Opinion
NOT TO BE PUBLISHED
Super. Ct. No. PC20050494
CANTIL-SAKAUYE, J.
Plaintiff Jerry Franco sued defendant, the Hines Gilbert Corporation (Hines Gilbert) and its majority shareholder Jerry Huckaby, claiming Franco provided services to Hines Gilbert and in return defendants had presented Franco with an old stock certificate as evidence of his 10 percent shareholder interest in Hines Gilbert. Franco’s suit alleged defendant breached agreements with Franco, disenfranchised him of his stock in Hines Gilbert, and transferred his ownership interest in the corporation to Huckaby. After Hines Gilbert’s attorneys were disqualified and the corporation failed to appear at a mandatory settlement conference, its answer was stricken and Hines Gilbert’s default was entered. At the subsequent prove-up hearing, the trial court entered a default judgment against Hines Gilbert. Huckaby appeared and presented evidence and argument.
Huckaby appeals from the default judgment against Hines Gilbert, which ordered the corporation to reissue 100, 000 shares of its stock, representing a 10 percent interest, to Franco. Huckaby contends he is an aggrieved party with the right to appeal because the judgment will require him to relinquish some of his stock and will result in the loss of his majority shareholder status. He further contends there is no substantial evidence that Hines Gilbert ever issued Franco any stock, so there is no basis for compelling the corporation to reissue stock to him. We agree with both points and reverse the default judgment as to Hines Gilbert.
FACTUAL AND PROCEDURAL BACKGROUND
The first amended complaint alleged Huckaby approached Franco in 2002 and explained he had inherited certain properties and mineral rights that he thought were valuable. Huckaby also said he was sole owner of Hines Gilbert. Huckaby sought Franco’s assistance in realizing the value of Hines Gilbert and the properties. Franco agreed to assist Huckaby and Hines Gilbert in exchange for 10 percent of the value of Hines Gilbert and the properties.
Franco assisted defendant, including meeting with Teichert Construction, Granite Construction, Derek Vanacore and William Palmer. On January 15, 2003, Huckaby, Franco, Vanacore and Palmer executed a Memorandum of Understanding (MOU). The MOU provided that Vanacore and Palmer would purchase 45 percent or 450, 000 shares of Hines Gilbert for a total purchase price of $100. Huckaby would transfer certain assets into Hines Gilbert. The MOU acknowledged that Franco had provided valuable services and was entitled to a performance bonus or a finder’s fee “provided certain future conditions are met.” The performance bonus or finder’s fee was to be the lesser of a fixed payment or a percentage of certain assets. The MOU also set forth certain contingencies necessary to close the transaction.
The first amended complaint alleged that based on Franco’s performance, defendant presented Franco with an old Hines Gilbert stock certificate as evidence of his 10 percent interest in Hines Gilbert. It alleged defendant promised certain documents would be forthcoming to confirm Franco’s status as a shareholder in Hines Gilbert. These promises were deliberate misrepresentations intended to induce Franco to provide funds and services and Franco made significant financial expenditures.
The first amended complaint alleged defendant failed to perform. At times Huckaby claimed to be sick, but was actually drunk, high on marijuana, and selling illegal drugs. On August 12, 2003, a shareholders meeting was held, which Franco attended as a shareholder. Subsequently, Huckaby confirmed the validity of certain documents, including the stock certificate given to Franco. Later, Huckaby told Vanacore he would not honor his commitment to Franco because Franco owed him a personal debt. In October 2003, Huckaby met with Franco and told Franco he would “see him in court, ” repudiating Franco’s shareholder relationship.
The first amended complaint alleged 12 causes of action. The first was captioned an action to compel Hines Gilbert to reissue stock to Franco under Corporations Code section 419. Franco alleged he was the lawful owner of 10 percent of the outstanding shares of Hines Gilbert stock, but his stock certificates had been decertified and his stock transferred to Huckaby. Franco notified defendant he wanted his stock honored and new certificates reissued to replace Franco’s original damaged certificates. Defendant refused to do so.
The first amended complaint set forth various causes of action for breach of fiduciary duty, breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, conversion, fraud, violation of state securities law and fraudulent business practices based on defendant’s transfer of Franco’s stock to Huckaby and defendant’s failure to honor Franco’s rights as a shareholder of Hines Gilbert. The complaint also sought specific performance of the MOU and injunctive relief, both based on Huckaby’s failure to transfer certain assets to Hines Gilbert.
Hines Gilbert answered with a general denial and 36 affirmative defenses.
