17 Cal. App. 3d 453 | Cal. Ct. App. | 1971
Opinion
Defendants, who unsuccessfully appealed from a judgment which granted the plaintiffs’ prayer for specific performance of a preemption agreement for the purchase from defendants of stock of a closely held corporation (see Addiego v. Hill (1968) 268 Cal.App.2d 280 [73 Cal.Rptr. 901]), now appeal from a post-judgment mandatory injunction which ordered them to carry out the judgment.
Insofar as the defendants seek to reverse the court’s order because of its effect on the rights and obligations of the corporation and other persons, there is no justifiable issue. Rightly or wrongly the corporation and its secretary performed sufficient acts at the behest of the defendants to relieve the defendants of any charge of contempt. They were discharged after plaintiffs secured an order to show cause to hold them in contempt. Any corporate officers or other third parties who were aggrieved by the post-judgment orders of the court are not before this court on this appeal. Moreover, by supplemental brief filed at the request of the court on the issue of the defendants’ claim for credit of interest on the amount of the purchase price fixed in the judgment, the defendants acknowledged that all issues other than those above designated as (1), (2) and (3) may be disregarded. It is concluded for the reasons set forth below that the court erred in failing to hold an accounting so that specific performance could be equitably enforced despite the delay occasioned by the appeal from the judgment. The order is reversed and the case is remanded for that purpose.
The background and the facts concerning the prejudgment proceedings in this action are found in two prior appeals, one involving the pleadings ((1965) 238 Cal.App.2d 842), and the second the merits of the judgment
The judgment, which was affirmed on the second appeal, was originally entered April 10, 1967. It provides: “Wherefore, by reason of the law and the findings of fact aforesaid, it is Ordered,, Adjudged, and Decreed as follows:
“1. That the defendants, Richard Hill and Albert Bindi, shall forthwith endorse and deliver over to plaintiffs the Seven Thousand (7,000) shares of Bahl Corporation stock now standing in the name" of the defendants, and plaintiffs shall pay to the defendants therefor the sum of One Hundred Fifteen Thousand One Hundred Twenty-Nine Dollars Seventy-Four cents ($115,129.74).
“2. That plaintiffs shall have and recover from defendants their costs herein the sum of $2,011.23.”
The prior opinion recites: “Upon learning that after entry of the judgment defendants had on April 24, 1967, held a meeting of the board of directors of the corporation and caused a dividend to be declared over the objection of plaintiffs, the court issued a post-judgment injunction restraining defendants from all activities in relation to the corporation, to preserve the status quo until the judgment became final.” (268 Cal.App.2d at p. 286. )
On February 18, 1969 the remittitur was filed in the lower court. On March 3, 1969 the plaintiffs’ attorney filed a declaration and application for an order requiring the defendants to show why they should not be adjudged guilty of contempt of court for failure to carry out the judgment. The declaration alleges that plaintiffs caused the defendant Bindi to be served with a copy of the judgment and the remittitur, that the plaintiffs are ready, able and willing to pay the amount fixed in the judgment, and that the defendants have failed to endorse the stock certificates held by the escrow holder to whom the certificates were delivered when originally issued. The court granted an order to show cause.
In response the defendants’ attorney filed a declaration and points and authorities in which various objections related to the third party claimant were interposed. At a continued hearing on March 20, 1969 the court threatened to find the defendants in contempt if the stock were not transferred, and continued the matter until April 28th. At a hearing on that
On May 7, 1969 the defendants filed their notice of motion to correct and modify the post-judgment mandatory injunction, and points and authorities in support of the motion. They sought to correct the order to provide that the purchase price should be “the sum of $115,129.74, plus 7% legal interest thereon from date of Judgment (April 10, 1967) to date of payment, as an offset to rents and profits accrued in said Bahl Corporation during the pendency of the appeal herein, but less the sum of $2,394.14 costs due from defendants to plaintiffs herein.” (The increase in costs represents $382.91 costs on appeal admittedly due from defendants to plaintiffs.) Other modifications were directed to points which are no
Meanwhile a further hearing transpired on May 12, 1969. The stock was not yet transferred, but the defendant Bindi signed a stock transfer form prepared by the attorney for the plaintiffs when ordered to do so by the court. Further controversy revolved about an affidavit of prejudice under section 170.6 of the Code of Civil Procedure filed by the secretary of the corporation, who appeared with his attorney at the hearing when served with a copy of the order of April 29th. All matters were continued two weeks.
