Opinion
Department One
Hearing In Bank Denied.
Appeal from a judgment of the Superior Court of San Bernardino County, and from an order denying a new trial. G. E. Otis, Judge.
COUNSEL:
A right of way to carry water through a pipe line is not real property, but is an easement in gross, and is not transferable. (Civ. Code, secs. 658, 662, 802, 803, 809; Reed v. Spicer , 27 Cal. 61; Kellet v. Ida Clayton etc. Wagon Road Co ., 99 Cal. 210; Washburn on Easements, p. 3, 15; Dark v. Johnston , 55 Pa. St. 169; 93 Am. Dec. 732; Wagner v. Hanna , 38 Cal. 111; 99 Am. Dec. 354; Bloom v. West, 3 Col. App. 212; Wood v. Truckee Turnpike Co ., 24 Cal. 475; Von Drachenfels v. Doolittle , 77 Cal. 295; Painter v. Pasadena etc. Co ., 91 Cal. 74; Pfeiffer v. Regents of University of California , 74 Cal. 156; Crippen v. Morss , 49 N.Y. 63; Philbrick v. Ewing , 97 Mass. 133.) As the complaint does not state a case affecting real property, the action to quiet title cannot be maintained. (Parks Canal etc. Co. v. Hoyt , 57 Cal. 46; Bloom v. West, supra .) The complaint is insufficient, because it does not allege that at the time of the making of the deed and subsequent transfer by the Vivienda Water Company that said company was the owner or in possession of either the water, canal, or pipe line described, nor that at the time G. A. Fudickar made the transfers to plaintiff that he was the owner or in possession of the property. (Turner v. White , 73 Cal. 300; Heeser v. Miller , 77 Cal. 192; Gruwell v. Seybolt , 82 Cal. 7; Castro v. Richardson , 18 Cal. 479; Sedgwick and Wait on Trial of Title to Land, sec. 443.) The judgment is not supported by the findings, because in order to constitute the exhibits and transfers a foundation for plaintiff's ownership, it should have been alleged, proven, and found by the court that the grantors therein were, at the time of their execution, in the actual possession, or that they were the owners, of the rights transferred. (Miller v. Long Island R. R. Co ., 71 N.Y. 383; Miller v. Downing , 54 N.Y. 631; Sedgwick and Wait on Trial of Title to Land, sec. 723 d; Simmons v. Hamilton , 56 Cal. 493; Gruwell v. Seybolt, supra; Civ. Code, sec. 1084; Martindale on Law of Conveyancing, sec. 93.) The deeds under which plaintiff claims are against public policy and void, since they appear on their face to have been made by the Vivienda Water Company, a corporation, by its president, granting and conveying the property to himself. (Civ. Code, sec. 2229; Wickersham v. Crittenden , 93 Cal. 17; Coal Co. v. Sherman, 30 Barb. 571; Barnes v. Brown , 80 N.Y. 535; Wilbur v. Lynde , 49 Cal. 290; 16 Am. Rep. 645; San Diego v. San Diego etc. R. R. Co ., 44 Cal. 106; Farmers' etc. Bank v. Downey , 53 Cal. 466; 31 Am. Rep. 62; Davis v. Rock Creek etc. Co ., 55 Cal. 364; 36 Am. Rep. 40.) This resolution is a void act, because it was moved, seconded, and voted for by the beneficiaries named therein. (Alta Silver Min. Co. v. Alta Placer Min. Co ., 78 Cal. 629.) Neither the president nor the secretary, nor both together, by virtue of their office, had the power to sell the company's property, without a resolution duly passed by the board of directors, authorizing it to be done and describing the property to be sold. (Alta Silver Min. Co. v. Alta Placer Min. Co., supra ; Salfield v. Sutter County Land etc. Co ., 94 Cal. 546; Davis v. Rock Creek etc. Co., supra ; Finch v. Riverside etc. Ry. Co ., 87 Cal. 597; Morawetz on Corporations, sec. 531; Civ. Code, sec. 305; Wickersham v. Crittenden, supra .) The ratification must be in writing, because the authority to convey real property should be in writing (Civ. Code, sec. 2309), and a ratification could only be made in the same manner. (Civ. Code, sec. 2310; Harding v. Vandewater , 40 Cal. 78; Salfield v. Sutter County Land etc. Co., supra .) If the property conveyed was personal property then the action cannot be maintained. (Code Civ. Proc., sec. 738; Frost v. Spitley , 121 U.S. 552.)