The trial court granted Franco’s motion to disqualify Hines Gilbert’s attorneys for a conflict of interest as they represented both Hines Gilbert and Huckaby.
After Hines Gilbert failed to appear at a mandatory settlement conference, the court struck its answer. Hines Gilbert’s default was entered.
Franco requested a default judgment compelling Hines Gilbert to reissue 100, 000 shares of its stock to Franco, representing his 10 percent interest. Franco submitted the following evidence at the prove-up hearing in support of that default judgment. Franco provided “sworn affidavits and corporate documents that show he is a shareholder in Hines Gilbert.” Vanacore and Palmer declared they knew Franco was a shareholder of Hines Gilbert. Vanacore and Palmer further declared Huckaby had admitted as much and had signed documents indicating Franco’s shareholder status. They had been given old, damaged stock certificates at the same time as Franco; theirs were replaced with proper certificates, but not Franco’s.
In the prove-up hearing, the court has discretion to “permit the use of affidavits, in lieu of personal testimony, as to all or any part of the evidence or proof.” (Code Civ. Proc., § 585, subd. (d).)
Franco’s declaration stated he had been given a damaged stock certificate marked “cancelled.” He had witnessed Huckaby sign documents indicating Franco was a shareholder. Franco further declared that Huckaby told Franco he was a shareholder before and after the August 12, 2003 shareholder’s meeting. Franco submitted to the court a stock certificate for 1, 000 shares, issued to William Sampson in 1920 and transferred to Marie Healy in 1929. The certificate was marked “cancelled.”
Other documents were submitted as exhibits to Vanacore’s declaration. These included an addendum to the MOU, signed by Franco; the addendum did not mention Franco or his entitlement to stock in Hines Gilbert. The minutes of a special meeting of shareholders, held August 12, 2003, authorized the sale of assets. Franco signed the minutes as a shareholder. On the same date, Huckaby executed a special power of attorney appointing Vanacore; the document did not mention Franco. In 2006, notices of a shareholders meeting were sent to Vanacore and Palmer, but not to Franco.
Franco argued Huckaby had no standing to argue against entry of judgment as Hines Gilbert had been suspended for nonpayment of taxes.
Huckaby opposed the entry of judgment against Hines Gilbert, contending the judgment was premature and must wait until trial on the case against Huckaby. Huckaby appeared at the prove-up hearing and argued entering a judgment against Hines Gilbert would gut his case. A jury needed to determine if Huckaby had agreed to transfer shares to Franco. The trial court refused to continue the matter, but permitted Huckaby to cross-examine Franco and to take the stand.
Franco testified that from the beginning Huckaby told him he would get 10 percent of the stock in Hines Gilbert. In a deposition, Franco had testified there was no written agreement to convey stock to him, but Franco later changed his answer to “yes, ” explaining Huckaby gave him a stock certificate and writings that identified him as a shareholder. Franco testified he was not given any writings with the Sampson stock certificate, just oral promises, and Huckaby never signed a stock certificate in Franco’s name.
Huckaby testified there was no written agreement to give Franco stock in Hines Gilbert. He testified his father had suspended the corporation, paid the shareholders for their stock, and cancelled the stock certificates. The old stock certificates were part of the corporate records he gave to Franco to give to Palmer for review.
The trial court ordered entry of a default judgment against Hines Gilbert. The judgment ordered Hines Gilbert to (1) reissue stock in the corporation to Franco representing his 10 percent interest in Hines Gilbert as 100, 000 shares of stock; (2) respect all rights of Franco as a registered shareholder; and (3) maintain all required books and records at the principal place of business of Hines Gilbert as 100 Iron Point Cir., Folsom California.
Huckaby appealed.
DISCUSSION
I.
Huckaby is an Aggrieved Party and May Appeal
Before the parties filed their briefs, we requested further briefing on the issue of whether Huckaby is an “aggrieved party” under Code of Civil Procedure section 902. Only Huckaby responded.
That statute provides as follows: “Any party aggrieved may appeal in the cases prescribed in this title. A party appealing is known as an appellant, and an adverse party as a respondent.”
“One is considered ‘aggrieved’ whose rights or interests are injuriously affected by the judgment. [Citations.] Appellant’s interest ‘must be immediate, pecuniary, and substantial and not nominal or a remote consequence of the judgment.’ [Citation.]” (County of Alameda v. Carleson (1971) 5 Cal.3d 730, 737.) “And as to the question who is the party aggrieved, the test... seems to be the most clear and simple that could be conceived. Would the party have had the thing, if the erroneous judgment had not been given? If the answer be yea, then the person is the ‘party aggrieved.’ But his right to the thing must be the immediate, and not the remote consequence of the judgment, had it been differently given.” (Adams v. Woods (1857) 8 Cal. 306, 315, quoted in Crook v. Contreras (2002) 95 Cal.App.4th 1194, 1201.)
