(36 Cal. App. 4) SPIER V. PECK, County Treasurer. (Civ. 2512.) instituted this proceeding to enforce the payment. [1, 2] The respondent contends that section (District Court of Appeal, Second District, Cali- 18 of the Juvenile Court Act, in that part of fornia. Jan. 14, 1918.) 1. STATUTES 181(2)-CONSTRUCTION. POSE. Statutes are to be so construed as not to give rise to an absurdity in their attempted application nor to destroy their efficacy as a whole or in substantial part. 2. STATUTES 184-CONSTRUCTION Strong indices to the legislative intent will always be found upon an inquiry into the nature of the evil sought to be remedied by a statute and the object to be accomplished. 3. OFFICERS OFFICES. 30-SALARIES-HOLDING TWO it from which we have quoted, disqualifies the petitioner, while holding the post of probation officer, from being superintendent of the detention home and, therefore, from drawing the salary annexed to that position. Can the language forbidding a probation of- PUB-ficer to "be a candidate for or seek the nomination for any other public office or employment" receive that construction? Statutes are to be so construed as not to give rise to an absurdity in their attempted application and as not to destroy their efficacy as a whole or in substantial part (Murphy v. City of San Luis Obispo, 119 Cal. 624, 628, 51 Pac. 1085, 39 L. R. A. 444; Hannon v. Southern Pacific R. R. Co., 12 Cal. App. 350, 355, 107 Pac. 335: Madary v. City of Fresno, 20 Cal. App. 91, 96, 97, 128 Pac. 340); all rules of construction having their existence, of course, for the purpose of ascertaining the intent of the Legislature, that being the prime object of the construction and interpretation of statutes. Strong indices to the legislative intent will always be found upon an inquiry into the nature of the evil sought to be remedied by a statute or into the object to be accomplished by it. Bannerman v. Boyle, 160 Cal. 197, 200, 116 Pac. 732; Patton v. Los Angeles Pacific Co., 18 Cal. App. 522, 525, 123 Pac. 613; Odell v. Rihn, 19 Cal. App. 713, 719, 127 Pac. 802; Gise v. Myers, 22 Cal. App. 127, 133 Pac. 500. Juvenile Court Act (St. 1915, p. 1225) § 18, providing that all probation officers receiving a salary of $75 or more per month shall devote their entire time and attention to the duties of their offices, and no such probation officer, while holding such office and receiving salary therefor, shall be a candidate or seek the nomination for any other public office or employ ment, prohibits probation officers from acting and receiving the salary under appointment as superintendent of the detention home; the prohibition against being a candidate and seeking nomination in view of the requirement of devotion of entire time being against the holding as Iwell as the seeking of another office. Original application for writ of mandate by Thomas W. Spier against H. E. Peck, as Treasurer of the County of Ventura. Application denied. Robert M. Clarke, of Los Angeles, for petitioner. Don G. Bowker, Dist. Atty., of Ventura, for respondent. In one of the cases above cited (Patton v. Los Angeles Pacific Co.), a statute was under review which provided: WORKS, Judge pro tem. Petitioner is probation officer of the county of Ventura and is "An employer is not bound to indemnify his also acting under appointment as superintend-emplové for losses suffered by the latter in conent of the detention home for the same coun- in which he is employed, nor in consequence of sequence of the ordinary risks of the business ty, both of the offices, or positions, having the negligence of another person employed by their existence under what is known as the the same employer in the same general business, Juvenile Court Act (Stats. 1915, p. 1225, unless the negligence causing the injury was committed in the performance of a duty the emDeering's Gen. Laws, Act No. 1770a). The ployer owes by law to the employé, law fixes petitioner's salary as probation of provided, nevertheless, that the employer shall ficer at $100 per month, and as superintend- be liable for such injury when the same results ent of the detention home at $50 per month. from the wrongful act, neglect or default of a coemployé engaged in another departSection 18 of the Juvenile Court Act provides, ment of labor from that of the employé injured, among other things: or employed upon a machine, railroad train, switch-signal point, locomotive engine, or other appliance than that upon which the employé is injured is employed. * * "All probation officers receiving a salary of seventy-five dollars or more per month shall devote their entire time and attention to the duties of their offices, and no such probation officer. * * * while holding such office and receiving salary therefor, shall be a candidate for or seek the nomination for any other public office or employment." The petitioner presented to the board of supervisors of the county