Bee v. Cooper

WASTE, C. J.

Plaintiffs appeal from a judgment entered in favor of the defendants upon the granting of a motion for nonsuit.

The cause went to trial on plaintiffs’ second amended complaint, wherein it is alleged, in substance, that the plaintiffs are stockholders of the Federal Building & Finance Company, a corporation; that prior to the filing of this action they had, without avail, made demand on the corporation to take the necessary steps to recover certain of its assets alleged to have been wrongfully disposed of by its seven former directors named, among others, as defendants herein; that in March, 1927, said seven directors “conceived and undertook to carry out a plan” to dispose of their personal stock" in the corporation, together with that of their friends (defendants Bush, Nowlan and Yaussi), and whereby they should secure the sum of $196,000; that the defendants Wright and Downing co-operated with them and aided the defendant directors in the conception and execution of the plan; that the defendants Federal Mortgage Company, Bush, Nowlan and Yaussi also knew of the plan; that in pursuance of such plan, and without the knowledge, consent or authority of the other stockholders of the eorpo

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ration, the said seven former directors-, defendants herein, transferred to one L. S. Farmer, a dummy or intermediary, approximately one-half of the assets of the corporation, having a value of $196,000, in exchange for rights to purchase 18,000 shares of the common stock of the National Mortgage Company at $5 a share; that these rights were valueless, as the defendant directors well knew, or should have

known;

that these rights were never exercised; that in accordance with said plan and in execution thereof the defendant Farmer, the intermediary, transferred said $196,000 in assets to the defendant Federal Mortgage Company, which latter company distributed such assets, or their equivalent in cash, to the defendant directors and their friends in proportion to their stock ownership in the defendant Federal Building & Finance Company, whereupon their stock and voting control in the latter corporation was transferred to the defendants Wright and Downing and Wright, Alexander & Company; that the defendant members of the board of directors thereupon resigned, and a new board was elected, which has since sought to dissolve the corporation; that the former directors conceived and carried out the unauthorized and illegal transfer of the corporate assets to themselves through an intermediary, with full knowledge of their want of authority so to do, and of the illegal and fraudulent character thereof; and that the parties defendant to whom the stock was transferred and those defendants who received, retained and used the diverted assets of the corporation “had notice and knowledge of the plan in pursuance of which said stock and said assets were received and acquired, as well as notice and knowledge of the official position of the said defendants as directors of the Federal Building & Finance Company, and had notice. and knowledge of the ownership of the assets of the Federal Building & Finance Company and of the disposition made and to be made thereof”. The complaint then prays for judgment against all of the defendants in the sum of $450,000.