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District Court of Appeal, Fourth District, California.


Civ. 3190.

Decided: May 21, 1946

Kendall, Howell & Deadrich, of Bakersfield, and Roy P. Dolley, of Los Angeles, for appellant. Calvin H. Conron, Jr., of Bakersfield, for respondent.

This is an appeal from a judgment in favor of plaintiff for principal and interest, attorneys' fees and costs, based on a promissory note given to plaintiff by defendant.

Actually the promissory note was given in lieu of payment of a cash dividend, according to the testimony of plaintiff and the secretary of the corporation. The corporation gave plaintiff a check for the amount of the dividend and he immediately gave his check to the corporation for a like amount in exchange for the note.

The corporation had nine directors, all of whom were stockholders. There were other stockholders, the exact number being undisclosed.

The record before us is not as complete as could be desired. However, we will assume certain facts to have been proved which are relied upon by plaintiff to authorize the payment of a dividend as we believe the turning point of the case is the lack of regularity of the special meeting of the board of directors at which the dividend was attempted to be declared and perhaps a resolution passed attempting to authorize the issuance of promissory notes to each director ‘in full payment of the dividend due them’.

The directors of the corporation were Gould M. Fitch, Clare R. Fitch, Walter J. Meyers, Helen K. O'Neal, George W. Gill, Jr., Emil Hefty and Joe D. Weedon. Gould M. Fitch, George W. Gill, Jr., Walter J. Meyers and Joe D. Weedon were present at the meeting and voted in favor of declaring the dividend and may have decided to give the directors the promissory notes in lieu of paying the dividend in cash. Directors Clare R. Fitch, Helen K. O'Neal and Emil Hefty were not present. As far as the record shows there was no call of the special meeting, no notice of it given to any of the directors (Sec. 307a, Civil Code), and no waiver of notice nor consent to the meeting signed by any of the absent directors. Sec. 307b, Civil Code.

It is well established in this State that a special meeting held without call or notice, or without written waiver of notice, or consent to the meeting signed by the absent directors is illegal, and that the directors present at such meeting cannot perform any valid corporate act. As said in Curtin v. Salmon River, etc., Co., 130 Cal. 345, 62 P. 552, 553, 80 Am.St.Rep. 132: ‘It was shown by the testimony of the secretary that no notice of the meeting was given to either of the two directors who were absent therefrom, and the minutes of the corporation contain no entry of the service of any notice of the meeting; nor were the minutes of that meeting ever approved at any subsequent meeting of the board of directors. Under well-settled rules, it must be held that the directors present at that meeting could not perform any valid corporate act. Harding v. Vandewater, 40 Cal. 77; Thompson v. Williams, 76 Cal. 153, 18 P. 153 [9 Am.St.Rep. 187]; Smith v. Dorn, 96 Cal. 73, 30 P. 1024 [Pauly v. Pauly, 107 Cal. 8, 40 P. 29, 48 Am.St.Rep. 98].’ See also, Cheney v. Canfield, 158 Cal. 342, 111 P. 92, 32 L.R.A.,N.S., 16, and cases cited in 6a Cal.Juris. Sec. 599, pages 1075–1076.

Plaintiff argues that defendant is estopped to urge the invalidity of the note. We cannot see how estoppel can arise from the facts before us. Plaintiff was a director and the vice president of the corporation and is charged with notice of the invalidity of the meeting.

As the evidence fails to show that the promissory note was lawfully issued for a valid consideration the judgment in favor of plaintiff cannot be supported.

The judgment is reversed.

MARKS, Justice.

BARNARD, P. J., and GRIFFIN, J., concur.

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