his claim for salary for June, 1917, as superintendent of the detention home, and the claim was allowed. The county auditor approved the demand and issued his warrant for its payment, but the respondent, who is the county treasurer, refused to make payment of the warrant upon its presentation. Thereupon the petitioner The facts of the case were that the motorman of an electric interurban car was injured by the negligence of the conductor of another car. The motorman brought suit against the railroad company for damages. His complaint was assailed by general demurrer and in passing on the demurrer the court said: "The objection urged is that single cars, like those upon which the plaintiff and the negligent conductor were employed, are not to be considered as machines or railroad trains, or to be comprehended within the term 'other appliances as used in the statute. To our minds, influenced For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes by the consideration that the statute must be burden the people of the state with the expense given a fair and reasonable meaning and be of maintaining more judicial officers than were liberally construed to effect the purposes of its actually necessary to the needs of the people. enactment (Judd v. Letts, 158 Cal. 359 [111 The narrow construction of the statute here conPac. 12, 41 L. R. A. (N. S.) 156]), this conten- tended for by petitioner obviously would result tion of appellant is without merit. From the in defeating the legislative purpose and intent phraseology of the provision quoted it is evi- in that behalf, and is therefore to be avoided if dent that the Legislature intended to make the possible. The words 'elected' and 'appointed' law broad in its scope and to preserve the lia-ordinarily are not synonymous. In its limited bility of the employer for the employé's benefit sense the word 'elected' is usually employed to in all cases generally where the mechanical de- denote the selection of a public officer by the vice upon which the injured servant is employed qualified voters of a community. On the other is separate and different from that being operat- hand the word 'appointed' is generally undered by the negligent employé. By way of closer stood to mean the selection of a public officer by definition of the department of labor classifica- one person who is empowered by law to make tion, the legislators undertook to and have said the appointment. In its broadest sense, howin effect that a person is not employed in the ever, the word 'elected' means merely selected. same department with another servant where he When used in that sense the word 'elected' is is at work with or upon a different machine, synonymous with the word 'appointed'; and railroad train, etc.; and in consonance with where, as in the case at bar, a public officer has a rule of fair construction it would be proper been selected by the votes of several members to say, if the words 'railroad train' were the of a city council, it may be truly said in the only descriptive ones contained in that portion broadest sense of the term that he was elected. of the statute quoted, that that term as applied* * * Having in mind the spirit and purpose to an interurban railway is sufficient to include of the Code section under discussion, it seems to a single trolley car. Such cars combine in their us that the word 'elected,' as used therein, was construction both motors for propulsion and not intended to apply solely to the election of seats for the accommodation of passengers. a city justice by the votes of the people at large; Used in interurban traffic they perform the but included as well the selection of a city jussame work over long distances as does the tice of the peace by the city council or other steam-propelled train. While a train usually legislative body in whom the power of election consists of a motor vehicle and cars attached is conferred by law. In other words, it is our thereto, where these adjuncts are combined in opinion that the appointment of a city justice one carriage and serve the same uses, there is of the peace by the votes of the city council [of no good reason why the one should be said to be the city] of Richmond was tantamount to the a train, within the meaning of the statute, and election of such justice of the peace in the sense the other not be so classed. In construing stat- contemplated by the Legislature, and that thereutes courts are not bound to an interpretation fore the fifteenth judicial township of Contra which shall give to words or phrases a literal, Costa county was entitled to have but one jusclose dictionary definition." tice of the peace at the time of the election in 1910." In Odell v. Rihn, another of the cases we have cited, the litigation was instituted under the following circumstances: At the time the controversy arose section 4014 of the Political Code provided: "The officers of a township are two justices of the peace. 