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DE GARMO v. SHENBERG et al.
Motion for substitution of attorneys.
This proceeding presents another phase of the troubled operating history of the appellant corporation. Recently we had occasion to consider some of its problems in Golden State Glass Corporation v. Superior Court, 13 Cal.2d 384, 90 P.2d 75, which proceeding in prohibition was ancillary to the above-entitled cause now pending here on appeal. Stripped of unessentials, the specific problem presently calling for solution has arisen out of the following circumstances. It appears that the plaintiff and respondent De Garmo, one of the four directors provided for in the articles of incorporation of the defendant and appellant corporation, and the owner of approximately one-third of its stock, commenced this action under section 310 of the Civil Code to remove as directors of the corporation the defendants and appellants Shenberg and Goldman, each of whom also owned one-third of the corporate stock. At the conclusion of a protracted trial the court below made findings which if sustained by the evidence, a matter not now before us but presentable at a later time upon the appeal proper, warranted the removal of said defendant directors under the cited code section. Accordingly, and as authorized by the code section, the trial court made and entered its judgment that ‘A. Goldman and N. E. Shenberg, each be and he is hereby removed from his respective office as a Director of the defendant corporation * * * and that said A. Goldman and said N. E. Shenberg each be barred from re-election during the period prior to December 1, 1940.’ Thereupon the defendants, i. e., the corporation, Goldman and Shenberg, filed separate notices of appeal to this court, each appearing by different counsel. Pursuant to stipulation, the three appeals have been brought up on a single transcript. The opening briefs have been filed in the corporate and Shenberg appeals. The required filing fee has not been paid in the Goldman appeal and technically it has no standing before the court. However, in passing, it may be stated that pursuant to stipulation Newby & Newby have been substituted as counsel for Goldman in place of the firm that filed the notice of appeal on his behalf.
Pursuant to corporate resolution authorizing the same, the present motion is made by Newby & Newby to also have themselves substituted in the place and stead of O. C. Sattinger as counsel for the appellant corporation in its appeal. Goldman, one of the removed directors who, as stated, already has designated Newby & Newby as his counsel upon his appeal, has filed an affidavit in support of the present motion wherein he deposes: ‘That he is a defendant and appellant in the above entitled action and has already substituted Newby & Newby as his attorneys, by and with the written consent of his former attorneys * * * which substitution has been filed; that he also desires Messrs. Newby & Newby to be substituted as the attorneys for the Golden State Glass Corporation in the above entitled action, in lieu of O. C. Sattinger; that affiant has for several years last past, been and is now the owner of one-third of the outstanding capital stock of the Golden State Glass Corporation; that N. E. Shenberg is the owner of one-third of said stock and G. C. De Garmo is the owner of the remaining one-third of said stock and has been such owner at all the times herein mentioned; that affiant has not acted or attempted to act as a director of the Golden State Glass Corporation since the judgment of removal was rendered on February 20th, 1939, and he does not now claim to be a director of said corporation; that after the entry of said judgment of removal, N. E. Shenberg [the other removed director] organized or caused to be organized the Republic Glass Company and ever since has been and now is operating said glass corporation as a competitor of the Golden State Glass Corporation; * * *.’ In the face of Sattinger's refusal to be substituted out as counsel for the corporate appellant this motion became necessary.
It is axiomatic that a client has the unrestricted right to change counsel unless the latter possesses ‘an agency coupled with an interest’, i. e., an actual interest in the subject-matter of the controversy as distinguished from a contingent interest in the avails of the suit. Sec. 284, Code Civ.Proc.; Estate of Cazaurang, 1 Cal.2d 712, 714, 36 P.2d 1069; Echlin v. Superior Court. 13 Cal.2d 368, 372, 90 P.2d 63, 124 A.L.R. 719. A motion for substitution is properly made in the tribunal where the appeal is pending. Jacobus v. Jacobus, 208 Cal. 562, 563, 282 P. 796.
Several affidavits and counteraffidavits, containing many charges and countercharges, have been filed in support of and in opposition to the motion for substitution. It is not our inclination, nor in many particulars our present province, to determine the innumerable factual and legal problems thus raised. Suffice it to say, that upon the giving and entry of the judgment for the respondent De Garmo removing as corporate directors the appellants Goldman and Shenberg, said De Garmo together with the fourth or remaining director, and purporting to act under the provisions of section 306 of the Civil Code, appointed two other persons to fill the two vacancies created on the board of directors by the trial court's judgment of removal. In view of our conclusion to be presently announced, it is immaterial whether the filling of said vacancies preceded or followed the noticing of the appeals from said judgment of removal. Nor do we think that upon this motion for substitution the method of filling the vacancies may be here collaterally attacked. From time to time following the filling of such vacancies other changes were made in the board of directors as a result of resignations and subsequent appointments by the remaining directors. To here detail these several personnel changes on the board would serve no useful purpose.