Charles R. Gray, for Appellant.
R. H. F. Variel, and Goodcell & Leonard, for Respondent.
The corporation was a mere agent to carry out an agreement between respondent and his associates, which was done by executing the deed in question. (Chater v. San Francisco Sugar Refinery , 19 Cal. 246, 247; Shorb v. Beaudry , 56 Cal. 450.) The genuineness and due execution of both deeds are deemed admitted, because of failure of defendant to verify its answer. (Code Civ. Proc., sec. 447.) A deed executed through the violation of a fiduciary relation, and without actual fraud, is not void, but only voidable at the election of the parties affected thereby. (Twin Lick Oil Co. v. Marbury , 91 U.S. 587; Hoyle v. Plattsburgh etc. R. R. Co ., 54 N.Y. 314; Thomas v. Brownville etc. R. R. Co ., 109 U.S. 524; Boyd v. Blankman , 29 Cal. 34; Graves v. Mono Lake etc. Min. Co ., 81 Cal. 319; Campbell v. Argenta etc. Min. Co ., 51 F. 1; Smith v. Los Angeles Immigration etc. Assn ., 78 Cal. 289; 12 Am. St. Rep. 53; Bigelow on Fraud, 327.) A deed may be ratified by the beneficiary in express terms or by conduct. (Civ. Code, sec. 230, subd. 1; White v. Iseline , 26 Minn. 490; Remick v. Butterfield , 31 N.H. 70; 64 Am. Dec. 316; Jennison v. Hapgood, 7 Pick. 1; 19 Am. Dec. 258.) The director of a corporation can honestly deal with it and purchase its property. (Pneumatic Gas Co. v. Berry , 113 U.S. 322.) Defendant claims the pipe line under a quitclaim deed, and cannot avoid plaintiff's title. (Johnson v. Williams, 37 Kan. 179; 1 Am. St. Rep. 243; Graham v. Railroad Co ., 102 U.S. 156; Hoffman v. Bullock , 34 F. 248; Crocker v. Bellangee , 6 Wis. 645; 70 Am. Dec. 489; Milwaukee etc. R. R. Co. v. Milwaukee etc. R. R. Co ., 20 Wis. 174; 88 Am. Dec. 740; Whitney v. Kelley , 94 Cal. 146; 28 Am. St. Rep. 106; Lawrence v. Montgomery , 37 Cal. 183.)
JUDGES: Van Fleet, J. Harrison, J., and Garoutte, J., concurred.
OPINION
VAN FLEET, Judge
[41 P. 1025] This is an action to quiet plaintiff's title to a certain water right and to certain rights in a pipe line and canal used for the carrying of the same.
No demurrer was interposed to the complaint, but the defendant answered, disclaiming any title or interest or adverse claim in or to the alleged water right, asserting absolute title in defendant to the pipe line and canal, and denying any interest therein in plaintiff. The pleadings were not verified. The plaintiff had judgment as prayed for, and the defendant appeals from the judgment and from an order denying its motion for a new trial.
The appellant contends: 1. That the complaint fails to state a cause of action; 2. That the findings do not support the judgment; 3. That the evidence is insufficient to justify the findings; and 4. That certain rulings of the court were erroneous.