車 In townships containing cities in which city justices or recorders are elected, there shall be but one justice of the peace, and in townships having a population of less than 5,000 there shall be but one justice of the peace. * * It was contended that the city of Richmond was entitled to two justices of the peace under this section. In disposing of the question the court said: [3] In the present case we have a potent index to the legislative intent in using the words "be a candidate" and "seek the nomination," in the very language of section 18 of the Juvenile Court Act. In the same sentence in which these words are found, and preceding them, it is declared that probation officers "shall devote their entire time and attention to the duties of their offices." It is therefore manifestly in aid of this provision that probation officers shall not be candidates nor seek nominations for other offices or employments. But this plain legislative intent will be frustrated and the provision be re"We are satisfied that the fifteenth judicial duced to an absurdity if the language emtownship of Contra Costa county was not at the time of the election in 1910 entitled, under Ployed is to receive a literal construction. the provisions of section 4014 of the Political The time to be expended by a probation ofCode, to more than one justice of the peace. ficer in seeking or being a candidate for anIt is conceded that the judicial township in question consists entirely of the city of other office or employment would ordinarily Richmond, which, although it has a population be inconsiderable when contrasted with the of more than 5,000, is provided by charter with time expended by him in occupying and disa city justice of the peace, who is appointed by charging the duties of the new office or em the city council. His jurisdiction and duties are concurrent and co-ordinate with those conferred ployment, if his seeking, or his candidacy, generally upon justices of the peace throughout were successful. Moreover, a literal conthe state. It is petitioner's contention that the term 'elected' as employed in section 4014, Polit-struction would serve to disqualify a probaical Code, should be construed to mean elected tion officer who sought another office or emby the popular vote of the people. In this con- ployment successfully, but would not disqualtention we cannot concur. Statutes must be * read and considered in conjunction with the leg-ify one who procured and occupied another islative intent, and then be liberally construed post without actually or technically seeking with the object in view of effecting such intent. it. We are convinced that the Legislature did In restricting the number of justices of the peace to one in townships which include cities in which city justices or recorders are elected, not intend such an anomaly to arise through the application of the provision now under commanded not to seek other places they were disqualified from occupying such places. The application for a peremptory writ of | mote, there should have been an allegation as to when their fraudulent character was discov tations being Code Civ. Proc. § 338, subd. 4, ered by plaintiff; the applicable statute of limirequiring actions for fraud to be brought within three years from its discovery. We concur: CONREY, P. J.; JAMES, J. 9. ACTION ~50(9)—StockHOLDER'S ACTION— mandate is denied. IMPROPER JOINDER. In stockholder's action against corporation (35 Cal. App. 778) and directors, a complaint stating a cause of JAMES v. P. B. STEIFER MINING CO. et al. action for fraudulent misappropriations, etc., (Civ. 1742.) but also alleging false representations of certain defendants inducing plaintiff's purchase of (District Court of Appeal, Third District, Cali- his stock, and illegal levy of assessment on his fornia. Jan. 8, 1918.) 1. CORPORATIONS 320(1) - STOCKHOLDER'S SUIT-RESTRAINING APPROPRIATION BY DI RECTORS. Fraudulent appropriation of the funds and the spoliation and destruction of the property of a corporation through the agency of its directors justifies the interposition of equity at the suit, against the corporation and directors, by a stockholder or stockholders, who sustain a fiduciary relation to the corporation whose interests they really represent in the action. 2. CORPORATIONS 110 - STOCKHOLDER'S SUIT-CANCELLATION OF STOCK. stock, was demurrable as improperly joining a cause of action for personal wrongs with one for injuries to the corporation. 