Creveling represented to plaintiffs that he had the sole and absolute right to cause and consent to the sale and transfer of the corporate assets in the manner recited in the agreements attached to plaintiffs’ complaint.” Whether or not these representations were true or false was set up as one of the issues remaining to be tried. It was tried and the trial court found that it was not true, but false. The inelusion of the further finding that was unsupported by the

We are not persuaded that the doctrine of election of remedies should dictate a reversal of any part of the judgments. We are not unaware of such cases as Acme Paper Co. v. Goffstein (1954) 125 Cal.App.2d 175 , 178 [ 270 P.2d 505 ], where an election was said to be required between an action for money had and received and one in which exemplary damages were sought. But it is also true that the doctrine of election of remedies is based upon estoppel, and when applicable, operates only if the party asserting it has been injured. (Pacific Coast Cheese, Inc. v. Security First Nat. Bank (1955) 45 Cal.2d 75 , 80 [ 286 P.2d 353 , 356].) In the case under review the action for money had and received was limited, at the trial, so that it applied only to Crooks. The judgment against Creveling was based on fraud. The award in each case was $8,000. Had the plaintiffs sought recovery for their ordinary damages under section 3318, Civil Code, $8,000 would doubtless have been the extent of the recovery. Crooks was not assessed exemplary damages. We fail to see how either defendant was injured, therefore, by the course the case took, even granting that an action for money had and received is, by a fiction, deemed to be one in contract, while those for damages based on fraud and for a breach of warranty are torts.

We need spend no time with the award of $959.23 in plaintiff’s favor against Stardust, as neither of the parties affected has appealed.

The remaining provisions of the judgment that allow the cross-complainant Stardust recovery against Creveling and Crooks have a common premise. It is that the false representations of the two individual defendants caused the plaintiffs to believe that they had acquired some rights from Stardust, and so brought an action against it, which necessitated it to defend at a cost to it of $1,500. Based on these causes and effects judgment was given against both cross-defendants for $1,500 compensatory damages and against each for $500 punitive damages.

We find no California case touching on such a situation as is here presented, but there may always be a first time, and we may find persuasive statements of legal principles elsewhere. In United States Fidelity & Guaranty Co. v. Frohmiller (1951) 71 Ariz. 377 , 379 [ 227 P.2d 1007 , 1008-1009],

The situation in the case under review fits the quotation. The two defendants, one an anxious creditor, the other his attorney, working together, secured a locksmith to open the safe of a business that is not theirs, some four days after the death of the only stockholder of the owner; take unauthorized action to appear as the management, and persuade the plaintiffs that they are. The plaintiffs, with $8,000 invested as a result of the representations made to them, find themselves out in the cold when the legal successors take over. Naturally, plaintiffs take legal action against the corporation owner, as well as against those making the representations. The owner, as naturally, defends itself, and to do so is put to an expenditure for legal services. The item of $1,500 in the judgment in favor of the cross-complainant is thus proper under the principle voiced in the American Jurisprudence quotations, and the obligation being one “not arising from contract.” (Civ. Code, § 3294) the award of exemplary damages in the sum of $500 against each codefendant is not an abuse of the trial court’s discretion.

The judgment is affirmed.

Burke, P. J., and Jefferson, J., concurred.

Appellants’ petition for a hearing by the Supreme Court was denied June 26, 1963.