The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1876-01-09
DEFRAUDED STOCKHOLDERS.

The Supreme Court General Term in this district
has just rendered decision Of the utmost importance
bearing the rights OF stockholders OF corporate
companies and the protection, or rather absence OF
protection Of their interests the companies in which
they may stock. In 1870 q company named the
'H. A. Gouge 4 Co" was organized In this State I'M
der the provisions OF general act OF the Legs
lature passed in ls4s, authorizing the formation
OF corporations for manufacturing, mining,
mechanical or chemical purposes" The
pany was ostensibly organized for the
purpose OF "owning and utilizing the patents and
inventions then owned by Henry A. Gouge with any
improvements which might be made thereto and the
manufacture Of all articles pertaining their use or
the occupation Of ventating heating cooling Of
space and also the selling and disposing Of the same
or the stock Of this company fixed 100000 Francis
Greaves was induced TO purchase twenty shares pay
ing into the company therefor 81, 600 Immediately
upon the organization OF the company Henry Gouge
became president and has so continued aud dur
ing the years 1917 and 1873 Frederick Reid was an
oicer and director trustee Of the company During
the years ISL 1872 and 1873 the company aid large
and prosperous business earning the sum of not less
than $40 900 and above all expenses and liabilities
the result ofths prosperity the sangune Mr.
very naturally looked Tor some dividends be paid
his investment but be has hitherto looked in VAIN In
April OF last year he commenced the Supreme
Court, in this city against Henry A. Gouge lndvidu
ally, and In his complaint therein, after rectng the
foregoing facts, charged Gouge IN company with Reid,
with having, through their influence officers Of the
company, fraudulently and illegally prevented the
declaration and payment OF dividends, and charged
Goure individually with having iraudulently and
wronguly converted to his own use the whole surplus
earnings OF the company during three years 40 O0J
As a part OF the means whereby this appro.
priaied by Gouge the complainant further charged
that he, 10 conspiracy with Reid and other
directors and trustees and officers OF
the company by his vote aud theirs, secured
TO himself unlawiuy salary Of E., 900 per year that
he took for his individual use under pretence Of loan
from the company. the sum of $4,000 that he appr0-
praed to his own use property Of the company valued
ST. O00 that he paid 81 900 out Of the funds Of the
company wages 70 persons Who performed labor for
his personal account and that be pledged the credit Of
the company 10 the extent Of S. 900 more hich sum
he also wrongfuly converted his own use In short
the complaint Of Mr. Greavcs that this Mr. Gouge
had used his position a. President OF The company and
had used the company for his individual benefit and
by his fraudulent ACTS that respect had rendered the
stock wholly worthless. and deirauded him reaves TO
the extent Of 1000 for which sum be demanded Judg
menk
GoUge nterposed several demurrers 20 his complaint
the principal one OF which, and that wherein The de-
caon made, was that admitting al that stock.
holder Greaves charged 70 be true, he without
remedy a. law and might whistle for bis investment
and expected dividends Judge Van Worst, before
whom the tried compelled N following
precedens to decide against the palntf In the case
aud sustain defendants demurrer holding the law 70 be
that, In order 70 sustain such action BY stock
holder the circumstances disclosed IN the complaint
should show injuries 10 him personally contradis-
tinsuished from injuries 70 the corporation. lo the
corporation" the Judge SAID the defendant Is directly
responsible and action for the recovery OF these
moneys and for damages, the consequences OF
his illegal acts, could be maintained against
him by the eorporation and n this property can be
restored and these moneys and damages DO recovered
by the corporation the value OF plaintiffs interest IN
the corporation will be repaired From this decision
appeal was taken on behalf OF the stakeholder 10
the General Term, BY which decision has now been
rendered The opinion Of the Court ls written by
Judge Brady concurrod in by presiding Judge Davis,
both Of whom say they are reluctantly compelled
10 concur with the decision Of Judge Van Worst beng
In consormity with existing law, but both make an
exception ordinary cases by ling attention 70 the
injustice OF the law they are thus compelled sustain
Judge Brady uses this language have suggested N
my opinion that The rule VII ch must be apulcd this