We also consider the remedial nature of Code of Civil Procedure section 902. It should be liberally construed and any doubts about appellate standing are resolved in favor of the right to appeal. (Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 540.)
Huckaby contends he is aggrieved because the trial court’s judgment will result in the loss of 100, 000 shares of his stock in Hines Gilbert and his status as the majority shareholder. Thus, he would have had “the thing”--100, 000 shares of Hines Gilbert stock and majority shareholder status--if the judgment had not been given. Since Huckaby’s right to the stock is immediate and pecuniary, we conclude he is an “aggrieved party” with the right to appeal.
Huckaby was a party; he was named as a codefendant in his individual capacity in the first amended complaint. Further, Huckaby appeared and argued below against entry of the default judgment, the matter that is the subject of this appeal. “Once the right to appear is established, the right to appeal an adverse decision should follow.” (Guardianship of Pankey (1974) 38 Cal.App.3d 919, 927 [proceeding involving minor children].)
II.
There was no Substantial Evidence that Franco was Issued Stock or was a Shareholder of Hines Gilbert
In an action other than an action on a contract for the recovery of money or damages only, judgment may be had if the defendant fails to answer. (Code Civ. Proc., § 585, subd. (b).) “The court shall hear the evidence offered by the plaintiff, and shall render judgment in the plaintiff’s favor for that relief, not exceeding the amount stated in the complaint, ... as appears by the evidence to be just.” (Ibid.)
“Generally speaking, the party who makes default thereby confesses the material allegations of the complaint. [Citation.]” (Taliaferro v. Davis (1963) 216 Cal.App.2d 398, 408.) Where a cause of action is stated in the complaint and the plaintiff introduces evidence to establish a prima facie case, the court must enter a judgment in favor of plaintiff. (Id. at pp. 408-409.) If the evidence does not support the allegations and show damage was sustained, the court will deny a default judgment. (Taliaferro v. Hoogs (1963) 219 Cal.App.2d 559, 560.)
Franco’s request for a default judgment compelling Hines Gilbert to reissue him 100, 000 shares of stock was premised on his assertion that he was a 10 percent shareholder in Hines Gilbert. His first cause of action to compel reissuance of stock alleged he was the lawful owner of 10 percent of the outstanding shares of Hines Gilbert common stock. Huckaby contends there is no substantial evidence that Franco was a lawful owner or had any Hines Gilbert stock.
While there was evidence Huckaby promised Franco 10 percent of the stock in Hines Gilbert and told him he was a shareholder and at times treated him as such, there was no evidence Franco actually received any stock in Hines Gilbert. Both Vanacore and Palmer declared they knew Franco was a shareholder because Huckaby admitted such and they saw Huckaby sign documents indicating Franco’s shareholder status. However, the only document submitted that Huckaby signed showing Franco was a shareholder was the minutes of an August 2003 shareholder’s meeting, which Franco signed as a shareholder. At best, this evidence might bind Hines Gilbert to a promise to issue Franco stock, but it does not show any stock was actually issued to Franco.
Franco declared Huckaby told him he was a shareholder and had given him an old, cancelled stock certificate for 1, 000 shares as evidence of Franco’s shareholder status. We fail to discern how an old, cancelled stock certificate in another’s name and in a different number of shares shows Franco was issued 100, 000 shares of stock in Hines Gilbert. Again, this evidence may support the promise to issue stock, but not that such issuance actually occurred.
Significantly, the MOU indicated Franco was entitled to a performance bonus or finder’s fee, subject to unspecified future conditions, but made no mention of Franco receiving any stock. Moreover, notices of shareholder’s meetings in 2006 were sent to Vanacore and Palmer, but not Franco.
Since there was insufficient evidence to establish even a prima facie case that Franco was issued shares of Hines Gilbert stock, one prerequisite to the reissuance of corporate stock, there was no basis for the default judgment compelling Hines Gilbert to reissue stock certificates to Franco.
DISPOSITION
The judgment is reversed. Franco’s motion to strike and request for sanctions is denied. Huckaby shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) and (a)(2).)
We concur: SCOTLAND, P. J. SIMS, J.