Hayden v. Green, No. 13,143

No. 13,143 | Kan. | Jan 10, 1903

The opinion of the court was delivered by

Smith, J. :

This was a suit brought by Mary H. Green and two others, holding shares of the capital stock of the Blue Rapids Company, for an accounting between the corporation and H. H. Hayden and Jason Yurann, for a winding-up of its affairs, and an equitable adjustment of the rights of the stockholders. Defendants below, with the exception of Hayden, made default.

Counsel for plaintiff in error complain of the trial court in finding that Hayden was a promoter of the company. We have no difficulty in sustaining the court below.on this question. No person connected with its organization was more active in securing a charter or more constant in attendance at the meetings of the incorporators and' directors. On his motion, stock of the face value of $199,500 was issued to Yurann at a time when the latter was insolvent.

Charles R. Bull, president of the company, testified that he was elected with' the understanding that he was to resign as soon as some other person could be secured to fill his place. He subscribed for $5000 in par value of the stock, but paid nothing for it, and it was never issued to him. He testified as follows :

“H. H. Hayden and Jason Yurann seemed to be, and they were in fact, the company. Jason Yurann told me that he had sold stock for the company to Mary H. Green, Lavinia Green, Ira H. Green, and Mary E. Bull, at about the time he sold it. These several certificates of the plaintiff were sent to me to be signed by H. H. Hayden. I signed them, and, my recollection is, delivered them to the plaintiff in behalf of the said Blue Rapids Company. It was never represented to me that I was selling or delivering stock that belonged to Jason Yurann individually, but, on the contrary, I was delivering stock of, and for, the Blue Rapids Company. I delivered it as its president, and I understood from Hayden and Yurann that the company was paid for this stock, and paid by the plaintiffs.”

A part of the stock which Yurann subscribed for was sold to the plaintiffs below under representations, both .printed and oral, which were deceptive and fraudulent.

It is quite apparent that the corporation was formed chiefly for the purpose of buying Hayden’s real estate. He and Yurann were the active spirits in its organization, and there is ample evidence in the record before us that “Hayden and Yurann were confederates and associates in all that was done by them or either of them in the organization of the company.”

Plaintiff in error, who owned the Stetson, Bivens and Cushing properties, was present, when Yurann proposed to pay for the stock issued to him by a transfer of property to the corporation. Hayden knew that a large part of the consideration which Yurann was to give for this stock consisted of real estate which he (Hayden) owned, and, knowing this, introduced a resolution at a directors’ meeting that Yurann’s offer be accepted. This resolution was adopted. Being a promoter, Hayden was bound to exercise good faith in his dealings with the corporation and its stockholders.

“The subscriptions of the shareholders are made upon the trust that the promoters are men of rectitude and business sagacity, who will use their knowledge and exercise their control over the enterprise, for the benefit of the company.” (Mor. Priv. Corp., 2d ed., §545. See, also, The South Joplin Land Co. v. Case, 104 Mo. 572" court="Mo." date_filed="1891-04-15" href="https://app.midpage.ai/document/south-joplin-land-co-v-case-8010089?utm_source=webapp" opinion_id="8010089">104 Mo. 572, 16 S. W. 390.)

The court below, in making an accounting between Hayden' and the Blue Rapids Company, credited him with the value of the Stetson, Bivens and Cushing properties, amounting to $20,000, and with the value of the hotel property, amounting to $4500, making a total of $24,500. Hayden was charged with money received from the sale of stock, except what was paid upon the Robertson farm and mill properties. The receipts from the sale of stock amounted to $21,200. There was paid on the Robertson farm and mill properties $6500. Hayden was therefore charged with $14,700. He was also charged with taxes which were a lien on the Stetson, Bivens and Cushing properties at the time of the incorporation of the company, amounting to $2207.95; with taxes which were a lien on the hotel property, at that time amounting to $292.43 ; with the amount of the mortgage on the Stetson property, amounting to $4000; and with the $5000 stock which he agreed to take as part of the purchase-price of his property. As the holder of this $5000 of stock, the court decreed Hayden to share in the proceeds of the assets of the company. He was charged with this stock at the rate of fifty cents on the dollar, making the amount $2500. The total charge against Hayden is $23,-700.38. The total amount of his credit is $24,500, and the difference is $799.62, which was the balance found .by the court to be due him in January, 1893. This sum, with the interest, amounts to $1296 at the date of the trial of this case, and for that sum Hayden was given a lien on the property.

Hayden, being a promoter, stood in a fiduciary relation to the company which was his creature. Acting in concert with Yurann, and being, as the court found, a confederate in all that was done by him, ■.there is no principle of equity which will permit him to profit by a violation of his trust. Under the accounting had, Hayden received at the hands of the trial court all that he could justly claim. We have examined into the numerous errors claimed to have been committed by the trial court but find nothing which will justify a reversal of the cause.

The judgment of the court below will be affirmed.

All the Justices concurring.