Schwab v. Schwab-Wilson MacHine Corp.

GOULD, J.,

pro

tem.

Plaintiff Schwab, defendant Wilson and one Williams constituted the board of directors of defendant corporation, the stock of which was so distributed among the three directors and plaintiff Seifert that no one stockholder owned sufficient to exercise voting control. In this action it is alleged that while plaintiff Schwab was suffering from an extended illness the other two directors, without notice of any kind to him, secured permission from the state commissioner of corporations to issue additional stock, and that defendant Wilson thereupon and without allowing plaintiffs or any other stockholder to purchase any of the new stock, bought sufficient to give him a total amount exceeding by one share the combined total of all other stock authorized, both issued and unissued. In other words, it is charged by the complaint that defendant Wilson, by the acts complained of, converted his position from that of a minority to that of a majority stockholder. Williams, the director acting with defendant Wilson, was the owner of only a single share of stock. Some two months after Wilson purchased the new stock he transferred it to defendant Higgins, his brother-in-law, residing in his home.

At the trial both plaintiffs testified as to their willingness, desire and ability to purchase and pay for a part of the new stock proportionate to their former holdings in the corporation. Evidence also was received to the effect that the book value of the stock at the time of the new issue was in excess

[3]

of par, at which it was sold to defendants. The trial court at the conclusion of plaintiffs’ case granted defendants’ motion for nonsuit, and judgment was entered accordingly. Plaintiffs appeal.

From the corporate entity arise a group of contractual relationships between the corporation, its stockholders, directors and officers. A corporate director acts in a fiduciary capacity, not only towards the corporation itself (Cal. Jur., vol. 6A, p. 1100), but also towards the stockholders. As expressed in

Wickersham

v.

Crittenden,