The record-union., 1891-03-13

sufficiently considered.
o b. They urge that the corporation had
power to purchase its own capital stock,
and that the resolution at the stockhold-
ers meeting was sufficient warrant for
the terms of the purchase.
1t is not necessary to decide upon
this appeal whether the corporation had
power to purchase its own stock. Such
a power even would not excuse the
fraud of the defendants. That they
were guilty of fraud is plain, if the al
legations of the complaint are true.
They were personally liable for the
debt to the original owners of the prop
erty, and agreed with the corpora
ton that they would pay such debt.
They obtained the stock put up as Sc
curity for their performance of said
agreement, upon condition that they
would apply the proceeds of such stock
''as received" to the eXtinguishment of
said debt. Instead of so doing they
converted the cash proceeds to their
own use leaving the debt un-
paid, and induced their creatures in the
board to have the corporation assume
action on the part of the board
was in the interest of said defend
ant, land for the purpose of de-
frauding the other stockholders" Such
conduct on the part of the Directors was
unquestionably fraudulent and the per-
reaped the fruits thereof must be held to
have participated therein.
IN order to cover up this fraud it is al
legged that they committed another.
About four months after the assumption
OF the debt by the corporation as above
set forth, they bought up the ten thou
sand shares of stock which they had sold
a year previously at Si2 so per share the
cash proceeds of which they had con-
verted to their own use), and by means of
their control over the corpora
ton, sold said stock to it at S37
per share-it then being worth only
S25 per share, At this time Bone
brake and Merrill were in the board,
and the other directors were the mere
creatures of the three defendants We
do not think that any argument is re-
quired to show that this transaction was
| fraudulent. 1t certainly does not help
the fraud first mentioned
Nor IS the resolution at the stockhold-
! ers' meeting of any, consequence. For
since the defendants held majority of
| the stock and voted at the meeting they
controlled the meeting, and the resolu-
ton was in effect but their formal consent
to their own fraud. 1t cannot affect the
rights of the stockholders who did not
consent
c. 1t is urged that the transaction was
executed" and therefore cannot be dis
| turbed.
Ibuo NlotcNGI tOlOG Ol IOTCD IIlS
have, If the objection was merely that the
transaction was ultra Ci1es, it has no APP
pllcatlon to q case where there is fraud
Il. 1t is objected that there was no offer
to place Howes, Bonebrake and Merrill
| Ia Stdtu Quo.
But the suit is not for rescission of the
contract whereby the plaintiffs acquired
their stock, and therefore no such action
on their part was required. SO far as the
10000 shares sold to the corporation are
concerned, it is sufficient to say that aside
from any other reason the three defend
ants constitute a majority of the board,
and must be presumed to have control of
such stock. So far as concerns the $780,
GOO evidences of debt (the balance of the
| proceeds of the first sale of the 10000
shares of stock, which the counsel say
have vanished from view,'' it is suffi-
cient to say that, aside from any other
reason, such evidences of debt are not
shown to have ever come to the possess
sion of the corporation. If they did they
must be under the control of the defend
ants.
G. 1t is argued that if the theory of the
plaintiffs be correct the result is that
the original contract of Howes, Bone
brake Il Merrill is still in force, and that
it must be presumed that they will per-
form it-that is to say, it must be pre-
sumed that they will pay off the debts to
the original owners of the property.
AS the corporation has mortgaged its
property to raise money to pay off
such debts, and has actually paid them off,
this position is somewhat singular.
i. 1t is said that ''the whole effect of the
transaction mentioned has been that the
corporation is vested with a perfect title
to the identical stock which it originally
regarded as sufficient collateral and
taken by the corporation at sum far less
than the amount of the indebtness to
which it was originally regarded as suf-
ficient security. There is no damage
shown, and there could be no action with
out DAMAGE sr@ Il
That is to say, that because the corpora
ton originally regarded the 10000 shares
of stock as sufficient security for the per-
formance of the defendants agreement,
they could sell the stock at S42 80 per
share, and convert the cash proceeds to
their own use in direct violation of their
agreement to apply it to the debt affect
ing the corporations property, and about
a year afterwards buy up the same stock
and by fraudulent means induce the cor
poration to purchase it at S37 per share
when it was only worth S25 per share in
the market, and then say to the other
stockholders: We'll, the corporation has
the stock, which it originally regarded as
sufficient collateral. How is it injured ?''
g. 1t is said that ''all the parties have
permitted the transaction to rest for more
than year, and that to permit rescis-
sion would be to do violence to every
principle of law and equity.n
But we do not think that the doctrine
of laches applies.
4. The demurrer takes the ground that
there is a defect of parties defendant, a
mlSjoinder Of parties and misjoinder of
causes of action.
The first ground is the only one which
is argued. 1t is said that the other MEM
bers of the Board of Directors should
have been joined & defendants. So far
as the corporations interests are con-
cerned, it is itself q defendant. AS to the
rest, Howes, Bonebrake and Mer-
rill are the only persons inter-
ested in the transactions complained
OF. The other Directors were
only their implements and representa-
tives,' and are not shown to have re-
ceived or to have any interest in the
fruits OF said transactions. 1t was not
necessary to join them as defendants.
The other grounds mentioned have not
been argued. The fact that there was a
demurrer on these grounds is mentioned
III the statement of facts. (See respond
ents' brief, PIP. and 10.) But there is
! not word Of argument in either of the
briefs for respondents in relation to the
grounds or anything to give rise to the
inference that they are relied upon.
Under these circumstances the grounds
mentioned should be considered as
waived.
5. We do not think that it is necessary
for the court to determine at this stage of
the case the precise measure of equitable
relief to.be awarded. A court of equity
molds its relief according to the particular
circumstances OF the case. (Heinlen VS..
Martin, 50 Cal. 342-3.) And it is better to
reserve the question mentioned until all
the circumstances shall have been dis
closed by the evidence. 1t is sufficient
for the disposition of the demurrer to say