1. No demurrer having been interposed to the complaint, mere defects in the manner of stating the facts relied on cannot now be considered. If a cause of action be stated, though defectively, the complaint must be sustained, notwithstanding any ambiguity or uncertainty that may exist therein; and, in aid of the judgment, the complaint must now receive as favorable an interpretation as its general scope will warrant. Tested by these rules, we think the complaint sufficient. It is certainly not a model of good pleading, and might have been obnoxious to a special demurrer; but, taking all the allegations together, it may fairly be construed as showing that the property claimed is real property, and that the plaintiff is the owner of that property.
The allegations of the complaint are, in substance: That plaintiff is the owner in fee of "that certain real property" described in two certain instruments annexed to and made a part of the complaint, and being, 1. A certain undivided interest in forty-two inches of water measured under a four-inch pressure, flowing through a certain canal and pipe line "from" certain described lands; 2. "The right of way for carrying the said forty-two inches of water" through said canal and pipe line; 3. The right to use said water for certain purposes; and 4. The right, in aid of such use, of making connections with said canal and pipe line. The instruments annexed to the complaint describe the property as follows: 1. "The following described water and water rights,. .. . being forty-two inches of water, continuous flow,. .. . being part of that water and water right. .. . on and flowing from" certain lands described; 2. A right of way through a certain pipe line and canal, for the carrying of said water, "together with a proportionate interest in said pipe line and canals in the proportion that the said forty-two inches bears to the whole carrying capacity thereof." The complaint further alleges that the property in question was conveyed by the Vivienda Water Company, a corporation, by said instruments to G. A. Fudickar (plaintiff's grantor) and one F. C. Howes, and that said instruments, "together with certain transfers from G. A. Fudickar. .. . to plaintiff, constitute the foundation of the plaintiff's claim, right, and title to the aforesaid water rights and rights of way." It is further alleged that the defendant claims adversely to plaintiff some estate or interest in the property, under a conveyance from said Vivienda Water Company, subsequent to plaintiff's conveyance therefrom. This latter allegation, so far as relates to the canal and pipe line, is admitted by the answer.
Appellant first contends that the plaintiff has attempted to set forth a deraignment of the title, which must be considered as controlling the general allegation of her ownership; and that this deraignment is insufficient, because, (a ) no title is alleged in the Vivienda Water Company; (b ) the alleged right is mere personal property, which cannot be the subject of an action to quiet title; and (c ) the alleged rights granted by the Vivienda Water Company in the canal and pipe line constitute merely a servitude in gross, and were not transferable to plaintiff.
( a ) As both the complaint and the answer show that plaintiff and defendant claim under a common grantor, it was not necessary to allege the title of that common grantor.
We do not, however, consider the complaint as setting forth a deraignment of title. The reference to the instruments annexed to the complaint appears rather to be for purposes of description, and as more clearly defining the nature of the rights claimed. The allegation of the ultimate fact of ownership must, therefore, be deemed to control, unless inconsistent with the facts specially alleged.
( b ) The answer disclaimed any interest in the water right, and we therefore could not reverse the judgment on account of any defect in the complaint in that particular.
But, as we construe the complaint, the water right claimed is real property. For the purpose of ascertaining its nature, the terms of the instrument annexed to the complaint may be examined. (Lambert v. Haskell , 80 Cal. 611.) From them it is seen to consist of a continuous flow of water on certain land, and from thence through a canal and [41 P. 1026] pipe line. Such a right is, or at least may be, real property. So long as the water flows in its natural channel it is undoubtedly real property; and while flowing by right through a canal or pipe, which is real property and owned by the owner of the water, it is appurtenant to the canal or pipe, and, therefore, real property. (Civ. Code, secs. 658, 662.) The canal and pipe in this case were real property, and appellant concedes that they were such. If, therefore, plaintiff has any estate in the canal and pipe line, the water right is entirely real property. There is nothing in the cases of Parks Canal etc. Co. v. Hoyt , 57 Cal. 44, and Bloom v. West, 3 Col. App. 212, cited by appellant, which conflicts with this doctrine, and the latter case clearly recognizes its correctness.
