Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1883-10-04

zsn-Out Party Still Remains in the Cold.
By referring TO our supreme court col
umn it will be seen that Judge Dickinson
gave an opinion yesterday in the case of
James II. Weed and j. 81. Saunders, ap-
pellants, vs the Little Falls and Dakota
Railway company, Henry Willard, wv. III.
Star buck, VIM. Crooks Chas. A. De Graf,
E. P. Barnum, Jonathan Simmons, R. G.
Moore. j. y. Whittemore, II. G. Tyndall,
81. Haupt, Geo. FL. Haupt, Geo. 81. Adams,
G. A. Dexter, Horace White, W. P. Clough
and F. 81. Tyrdall, respondents
AS this case possesses co3side. a'le local
interest, the following digest of the COM
plant and the findings of the court can
not fail to be Of interest,
The parties were all stockholders in the
Little Falls & Dakota Railway company,
which was incorporated with capital stock
of 10000 shares. The complaint alleges
that August 4, 1881, only 232 shares had
been issued, of which Willard held 126, and
Sc shares were held by partnership con-
sisting of these plaintiffs, the defenden4s,
Barnum and Simmons, and three others.
In short tina this partnership az
CURED other stock, making Ia Ill fifty
nine shares, and Barnum, Willard and
Starbuck were of the board Of directors of
the company. Prior to Aug. 4, 1881,
Willard prepared two contracts of the came
date, ell being parts of one transaction.
Crooks and DeGraff were partners on the
| first part and the railroad corporation,
| (defendants) the party CT the other. By
| the terms of these contracts De Graft u
Co. were to construct and equip the road
of the corporation, and the latter were to
issue them for each completed
mile 331 shares of the capital
stock and its bonds to the amount of $780,
600, securing the same by mortgage of all
| the railroad property and franchises, and
to assign to De Graf also, the municipal
securities to be issued in aid of the road,
such securities having been voted with
legislative sanction to the amount of
| $164,OO0.
In the second contract the parties named
were De Graf & Co., and the defendant
Starbuck. By its terms De Graft &
Co. assigned to Starbuck all the
stock, mortgage bonds and mu-
nicipal securities which they were to
receive under their contract with the rail-
road company. Slarbuck was to pay them
$5,446 for each $4,000 of mortgage bonds
with 331 shares of stock, and also to pay
specified sums for extra work in construc-
ton, and provide large amounts of mate
rial for the road. Willard was interested
with Starbuck in this contract. and was to
receive some share OF the stock and bonds
referred to therein.
} In the De Graf & Go contract the actual
construction and equipment did not ex
ceed $4,000 per mile, nor cost Starbuck
more than that to cary out his contract, and
when the road was completed the lands
and stock were largely in excess of the
cost of its construction and equipment.
AT meeting Of the directors August (,
1881, Barnum and Simmons being present
and Willard ard Starbuck absent, the De
Graf 81 Co. contract at the instance Of
Willard was authorized by an unanimous
vote of those present. After the vote the
resignation of Willard and Starbuck were
rendered and accepted and others ap-
pointed in their places. It wgs
represented by Willard that if the
directors voted these contracts ali
were to share in the benefits to be derived
by Willard and Starbuck in the transaction.
Relying on these assurances given by Bar
mum and Simmons, the directors were
satisfied, but when Immediately offering to
raise their necessary portion of the ready
money, and asking for their portion of the
loaf they were summarily frozen out.
The appeal was by these frozen-out di-
rectors, who took in the stockholders in
their plea, for adjudication on the ground
. that these contracts were fraud, and an
J Injunction was sought against the contem-
plated issuing of the bonds, mortgages and
stock, and the transfer of the same, and of
the municipal securities as provided in
the contracts.
The court does not in terms find the
transaction complained of fraudulent, but
from the facts adduced conclusion of
fraud cannot we'll be avoided. The cor
poration assumed obligations to raise
money largely in excess of the cost of
building the road, and gratuitously be-
slowed the balance on Starback and Viii
lard, which was fraud as to the stockhOld
ers, who did not consent to it.
At the threshold, no wGver, stands maxim
shat he who comes into the court of
equity must como with clean hands"
court of equity will not at the suit of e
party TO fraud grant affirmative relief
from the consequences of it, but will leave
the parties these directors,) in the posi-
ton in which they have placed themselves,
and this exact situation is ruled to exist in
the present case
It is further claimed in the appeal that
the contract was represented to these di-
rectors who voted for it, that any stock
holder might share in the enterprise" But
the court dit not consider itself bound to
consider this phrase of the question.
1t is claimed that Willard disclosed to
Barnum and he to Simmons that This
stock and the bonds would be worth in
market their par value, that the road
could be built for $4,000 mile leaving a
profit of about $1,000 to those who fur
uished the money for construction, and
Barnum was encouraged to form pool
here on the assurance given that he, Viii
lard would help him. Barnum and Sim
mons proceeded to form The pool,
taking into partnership their as
| sociate directors on the promise
of dividends to themselves, and leaving
the stockholders to shift for themselves,
except as they were exposed to the tender
mercies of Willard and Starbuck.
A letter was produced written by Bar
mum and Simmons to Willard showing that