10. PLEADING →225(1)—SUSTAINING DemurRER-LEAVE TO AMEND. Where a demurrable defect in the amended complaint could easily be remedied, it was error to sustain demurrer without leave further to amend. Appeal from Superior Court, Butte County; Henry C. Gesford, Judge. Action by Henry T. James, in behalf of himself and all other stockholders desiring to join, against the P. B. Steifer Mining Company and others. From judgment for Reversed, defendants, plaintiff appeals. with directions. Issuance of corporation stock without consideration, being a violation of the express provisions of Const. art. 12, § 11, and Civ. Code, § 359, and a breach of trust by the directors, may be redressed in suit against the corporation and directors by stockholder for cancellation of such stock; the corporation being concerned Frank D. McClure, of Minneapolis, Minn., in the cancellation of certificates of stock that and Franklin P. Bull, of San Francisco, for have been fraudulently issued and are void. appellant. Frank Freeman, of Willows, W. 3. CORPORATIONS 110 STOCKHOLDER's M. Brown, of Los Angeles, and George E. SUIT CANCELLATION OF STOCK-PLEADING. In action by stockholder against corporation and directors for cancellation of stock, the allegation of the issuance of such stock without consideration, and in fraud and damage of said company, and in violation of the laws of the state, while subject to criticism, was sufficient as against general demurrer. 4. CORPORATIONS 312(3) LIABILITY OF DIRECTORS-FRAUDULENT APPROPRIATION. Where treasury stock is sold, and the proceeds fraudulently appropriated by one having no right thereto with the approval, sanction, and connivance of the directors, they are liable to the corporation, in action by a stockholder, for the amount. 6. CORPORATIONS 320 (7)—DEBTS · STOCKHOLDER'S Gardner, of Oroville, for respondents. BURNETT, J. This appeal, coming up on the judgment roll, is from a judgment duly rendered after a demurrer, both general and special, to the amended complaint, had been sustained without leave further to amend. The order does not specify the ground upon which the demurrer was sustained, but merely sustains the demurrer generally. The grounds of demurrer are: (1) That the complaint does not state facts sufficient to constitute a cause of action; (2) that sevéral causes of action have been improperly united, namely, a cause of action in favor of and on behalf of the corporation against said defendants other than the corporation and a cause of action in favor of plaintiff stockholders in their personal capacity, for injuries to their personal rights by said defendant; (3) that the complaint is respectively ambiguous, uncertain, and unintelligible. It may be here interjected that defendants also filed an answer denying all material allegations as to fraudulent conduct and controverting any imputation of evil motives on the part of defendants. With the grounds of demurrer in mind we may turn to the complaint. Demand upon directors to bring action to recover corporation money or property which they have fraudulently appropriated is not required precedent to action by stockholder, if it appears such demand would have been futile. The first part of the complaint alleges gen8. LIMITATION OF ACTIONS 100(1)-PLEAD-erally the incorporation of the defendant corING-DISCOVERY OF FRAUD-STOCKHOLDER'S poration, the names of its directors and offiACTION. In stockholder's action against corporation cers, the amount and par value of its capiand directors for fraudulent appropriation, etc., tal stock. In paragraph 7 it is alleged that where some of defendants' acts were quite re- there has been issued to P. B., M. V., S. M., For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes wrongs. H. M., Mrs. Barbara A., and Mary C. Steifer Hunt upon a guaranty that a dividend of $1,each 56,729 shares of the stock of said cor- 500 would be paid thereon, or in default poration "without consideration, and in fraud thereof the company would loan said Hunts and damage of said company, and in vio- the difference between the dividend and $1,lation of the laws of the state of California." | 500; that no dividend was paid, and the ofPlaintiff then purports to set forth the ele-ficers fraudulently and without authority ments excusing a demand upon the directors loaned said Hunts $952.50. It nowhere apas being useless and futile to bring an action pears, however, that said sum has not been vindicate his rights and redress his repaid nor that the Hunts were not responsible persons. Continuing, the paragraph avers the fraudulent issuance to Mary C. Steifer, without consideration, of thousands of shares of stock, the subsequent sale by the corporation of said stock and payment of exorbitant commissions by the corporation, the proceeds going to Mary C. Steifer, the subsequent borrowing by the corporation of said sum from Mary C. Steifer, and the giving to her of the company's notes and mortgage therefor. In paragraphs 9 and 10 plaintiff alleges the purchase by him in August and December, 1911, of 825 shares of supposed treasury stock for which he paid $3,750; that no part of said sum was received by the treasury of said company, "and said money was wrong fully converted from the funds of said company by said M. V. Steifer and Mary C. Steifer and other persons unknown to