( c ) Appellant contends that neither the instruments of conveyance nor the allegations of the complaint contain anything to show that the rights claimed were appurtenant to any land of the plaintiff; that the complaint claims only a "right of way" in the canal and pipe line; and that such a right is one of the servitudes in gross mentioned in section 802 of the Civil Code, and is not transferable.
It is true that, at common law, servitudes merely in gross were not assignable, though this doctrine was so far looked on with disfavor that many nice distinctions were invented to limit it. But the Civil Code of this state has swept away both the rule and the distinctions. By sections 654 and 802 this class of servitudes is declared to be property; and by section 1044 every species of property, except a mere possibility not coupled with any interest, may be transferred. (Rice v. Whitmore , 74 Cal. 619; 5 Am. St. Rep. 479.) It is true that in Painter v. Pasadena Land etc. Co ., 91 Cal. 74, 84, it was said that the servitudes named in section 802 are not assignable. That remark was, however, merely dictum; and that question was not argued in that case, nor the attention of the court directed to section 1044. In Bloom v. West, supra, cited by appellant, such rights were expressly held to be assignable.
But what the complaint claims is not a mere "right of way." It is so denominated by the pleader; but the language of the conveyances, which are part of the complaint and which control as to description, shows that it is a definite interest or estate in the canal and pipe line. By those conveyances an undivided interest, equal to the grantee's proportionate share of the water, was conveyed. That interest is a corporeal estate, and not an easement or servitude at all, and to that estate the water right is appurtenant. The complaint alleges that a certain undivided portion of this interest has been conveyed to plaintiff, and she is, therefore, entitled to sue with respect to that interest.
2. The findings are sufficient to support the judgment. Most of the objections urged to them by appellant are covered by what we have said respecting the pleadings. Appellant also contends that the deed (Exhibit A) from the Vivienda Water Company to Fudickar & Howes is void on its face, as against public policy, because executed by Fudickar, as president of the corporation, to himself as grantee. But this deed purports to have been made under authority of a resolution of the board of directors, directing its execution by the president and secretary, and recites that a full board was present at that meeting. On the face of the deed, therefore, the president acted not as a trustee, but as the mere instrument of the board of directors, and the doctrine relied on does not apply.
3. Appellant's contention that the evidence does not justify the findings embraces many particulars; but, in the view which we take of the case, it is necessary to consider only one of them.
As we have said, the only issue in the case is as to plaintiff's ownership of an interest in the canal and pipe line, and, under the pleadings, that interest must be regarded as real property. If it be not real property this action cannot be maintained, for no action will lie in this state merely to quiet the title to personal property.
Plaintiff seeks to deraign her title to this real property through the Vivienda Water Company, a corporation, the title of which corporation is now held by defendant, unless it was previously conveyed to plaintiff. In actions of this character the plaintiff must establish a legal, as distinguished from a mere equitable, title. (Von Drachenfels v. Doolittle , 77 Cal. 295; Nidever v. Ayers , 83 Cal. 39; Bryan v. Tormey , 84 Cal. 126; Harrigan v. Mowry, 84 Cal. 456.) Being real property the interest sued for could be conveyed only by deed; and, to support the deed of a corporation (when, as in this case, it does not bear the corporate seal) it is incumbent on the party relying on it to show affirmatively that it was executed by authority of a resolution of the board of directors, entered on the records of the corporation, or that it was ratified by such a resolution. (Salfield v. Sutter County L. etc. Co ., 94 Cal. 546.) In the present case the deeds relied on by plaintiff were neither authorized nor ratified by any such resolution. The only resolutions of the board of directors on the subject were the following:
[Nov. 7, 1887.] "Moved and seconded that the company gives and exchanges with Messrs. Howes and Fudickar forty-two inches of water from the Raynor supply for the forty-two inches now owned by them from the Vivienda well supply, and that the forty-two inches so received from Messrs. Howes and Fudickar be sold by the company and the proceeds thereof to represent the proceeds of the forty-two [41 P. 1027] inches so exchanged from the Raynor supply, and be diverted with Mr. Raynor's consent according to the contract with him, the said water to be given and taken in exchange at the common point of meeting, the northeast corner of the Goldkoffer property. Motion carried."
