Donohoe v. Mariposa Land & Mining Co. (66 Cal. 317, 1885)

McKinstry, J.

The court below found that each of the two actions—the one being the action instituted by Eugene Kelly, on the 3d of October, 1871, in the name of C. D. O’Sullivan, as plaintiff, against the Mariposa Company and the trustees, in which the injunction was issued; and the other brought by the Mariposa Land and Mining Company (of New York) against Kelly, the plaintiff herein, the nominal purchasers at the tax sales, John W. Brumagim and others, on the 19th day of February, 1871—was commenced and prosecuted in good faith, and that, before the time of the settlement and compromise of the 29th of January, 1872, each of said parties litigant and interested, including the Mariposa Land and Mining Company, the Mariposa Company, and the trustees of the Mariposa Estate, had notice of all the matters and things alleged in the pleadings in this action which occurred before the 29th of January, 1872 ; and on that day the said parties, having full notice, as aforesaid, executed and delivered, to each other the agreement, in writing, of that date.

The foregoing finding is to the effect that the Mariposa Land and Mining Company, and the other parties to the pending litigation, entered into the agreement of the 29th of January, 1872, with full knowledge of the transactions averred in the pleadings herein to have occurred prior to that date. It would be doing violence to the -language employed to say the finding is that the agreement was made by Kelly on the one hand, and by John W., or Mark Brumagim, or the attorney employed by the corporation to prosecute the action, on the other, without authority from the Mariposa Land and Mining Company, or without the knowledge of that company.

The statement on motion for a new trial contains no specification of a deficiency of the evidence to support this finding, or which points to a deficiency in that regard. When the notice of motion for a new trial designates, as a ground of the motion, the insufficiency of the evidence to justify the decision, the statement must specify the particulars in which such evidence is alleged to be insufficient. If no such specifications as are required are made, the statement must be disregarded. (C. C. P., § 659.) The “ decision ” includes the facts found. (C. C. P., § 633.)

The finding is to be taken, therefore, as absolutely true.

If the finding be construed as a finding that the trustees or directors of the Mariposa Land and Mining Company had notice of the matters alleged in the pleadings herein, as having transpired before the settlement was made, that company was bound by the settlement and agreement, unless, as matter of law, the trustees or directors had no power to settle the litigation. It cannot be contended that the directors of a corporation do not possess authority, acting in good faith and in the exercise of their best judgment, to settle1 a pending action, or that the settlement is not binding on their stockholders, even though it may subsequently appear that they failed to secure the best terms to which the corporation might have been entitled. If they have full knowledge of the circumstances on which the adverse claim is based, it cannot be said that any fraud is practised on them. And, unless they have colluded with an adverse claimant, to practice a fraud upon those whom they represent, it cannot be said that they are guilty of a fraud on the grantee of their corporation, who has agreed to assume its debts, by representing a claim arising out of the settlement or compromise to be a valid claim.

The answer does not allege fraud on the part of the trustees of the Mariposa Land and Mining Company (N. Y.), in entering into, or with reference to the contract or stipulation of the 29th of January, 1872. On the contrary, it is expressly alleged that the contract was made between Kelly and the Brumagims, and that the existence of the papers of that date “ was unknown to the Mariposa Land and Mining Company, its trustees and stockholders, who had no notice thereof.”

It is true, it is alleged in the answer that, by collusion between plaintiff herein and Kelly, and the trustees and officers of the Mariposa Land and Mining Company of New York, it was wrongfully admitted by that company that there was due to said plaintiff herein, on behalf of himself and said Kelly, or to Kelly, from the Mariposa Land and Mining Company of New York, in August, 1875, a large sum of money; that the trustees of the New York Company so wrongfully represented the fact to be to the officers of this defendant, the Mariposa Land and Mining Company of California; and the trustees of the said defendant being thus deceived, executed the notes and mortgage sued in this action.

But inasmuch as the court found (and appellants did not object to the sufficiency of the evidence on which the finding was based) that the Mariposa Land and Mining Company (N. Y.), with full knowledge of the facts alleged in the pleadings herein to have occurred prior to the 29th of January, 1872, on that day entered into a contract which recognized and provided for claims then asserted by Eugene Kelly, and there is no charge-in the answer that the arrangement, compromise, and contract were entered into fraudulently by the said New York Company,, or its trustees (but on the contrary, that the same was made without the knowledge of the said company, its trustees or stockholders), it must follow that no fraud was practiced by the trustees of said company, in representing that Kelly, or the plaintiff and Kelly, had valid claims against the New York Company, such as were recognized and were provided for in the said arrangement of the 29th of January, 1872.

Thenceforth, the parties to that agreement were at arms’ length, and Kelly could not be guilty of wrong, in any legal efforts to secure an enforcement of the rights accorded to him by it.

As to such of the holders of Mariposa certificates, or of stock of the Mariposa Company, if any, as did not become stockholders in the Mariposa Land and Mining Company of New York, it may be conceded that company did not represent or bind them in the composition or settlement of the 29th of January, 1872. Such persons, if any there are, are not parties to this proceeding. It may be that the Mariposa Land and Mining-Company of New York held its property subject to a claim on the part of such holders of Mariposa certificates of stock; or that, by dealing with the property of the Mariposa Company, the Mariposa Land and Mining Company of New York became-involuntary trustees for such holders of Mariposa certificates, or stock in the Mariposa Company. But the Mariposa Land and Mining Company (N. Y.), claiming to own and deal with the entire estate, could not be permitted to assert that it had no-power to make the compromise, because of actual or possible claims on the part of holders of Mariposa certificates, or Mariposa stock, not included among its stockholders. Nor can the-defendant, the Mariposa Land and Mining Company of California, as successor in interest of the New York Company, now urge that a fraud was committed on it by a subsequent recognition by the trustees of the New York Company of rights in Kelly, growing out of an arrangement or compromise entered into by said New York Company—or its trustees on behalf of it's stockholders, whom they represented.