plaintiff, for their own personal possession and uses, with the approval, sanction, and connivance Further alleging details of the transaction of the directors of said company, all to the last above referred to, in paragraph 13 it is detriment, damage, and fraud of said com- stated that the company gave to Mary C. pany, and the stockholders thereof." Steifer its promissory notes (setting forth Paragraph 11 purports apparently to set amounts and terms) and a mortgage to secure forth facts constituting a fraud upon plain-payment thereof on all the real and personal tiff (and others named) personally. It avers property of the corporation, and it is stated, that in January, 1902, defendants, other than on information and belief, that the company defendant corporation, and others unknown was not at any time indebted to said Mary to plaintiff, unlawfully and fraudulently con- C. Steifer in any sum whatever. spired and combined to defraud plaintiff and all others who should purchase stock by organizing a corporation to be known as the P. B. Steifer Mining Company, and placing certain shares on the market for sale and selling the same by false representations. The alleged false representations are then particularly set forth and alleged to be false. Paragraphs 11a and 11b allege that plaintiff and the other stockholders believed the fore going fraudulent representations; otherwise they would not have purchased stock. Plaintiff, however, does not aver that the stock was not of the value which he gave for it at the time he purchased, nor that he was oth-the corporation. erwise damaged by the reliance on said rep- In paragraph 16 it is alleged, on informaresentations. The rest of the complaint complains of the assessment levied on the stockholders of the corporation. It is averred that said assessment is, by the resolution creating it, for the purpose of paying in part an indebtedness of some $89,000 alleged to be due Mary C. Steifer, whereas the total corporation debts amounted only to $7,000, and therefore said assessment is unnecessary; that plaintiff and others have not paid the same, and their stock is advertised for sale; that the said Steifers have never paid the assessment upon their stock, but have fraudulently marked their assessments as paid upon the books of tion and belief, that the directors on January 4, 1915, did not levy an assessment upon all the stock of the corporation, to wit, 515,429 shares, but upon 511,949 shares only. The complaint then proceeds to set forth the issuance of 347,500 shares of capital stock to P. B. Steifer in return for certain mining land conveyed by P. B. Steifer to the The prayer in substance purports to ask: corporation, that said land was worthless, (1 and 2) That the issuance of the capital and known to be so by the defendant direc- stock to the defendants and others named, tors, all of which is a fraud upon the com- other than the corporation, be declared ilpany and a breach of trust. In the same legal and void, and a fraud on the corporaparagraph is alleged the fraudulent expendi- tion and the shareholders thereof; (3) "that ture of the corporate money in useless the sale of said capital stock to plaintiff and buildings, flumes, and machinery and in the all other stockholders, other than defendants, payment of excessive and illegitimate sala- was made in furtherance of said conspiracy ries and commissions; that certain shares of to defraud them and made upon false and stock were sold for sums ranging from $5 to fraudulent representations;" (4) that the $8 per share; but that of said sums the cor- mortgage and notes given by the corporation poration received at times but $1 a share, and to Mary C. Steifer be declared to have been at others nothing, the difference being pock- given without consideration and be declared eted by defendants and their confederates. | null and void and canceled; (5) that the asIt is then stated that 300 shares of stock sessment be declared unlawfully levied, and strained; (6) that the sale of the stock be[ restrained; (7) that plaintiffs be given costs and general relief. That the amended complaint states a cause of action in behalf of the corporation against the directors and those co-operating with them cannot be doubted. The case is brought clearly within the rule announced and illustrated by many authorities to which attention is directed in the brief of appellant. It is sufficient to refer to Woodruff v. Howes, 88 Cal. 184, 26 Pac. 111; Wickersham v. Crittenden, 93 Cal. 17, 28 Pac. 788; California Calaveras Min. Co. v. Walls, 170 Cal. 285, 149 Pac. 595; Whitten v. Dabney, 171 Cal. 621, 154 Pac. 312; Harvey v. Meigs, 17 Cal. App. 353, 119 Pac. 941. [1] The fraudulent appropriation of the funds and the spoliation and destruction of the property of the corporation through the agency of the directors present an obvious instance for the interposition of equity at the suit of a stockholder