At the hearing on May 26th, the defendants produced and delivered to plaintiffs a power of attorney from the defendant Hill, who had been out of the state, granting the plaintiffs power to do all Hill could personally do to effect a transfer of his stock. The court then discharged the original order to show cause as to the defendants Bindi and Hill. Further controversy between the secretary and the plaintiffs was continued from time to time, and the defendants’ motion to modify the April 29th order was argued and submitted. On June 23, 1969 the motion to modify was denied and this appeal ensued.
The trial court properly exercised its powers to adjudge the defendants guilty of contempt in order to carry out the judgment for specific performance which had been affirmed on appeal. (See ’76 L. & W. Co. v. Superior Court (1892) 93 Cal. 139, 143 [28 P. 813].) Nevertheless, the question of whether the court properly computed the amount to be paid may be reviewed.
In Ellis v. Mihelis, supra, 60 Cal.2d 206, the purchaser of real property brought an action for specific performance against the seller. The court held that since the rents and profits from the time the transaction should have been effected until it was ultimately completed were awarded to the purchaser, the seller was entitled to an offset against the rents and profits awarded to the purchaser, equal to interest on the purchase price. The court stated, “The following general rules are applicable where damages are awarded incident to a decree of specific performance: A party to a contract for the purchase or exchange of land who is entitled to a decree of specific performance is also ordinarily entitled to a judgment for the rents and profits from the time he was entitled to a conveyance. . . . The complainant affirms the contract as being still in force and asks that it be performed. If the court orders it to be performed, the decree should as nearly as possible require performance in accordance with its terms.
“The guiding principle with respect to the calculation of the damages incident to the decree of specific performance, as we have seen, is to relate the performance back to the date set in the contract. Timely performance of the contract would result in the purchaser’s receiving the rents and profits of the land but being denied the use of the purchase money, and a purchaser who seeks to recover rents and profits must permit an offset for his use of the purchase funds during the period that performance was delayed. In an early case this court .held that a defendant in a situation like the one before us should be permitted to offset against the profits interest on the entire purchase price. (Heinlen v. Martin (1879) 53 Cal. 321, 343.) This holding is the overwhelming weight of authority. [Citations.]” (60 Cal.2d at pp. 219-220. See also Re v. Wells Fargo Bank (1969) 269 Cal.App.2d 783, 788 [75 Cal.Rptr. 367]; and note, Abrams v. Motter (1970) 3 Cal.App.3d 828, 847-848 [83 Cal.Rptr. 855]; Lawrence v. Shutt (1969) 269 Cal.App.2d 749, 767 [75 Cal.Rptr. 533]; and Lister v. Sorge (1968) 260 Cal.App.2d 333, 342 [67 Cal.Rptr. 63].)
The plaintiffs had the use of the purchase price until they deposited it with the escrow agent. Under the judgment and order of the court they also received an interest in all of the earnings of the corporation as they existed on April 10, 1967 and accrued thereafter. Reason suggests that the principles applicable to an action for the specific performance of a contract to convey real property should be applicable to an action to secure specific performance of a contract to purchase closely held stock. (See Lister v. Sorge, supra, 260 Cal.App.2d 333, 341-342.)
