Gilpin observer., 1900-11-01
TWO IMpoRrANr pEo1s,oys

Justice Gabbert Of the State Supreme
court has handed down the following
decisions which constitute precedent
in corses involving the rights of minority
stockholders. One of the suits involved
the directors Of the Ibex Mining COM
pany at Cripple Creek, who had secured
control of the G.enary Consolidated
company, and obtained lease on the
property of that company. In uphold
ing the minority stockholders in their
appeal to have the lease annuled.
Judge Gabbert said:
No combination or stockholders of
corporation less than the whole will be
permitted to manage or control its
affairs in their interests alone. Minority
stockholders cannot be deprived of their
rights by such combination under the
guise of policy OF the corporation
dictated by the majority. So far as the
rights Of the minority are concerned, the
majority, in furtherance OF their plan to
reap benefit to themselves through a
transaction in which the minority do not
participate, becomes the corporation
itself, and assume the trust relation oc-
cupied by its stockholders toward the
corporation.
The other suit was brought by the
stockholders of the Wolfton Mining COM
pany to annul sale of stock from the
State National bank to Samuel b. Nor
gan. The bank had come into possession
OF the stock and afterwards transferred
1T to Morgan on promissory notes, the
stock never having been issued to the
bank and were not entered upon the
bank records, but held by one of the
directors, the dividends on theistock dis
charged the entire indebtedness of the
bank to Morgan within two years. In
his decisou Judge Goddard said:
"Ihe ground is that the directors pur-
chasing were guilty of a constructive
fraud by reason of their relationship to
the bank at the time of such purchase;
and, second, guilty of actual fraud in
affecting the purchase from their co .di-
ectors OF the stock in question. The
facts upon which plaintiff relieved to es-
buoIiStl lIO COLSII were DOJ
denied; those tending to show actual
fraud were.
"The first question which is naturally
presented is, What are the legal elations
between the directors of corporation
and its stockholders? Upon this propo-
sition the courts have universally held
that the relationships to the legal entity
which they represent and its stockhold-
ers, is fiduciary, and treat them as trus-
tees. Such being the relationship be-
tween the defendant directors and the
stockholders of the bank, the familiar
rule is invoked that a trustee cannot
become the purchaser of trust property.
From an examination OF the authuri.
ties cited on behalf of the appellee, we
are convinced that as applied to the
facts of the case at the bar, namely, a
consideration OF tho relationship of the
directors purchasing, to the bank at the
time they made this purchase, that the
rule contended for by his attorney THAT
the ordinary rules governing trustees as
between themselves and their cestuis
que trust have been relaxed) has not
been relaxed in the slightest degree. In
l. Porry on Trust, 4th ed, p. 207, it is
said:
"The directors of corporations are
trustees and agents of shareholders and
of corporation, and the same rules are
applied to contracts of directors with
the corporation as are applied to the
dealings of other parties holding a
judiciary relation to each other"
These decisions are of especial interest
to mining men generally. There are
other cases of similar character now
pending in Ell Paso county. The prece-
dent established by Judge Gabbert, will
no doubt be quoted when these cases
come to trial