[May 11, 1888.] "It was moved and seconded that the president and secretary be authorized to carry out the terms of that certain resolution heretofore made by this company for exchange with G. A. Fudickar and F. C. Howes of forty-two inches of water, and that the president and secretary be authorized to execute and deliver and receive deeds in accordance with the above."
[March 12, 1889.] "Resolved, that the forty-two inches of water deeded to Fudickar and Howes be carried free of charge by this company to the lands of Fudickar and Howes, in section 32, township 1 south, range 4 west, S. B. M., on the East Riverside mesa. Motion seconded by Mr. Howes and carried." We do not discover anything in the transcript to show that the second of the above-quoted resolutions was ever adopted by the board. But, however this may be, it is evident that none of these resolutions purport to grant any authority to convey any interest in the canal or pipe line of the corporation. At the most they authorize only a conveyance of the water right (not in dispute in this action) and an agreement on the part of the corporation to deliver that water at a certain point or points. The deeds executed by the president and secretary, so far as they purport to convey any interest in the canal and pipe line, were, therefore, unauthorized and void. They were not, as respondent contends, merely voidable. They were not the acts of the corporation at all, and the parol acts of ratification and acquiescence relied on by plaintiff did not validate them (Civ. Code, sec. 2310), and, therefore, cannot aid the plaintiff in this action.
These considerations dispose of plaintiff's right to recover under the pleadings as now framed, and necessitate a reversal. But the evidence tends strongly to suggest that, though the legal title is in defendant, plaintiff is equitably entitled to a conveyance from defendant, as a purchaser from the Vivienda Water Company with notice of plaintiff's equities. As the case appears to have been tried on both sides upon a wrong theory, the evidence is not clear on this point, and it would not be proper to express, at this time, any opinion as to its sufficiency for that purpose. But, as it appears that under pleadings properly framed for that purpose plaintiff might be entitled to a specific performance of the contract between the corporation and Fudickar and Howes, or some other equitable remedy, we think the ends of justice will be best subserved by permitting the plaintiff to amend so as to avail herself of her equities, if any. In this view it is probable that many of the questions discussed on this appeal will not arise upon a new trial, and we will, therefore, briefly state our conclusions on such points only as appear to be necessary for the guidance of the court below.
A contract between a corporation and one of its directors by which such director obtains property of the corporation, or some other advantage to himself, is not absolutely void, but is voidable only at the instance of the corporation or of its stockholders. The corporation, as well as its stockholders, may moreover be estopped from questioning its validity, either by express ratification or by their laches or acquiescence. On these points the burden of proof is upon the director claiming the benefit of the contract.
The right to avoid such a contract must be exercised by the corporation itself (or a stockholder acting for it), and cannot be transferred to another. (Sanborn v. Doe , 92 Cal. 153; 27 Am. St. Rep. 101.) If, however, in a purely equitable action, the rights of the plaintiff depend entirely upon such a contract, the plaintiff must show the existence of the facts upon which the validity of the contract depends, even though the defendant is not the corporation, but merely its assignee; because a plaintiff must come into a court of equity with clean hands. But, if the defendant claims only under a quitclaim deed from the corporation, and does not otherwise connect himself with the rights of the stockholders, this rule will not apply, unless the case of the plaintiff discloses actual, as distinguished from constructive, fraud. The defendant in such a case, not having been injured by the transaction, cannot be heard to complain of it.
The deed to plaintiff from Fudickar is not void for uncertainty. It contains a description which might, by appropriate evidence of the facts therein referred to, be shown to apply to the property here in controversy. Nothing more is required of any deed.
The other points made cannot be properly decided upon the present record, and no reference to them is necessary.
The judgment and order denying a new trial are reversed, and the cause remanded to the court below, with directions to permit the parties to amend their pleadings as they may be advised, and for such further proceedings as shall not be inconsistent with this opinion.