On March 15, 1940, the board of directors, as then constituted, adopted a resolution which, in part, declared that:
‘Whereas, said appeal purporting to be for and on behalf of said corporation is being prosecuted by said O. C. Sattinger without the consent of said corporation and contrary to its best interest:
‘Now Therefore, Be It Resolved: That the said O. C. Sattinger be and he is hereby notified not to pretend to represent said corporation in any capacity whatsoever and especially in said action No. 428700, or upon said appeal, L.A. No. 17346;
‘Be It Further Resolved: That the President of this corporation be and he is hereby authorized and directed to sign and file a stipulation on behalf of the Golden State Glass Corporation substituting the said Newby & Newby as attorneys for said Corporation in said action, and upon said appeal; and if the said Sattinger refuses to sign said stipulation, the said President is hereby authorized and directed to take all necessary or proper legal steps to effect said substitution in the manner provided by law.’
As already shown, Goldman, one of the removed directors, now favors such substitution. It thus appears that the substitution is desired by the present board of directors of the appellant corporation and by the owners of two-thirds of its stock. However, inasmuch as O. C. Sattinger has refused to join in the stipulation for substitution authorized by the foregoing corporate resolution, this motion as therein contemplated and sanctioned has been made to substitute Newby & Newby in his place and stead. As already intimated, it is immaterial in our opinion whether the appeals from the judgment removing the directors Shenberg and Goldman preceded or followed the filling by the two remaining directors of the vacancies thus created, for said judgment must be held to be self-executing and the appeals therefrom did not serve to stay its operation. Consequently said appeals would not preclude the remaining directors from filling the vacancies and the new board, acting for and on behalf of the corporation, has the right to determine who shall serve as counsel for the corporate entity upon its appeal.
In 2 California Jurisprudence 438, section 195, the rule is generally stated to be that ‘Where a judgment is self-executing, or has intrinsic effect, there are no proceedings to be stayed, or to be affected by an appeal therefrom.’ In Hibernia S. & L. Soc. v. Belcher, 4 Cal.2d 268, 273, 48 P.2d 681, 683, this court held that ‘An order removing an executor, administrator, guardian, or receiver is self-executing. The appeal taken from such order in the instant case did not restore his powers.’
In Dulin v. Pacific W. & C. Co., 98 Cal. 304, 305–307, 33 P. 123, 124, at a stockholders' meeting one Clugston was declared elected a corporate director whereupon Dulin, the plaintiff, commenced an action against the corporation and Clugston under section 315 of the Civil Code to set aside the election of Clugston and to confirm Dulin's election as a director. After trial, the court entered judgment that the plaintiff Dulin and not Clugston had been elected and that the latter was not a director. For all practical purposes the judgment was analogous to that here involved removing the appellant directors. Clugston appealed and contended, as is substantially urged here, that the appeal stayed the judgment. This court declared, in part, that:
‘There are many judgments, however, which are self-executing, or which have an intrinsic effect, upon which there are no proceedings to be stayed, and which will not be affected by an appeal therefrom. A judgment granting or dissolving an injunction, or determining the status of an individual, granting or denying a divorce or an annulment of marriage, quieting title to a tract of land, setting aside the execution of a deed, are instances of such judgments. In Walls v. Palmer, 64 Ind.  496, a judgment had been rendered suspending the petitioner from practicing as an attorney, and it was urged that an appeal therefrom had the effect of restoring him to his right to practice during the pendency of the appeal. The court, however, held that to give that effect to the appeal would be to reverse the judgment of the suspension before the appeal was judicially decided; saying: ‘The effect of the appeal and supersedeas is to stay the judgment of suspension as it is, and prevent further proceedings against the petitioner. It does not reverse, suspend, or supersede the force of the judgment. That remains in all respects the same. The judgment itself requires no further execution than its own terms. It executes itself except as to the collection of costs, which is stayed by the appeal and supersedeas. The only effect of an appeal to a court of error, when perfected and while pending, is to stay execution upon the judgment from which it is taken.’ And herein should be observed the distinction between the effect of an appeal from a judgment in staying further proceedings thereon, and its effect in depriving the judgment itself of any efficacy as evidence of the fact determined. The appeal suspends its force as a conclusive determination of the rights of the parties, but the stay of proceedings consequent upon the appeal is limited to the enforcement of the judgment itself, and does not destroy or impair its character.
‘The purpose of the present application is not to prevent the court from taking any action to enforce its judgment, but to prevent Dulin from acting as one of the directors of the corporation. His assuming to be such director, while it may be in consequence of the judgment is not a proceeding upon the judgment. * * * The court limited its action to ascertaining the result of the election, and did not grant any relief in the premises other than to confirm the election of Dulin, and to declare that Clugston was not elected. No other proceedings have been had or attempted in the court below upon this judgment, and the judgment itself does not contemplate or authorize any other proceedings, or any process to enforce it.’
The foregoing case has been frequently cited with approval.
In conclusion, it should be stated that the granting of this motion merely serves to work a change of counsel for the corporation upon its appeal from the judgment removing directors Shenberg and Goldman. In no way does such substitution affect or destroy the right of said removed directors to prosecute their individual and separate appeals from said judgment of removal.
The motion is granted and Newby & Newby are hereby substituted as counsel for the appellant Golden State Glass Corporation in the place and stead of O. C. Sattinger.
WASTE, Chief Justice.
We concur: SHENK, J.; CURTIS, J.; CARTER, J.
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Docket No: L. A. 17346.
Decided: May 14, 1940
Court: Supreme Court of California.
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