206 Mich. 664 | Mich. | 1919
The bill of complaint in this case was filed against Harry W. Wiley, Emma McCourt, George W. Dickinson and Charles E. Duffy for the purpose of canceling 100 shares of stock in the plaintiff company, originally issued on the order and direction of said defendant Wiley to himself and to his sister, Emma McCourt, 20 shares of which were subsequently issued to George W. Dickinson, and 10 shares to defendant Charles E. Duffy. The bill alleged that defendant Wiley claimed, prior to the execution of the articles of incorporation, that he was the owner of certain patents which were then under consideration at the patent office at Washington, which were valuable and useful for the manufacture of articles which said corporation desired to manufacture and sell; that he was acquainted with various people of financial ability whom he could induce, and would induce, to take stock in the proposed corporation, and thereby furnish said corporation with a means to proceed with its business of manufacturing, and that he proposed, in the event of said corporation being formed, to finance said business and secure valuable financial assistance therefor.
It alleged that the original incorporators of said corporation were defendant Wiley, Warren W. Stoler, Edward Stoler, Edgar A. Rathbun and Evan P. Heaton; that said incorporators, at the suggestion of defendant Wiley, employed an attorney to ‘draw up articles of incorporation; that none of the said individuals were trained in the law, or had knowledge of the provisions of the statutes of Michigan relative to incorporation, and relied entirely upon the advice of said attorney in the drawing of said articles; that the said attorney advised the said incorporators that under the laws of the State of Michigan it would be necessary to have all of the capital stock subscribed for, and all issued; that said incorporators — at least
The bill alleged that, subsequently, at a meeting duly held by all of the stockholders, each of the said stockholders, excepting the said defendant Wiley, voluntarily canceled one-half of the stock so isshed to each of them, turning the same back into the treasury to be used as treasury stock for the purpose of securing capital for said corporation,* and that said defendant Wiley objected and refused at first to turn any portion of his said stock in, as he had agreed, but finally
The bill charges that the defendant Duffy had knowledge of the facts connected with the issuing of said stock, and of the terms and conditions under which said defendant Wiley held said stock, and the fact that this plaintiff claimed and insisted that said Wiley had no legal title thereto, and that said defendant was so informed at the time he presented said stock and asked that two certificates be issued in lieu of said 40 shares of stock, one in the name of said Duffy for 10 shares, and one in the name of said defendant Wiley for 30 shares, which request this plaintiff refused, and did not consent to the transfer, and did not issue any stock in lieu thereof; and the plaintiff claims that said Duffy paid no value for said shares of stock and was not a bona fide holder thereof.
The bill further alleged that defendant Wiley is not entitled to any of the shares of said stock; that he has not fulfilled the terms and conditions under which the same were delivered to him, nor discharged the trust imposed in him at the time, and that he is not legally entitled to hold and control any of said stock,
The bill further alleged that defendant Wiley is a man of no financial responsibility, and that a judgment against him for the value of the stock would be of little or no value, and that since the incorporation of said company certain of the stockholders of said company have been successful in selling stock, and interesting capital in its venture, and that the plaintiff at the present time is in a fairly prosperous condition, and engaged in the manufacture and selling of sockets and forgings of different kinds, and as a consequence the stock of said company is worth many thousands of dollars; that said stock in question, as matter of law and right, belongs to this plaintiff; that said defendant Wiley should be helcUto account to said plaintiff for said stock, he being given credit for any and all moneys he has expended, and for any and all work that he did for the benefit of such corporation, and the balance of the stock returned by him to the plaintiff.
The articles of incorporation were executed on the 28th day of May, 1915. They appear to be in due form. The purpose or purposes of the corporation are therein described as follows:
“To manufacture and sell, both at wholesale and retail, forgings, sockets, and automobile parts of all*670 kinds, and to purchase, own and operate a factory for the manufacture of forgings, sockets, and automobile parts of all kinds.”
The principal place of business is stated to be the city of Pontiac, Oakland county, Michigan. The capital stock was the sum of $100,000; the number of shares 1,000 of the par value of $100 each. All of this stock was in form subscribed, and the names of the stockholders and the number of shares of stock subscribed for by each were as follows:
Harry W. Wiley ...........................200 shares
Warren W. Stoler ...'.......................200 ”
Edward Stoler .............................200 ”
Edgar A. Rathbun .........................200 ”
Evan P. Heaton............................200 ”
—all of which it was alleged was actually paid in, of which amount $5,000 was said to have been paid in cash, and $95,000 in property described as follows:
One patent, serial No. 29,402, issued to Warren W. Stoler by the United States, May 20, 1915, on a bow socket locking machine, and duly assigned to this plaintiff, which patent was of the value of $50,-000; also one patent, serial No. 634,106, issued to Edward Stoler by the United States, July 2, 1914, on an automobile top socket, and duly assigned to the plaintiff, the value of which was stated as $45,000.
The affidavit required by the statute was signed and sworn to by Warren W. Stoler, Edgar A. Rathbun and Edward Stoler.