The reasons advanced by the lower court upon which the purchaser-plaintiffs rely are not persuasive. It is true that the judgment fixed a definite sum as the consideration to be paid for the stock. It is likewise established from examination of the record on the last appeal that the defendants raised the question of double income to the purchaser in their opening brief, their reply brief, and in their petitions for rehearing, and for a hearing by the Supreme Court. Nevertheless, the judgment, could only speak as of the time it was rendered and entered, April 10, 1967. Up to that time, and prior to the first post-judgment injunction, which was the subject of the earlier appeal, the defendants, as controlling stockholders,
The fact that the defendants claimed a third party was entitled to their stock does not defeat their request for equitable treatment. The judgment of necessity establishes that the rights of any third party claimants were subordinate to the rights of the defendants as far as this action is concerned. The fact that the defendants may hold the purchase price for a third party with valid claims against them should not defeat their right to have the purchase price determined in an equitable manner.
The defendants, having occasioned the delay in the specific performance by objections which have been adjudicated adversely to them, should not profit from their actions. Ellis v. Mihelis, supra, suggests that the offset of interest is only as against the accumulating profits which the purchaser acquires with his purchase. So here, any adjustment to the purchase price by reason of interest on the sums retained by the purchasers during the pendency of the appeal should not exceed the increase in the proportionate net worth of the corporation attributable to the stock in question by reason of the business transacted by the corporation in the interim.
The order appealed from is reversed, and the case is remanded for a post-judgment accounting between the parties in accordance with the principles set forth herein.
Molinari, P. J., and Elkington, J., concurred.
A petition for a rehearing was denied June 3, 1971, and respondents’ petition for a hearing by the Supreme Court was denied July 7, 1971.
This order reads in part: “lx Is Hereby Ordered, Adjudged and Decreed that pending a final judgment herein the defendants, their employees, servants, agents and proxy holders of any of the defendants’ shares of stock of Bahl Corporation be, and they are, hereby enjoined and restrained from doing .any act whatsoever affecting the assets of Bahl Corporation other than is necessary to preserve the assets of the corporation; nor shall they permit any such act to be performed on behalf of or for the benefit of or by the defendants acting either as owners of shares of stock of the corporation or as its directors, or otherwise, and that defendants shall exercise no act or
The complete order reads, after preliminary recitals, “It Is Hereby Ordered, Adjudged and Decreed as follows:
“1. That the defendants Richard Hill and Albert Bindi shall forthwith take whatever steps are necessary to cause Bahl Corporation to issue its stock certificates as follows: (a) Certificate No. 9 to William B. Addiego for 4,000 shares, (b) Certificate No. 10 to Harry J. Love for 3,000 shares.
“2. That the defendants shall cause said Certificates No. 9 and 10 to be delivered forthwith to Paul F. Kelly, Attorney at Law and Escrow Holder herein, with the following instructions: (a) to cancel Certificate No. 1 in the name of defendant Albert Bindi for 4,000 shares, which said Certificate is now in the hands of the Escrow Holder, (b) To cancel Certificate No. 7 in the name of defendant Richard Hill for 3,000 shares, which said Certificate is now in the hands of the Escrow Holder, (c) To deliver Certificates No. 9 and 10 to plaintiffs for the sum of $113,118.51 in cash (being the amount of $115,129.74 less costs in the amount of $2,011.23 as set forth in the judgment) and receive their receipts therefor, (d) To mail a copy of said receipts from the plaintiffs to the office of the Corporation Commissioner together with a copy of the judgment herein together with a copy of this Order within five (5) days after such transfer is consummated in accordance with Section 260.141.14 of Title 10 of Regulations.
“3. That wherein this order requires the defendants Richard Hill and Albert Bindi to do all of the things and acts under Paragraphs 1. and 2. hereof, the Order extends with equal force and effect to their employees, servants, agents, attorneys, proxy holders of any of defendants’ shares of stock of Bahl Corporation, a California corporation, and to the officers and directors of said Bahl Corporation.
“4. Said Paul F. Kelly, attorney at law, and Escrow Holder herein, is hereby directed to comply with Paragraph 2. hereof.
“5. That except as herein specifically provided the Order Pending Final Judgment filed herein on June 5, 1967 shall remain in full force and effect.
“6. That a further hearing on the Order to Show Cause in re Contempt Issued on March 3, 1969 is hereby set for Monday, May 12, 1969 at 4:00 o’clock P.M. of said day.”