or stockholders who sustain a fiduciary relation to the corporation whose interests they really represent in the action. The general principle is stated in High on Injunctions, vol. 2, § 1203, as follows: [4] In the ninth paragraph there is an imperfect attempt to allege that treasury stock was sold to plaintiff and the proceeds fraudulently appropriated by M. V. Steifer with the approval, sanction, and connivance of the directors of the company. If true, the directors would, of course, be liable to the corporation for the amount of the sale, and it could be recovered in this action. [5] In the twelfth paragraph it appears that the defendants, other than the corporation, issued to said P. B. Steifer 347,500 shares of the capital stock for the right, title, and interest of said Steifer in and to certain alleged mining land when said defendants knew that said right, title, and interest of said P. B. Steifer "was worthless and without value, and that the transfer of said capital stock to said P. B. Steifer was without consideration," etc. Therein, as we view it, is presented, though somewhat inartificially, another instance of fraud against the corporation and cognizable in this proceeding. In the same paragraph is set forth, as we have seen, the useless expenditure of a large amount of the funds of the corporation in the erection of buildings that were not designed or needed for the legitimate purposes of the corporation, and also that large blocks of treasury stock were sold and the money derived therefrom converted to their own use by said defendants; that they also paid to themselves large sums of money for traveling expenses, hotel bills, and salaries out of all proportion to the expenses incurred and the services rendered; that certain shares of stock belonging to the corporation were sold, and only a portion of the proceeds accounted for; that thousands of shares were issued to Mary C. Steifer without consideration; that portions of said stock were sold by the secretary of the corAnd it is equally clear from the authori-poration, and he was paid therefor out of ties that a court of equity, as far as it can be done, will compel the restitution and restoration of the funds or property of the corporation that have been misappropriated or destroyed by the directors and those acting in concert with them. To make it manifest that such is the case before us we may recall more specifically a few of the facts set forth in the amended complaint. "The protection of the rights of shareholders in incorporated companies against the improper or illegal action of other shareholders, or of the officers of the company, is a favorite branch of the jurisdiction of equity by injunction. And it may be asserted as a general rule that courts of equity may enjoin, in behalf of the stockholders of an incorporated company, any improper alienation or disposition of the corporate property for other than corporate purposes, and will restrain the commission of acts which are contrary to law and tend to the destruction of the franchise, as well as the improper management of the business of the company, or a wrongful diversion of its funds or from depriving plaintiff of his rights as a corporator.' [2, 3] The allegation in the seventh paragraph as to the issuance of over 300,000 shares of the capital stock without consideration affords an instance of the violation of article 12, § 11, of the Constitution of the state and section 359 of the Civil Code, and the directors thereby committed a breach of trust to be redressed in an action of this character. Naturally the corporation is concerned in the cancellation of certificates of stock that have been fraudulently issued and are void. Cortelyou v. Imperial Land Co., 156 Cal. 376, 104 Pac. 695. The form of said allegation is subject to criticism, but the averment should be deemed sufficient as against a general demurrer. the funds of the company a large sum for commissions; and that a note and mortgage were given to said Mary C. Steifer to cover money borrowed from her, but which she had received as the proceeds of the sale of said stock fraudulently issued to her as above stated. [6] In the thirteenth paragraph there is the additional allegation that two notes and a mortgage were given to said Mary C. Steifer for the sum of $49,837.07 and $40,000, respectively, whereas the corporation was not indebted to her in any sum whatever. The foregoing are deemed sufficient specifications of fraudulent transactions affecting the interests of the corporation to establish the right of plaintiff to be heard in a court of equity in this kind of proceeding. As indicated, some of the allegations are subject to verbal criticism, but we think respondents seek to apply too strictly the technical rule of pleading. One or two specifications may be noticed briefly. [7] The failure of plaintiff to make demand upon the directors to bring the action |