The statement on motion for new trial contains no specification of an insufficiency of evidence to sustain the finding, that on the 14th of November, 1872, Kelly, “ at the request of the Mariposa Land and Mining Company ” (N. Y.), in pursuance of the contract of the 12th of that month, released and conveyed to the said company his undivided third part of the Mariposa Estate, and released his mortgage on the two-thirds thereof. There is a specification: “ There is not sufficient evidence to justify the-court in finding that 75,025 shares of stock of the Mariposa Land and Mining Company delivered to Donohoe and Kelly were, on the 14th of November, 1872, or ever had been, the property of John W. Brumagim. But on the contrary, it appeared that Mark Brumagim, without the consent of said company, or the authority of its board of directors or trustees, delivered to Donohoe and Kelly, composing the firm of Eugene Kelly & Company, New. York, and Donohoe, Kelly & Company, San Francisco, 75,025 shares, the majority of its whole capital stock, to be held by Donohoe and Kelly as security for two sums, to wit: $225,908 and $103,513.39, alleged to be due said Donohoe and Kelly, all of which stock the said Donohoe and Kelly received with the knowledge that it was a portion of the stock which had been issued to John W. Brumagim, to be held in trust for the purpose of carrying out a contract theretofore made, and the certificates of which had been transferred in blank by the said John W. Brumagim, and delivered to the company, for the purpose of being disposed of to raise a working capital for said company.

It is an admitted fact, that the Mariposa Land and Mining Company of New York requested Kelly to convey to it the one third, and to release his mortgage on the two-thirds of the Mariposa Estate, in pursuance of the written contract of November 12, 1872. That contract provided that Kelly should convey and release, as aforesaid, to the eompany, and that, simultaneously, John W. Brumagim should cause to be delivered to Kelly a majority of the shares of the stock, as security for the payment of the two sums, $225,908 and $103,515.39, with interest, etc. In fact, the deed and the stock were delivered simultaneously. How, under these circumstances, the company could have requested a delivery of the deed and release “ in pursuance of the contract,” without at the same time approving of the substitution of the stock as security, is difficult to understand.

Nor, even if we were authorized to do so, ought we to extend a broader effect to the specification than its language imports. On defendant’s theory that the New York Company and its trustees were ignorant of the agreement of the 29th of January, 1872, when that agreement ivas entered into, silence on their part, after they became aware of it, might be construed into evidence of acquiescence, and, in connection with the fact that they entered into possession under it, of approval. Hence defendants were willing to admit, and insisted, that the company demanded of Kelly a conveyance and release of his mortgage. But the finding of the court, that the request or demand of the company was for a conveyance and release in pursuance of the written contract of the 12th of November, and that the conveyance and release were made in pursuance of that contract, is not attacked by the specification. We must assume that there was evidence sufficient to sustain the finding unattacked, and such evidence would sustain the portion attacked.

By the contract of July 22,1875, between Donohoe and the California Company, the sum recognized to be due Kelly from the New York Company, by the contract between Kelly, the New York Company, and the stockholders of that company, represented by Stilwell, was agreed to be paid by the California Company, and constituted part of the amount represented by the six promissory notes, to secure which the mortgages herein sought to be foreclosed were executed. The balance of the amount was made up of advances made by plaintiff, to secure the title under judgment and tax sales.

This much seems to be admitted, but the charge of defendants is, that the New York Company was not, in fact, indebted to Kelly. The contract of July 22,1875, recites that whereas the party of the first part (Donohoe) by letter of January 23, 1875, had communicated his intention, in case he should become the purchaser of Las Mariposas at the then impending sale, to offer to the party of the second part (the California Company) the option to purchase the same, upon certain terms in the letter mentioned; and also recites that “ the terms of a compromise have been since agreed upon in New York between Eugene Kelly, the Mariposa Land and Mining Company (of New York), and Benjamin M. Stilwell, representing the stockholders thereof, in order to avail of which, and secure to the party of the second part the other advantages desired by it in the premises, it has been necessary to modify in other respects the terms and conditions of purchase suggested in said letter,” etc.

The evidence tended to prove that the settlement and contract of the 22d of June were known to the California Company when it entered into the contract of the 22d of July; not only so, but that the same was a settlement of certain litigation previously pending in New York, in which the Mariposa Land and Mining Company of New York claimed and asserted that the fifty thousand shares of its stock were wrongfully in the possession of Kelly; that his sale of the twenty thousand was without authority, and all other of the alleged facts on which defendants now aver that the recognition of indebtedness by the New York Company was fraudulent. But the defendant, the Mariposa Land and Mining Company of California, cannot be relieved of its own contract, if, when it was entered into, the company both knew of the agreement of the 22d of June, 1875, and of the asserted rights of the respective parties to that agreement, in the litigation to settle which it was executed.

If the indebtedness, as security for which Kelly had held 75,-025 shares of stock, was an indebtedness of John W. Bruma