The defendant Wiley answered denying generally the allegations of the bill of complaint, and especially that he ever agreed to account to the plaintiff in any way for the 100 shares of stock here involved, claiming to own the same, with the exception of 20 shares conveyed to the defendant Dickinson. Defendant Emma McCourt. disclaimed all interest in the stock, and defendant Duffy admitted on the record that his stock
It appears undisputed from the evidence that the Edward Stoler patent was never issued and never received by the company. The $5,000 said to be paid in cash was not paid in as stated in the articles, but, at the most, about one-half thereof was expended by two incorporators, Heaton and Rathbun, in building the machine covered by the Warren W. Stoler patent.
The court below found that the certificates for 80 shares of stock remaining in the name of defendant Wiley were issued and delivered without any adequate consideration therefor, and that the material allegations in the bill of complaint in relation to said certificates were true, and that defendant Wiley had not paid for said certificates of stock. It ordered and directed that the said defendant deliver up to the plaintiff the said certificates, and that they be decreed in his hands to be null and void; and that in case he refused to deliver up said certificates, the decree should operate as a cancellation thereof. It dismissed the bill of complaint as to defendant George W. Dickinson. It restrained all the defendants from assigning, selling, transferring, disposing of, or incumbering in any way the certificates for the said 80 shares of stock, and awarded costs against defendant Wiley; and decreed that as to defendant Charles E. Duffy, his rights should abide the decree in relation to the stock standing in the name of defendant Wiley.
While all the defendants appear to have claimed an appeal, the defendant Wiley, only, has filed a brief in this court. It is the claim of the appellant Wiley that the plaintiff has no standing in a court of equity, for the purpose of obtaining the relief prayed for in the bill of complaint; that the rights of the public or creditors are not involved, and that the original stockholders dealt wholly with themselves as sellers and
It is the claim of the plaintiff that a court of equity has jurisdiction to. grant the relief prayed for in the bill of complaint, and it cites in support of that position: Old Dommion Copper Co. v. Bigelow, 203 Mass. 159 (40 L. R. A. [N. S.] 314, 89 N. E. 193); Fred Macey Co. v. Macey, 143 Mich. 138 (5 L. R. A. [N. S.] 1036); Cuba Colony Co. v. Kirby, 149 Mich. 453, and other Michigan cases.
It is also the claim of plaintiff that Old Dominion Copper Co. v. Lewisohn, supra, was not followed in the Massachusetts case, which latter case is in accord with our decisions. It should be said that the Massachusetts case was affirmed by the Supreme Court of the United States, in Bigelow v. Old Dominion Copper Co., 225 U. S. 111 (32 Sup. Ct. 641), the question involved being whether the Massachusetts court gave to the Lewisohn Case (being a New York judgment which was pleaded in bar in the Massachusetts suit) the full faith and credit which was required by the Constitution of the United States and the statutes thereunder. Of course, the Massachusetts court was not bound to follow the United States Supreme Court upon the main questions decided in the Lewisohn Case. This court has adopted the doctrine of. the Massachusetts case.
There is no question that the defendant Wiley, as a promoter, stood in a fiduciary relation to the plaintiff and to those who subscribed for its. stock. As such
The evidence shows that subsequent to the organization of the plaintiff, certain of its stock, which had been surrendered in pursuance of the alleged agreement, had been sold to stockholders who had no knowledge of the agreement or arrangement alleged in the bill of complaint.
From the evidence contained in .this record, we are of opinion that the plaintiff has sustained the burden of proof by showing the arrangement between the defendant Wiley and the other incorporators, substantially as alleged in the bill of complaint. On the familiar principle that where property or money has been received by, or is found in the possession of, a fiduciary in violation of a fiduciary duty, a court of equity has jurisdiction to compel restitution, a suit in equity may be maintained by a corporation against a promoter to recover the same; and in equity, that kind of relief will be granted which is best adapted to the situation at the time it is applied for. Old Dominion Copper Co. v. Bigelow, supra; Yeiser v. U. S. Board & Paper Co., 46 C. C. A. 567 (107 Fed. 340, 52 L R. A. 724).
We have no doubt of the right of this plaintiff to maintain this action. We are satisfied that the defendant Wiley, sustaining a trust relation to the plaintiff, has in his possession certain shares of the capital
The court below having found in favor of defendant
The bill of complaint alleged that the defendant Wiley might retain a sufficient amount of stock to repay him for the value of the patents, and for the work which he would do in promoting the interests of the corporation, and in securing investments of capital therein. We are satisfied, from the testimony of defendant Wiley, himself, that he had no substantial interests in the patents, or either of them; but, desiring to do justice to all the parties in the case, we are not satisfied that the work which he did in promoting the organization and interests of the corporation was of no value. He seems to have spent considerable time in the interest of the organization of the corporation, and for two or three months thereafter, jointly with the other officers, when he “washed his hands” of the matter. He has had the benefit of the 20 shares of stock standing in the name of defendant Dickinson; but we are constrained to hold that, under the evidence, the value of his services for the corporation has exceeded that amount. We think the decree of the circuit court should be affirmed as to 60 shares of the capital stock of the corporation instead of 80 shares, as provided in such decree, and that the defendant should surrender for cancellation 60 shares of said stock instead of 80 shares, and as thus modified the decree will be affirmed, without costs in this court to either party.