The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1902-06-02
THE FEE IS
CUT DOWN
The LiberaIity of Judge
Humphreys Is
Rebuked.

The Supreme Court handed down
decision Saturday In the Kamalo cas-
! fer the second time affirming the de
cree OF Judge Humphreys. but reduc
ling the extravagant attorneys fee !
so. 600 allowed by him TO $500 tn
loplnIon Is unanimous. excepting as
the reduction IN the fee. watch Juds
IGalbraith believes should be $1,000
1.-THE attorneys who were TO divide u
the 81. 600 are George A Davis. T. Nc
cants Stewart. +. NJ. Hatch. Il. L
Marx. J. A. hagoon. T. I. Dillon an
J. Lightfoot. for plaintiffs.
BY the decision of the Supreme Cour
the defendants. Frank Hustace. John J
Egan and Frank II. Foster must paI
back into the treasury OF the ksmai'
Sugar Co. the sum OF $4,000 In cash
and COCO shares OF the capital stool
which they took as promoters fees. anc
which the court holds TO be void and
fraudulent
An appeal to the United States su'
| preme Court will be taken by these de-
10 ndants. The plaintiffs in the case
we're II. r. Hitchcock. L H Dee and
other stockholders OF the Ramalo Sus-
ar Co.
The syllabus Is as follows: "a pro-
moter is the fiduciary OF the corpora
ton he brings into existence and OF
those ne induces 20 buy It's shares. II
Is his duty to make full and fair dis
close OF the facts to the shareholders
or subscribers.
where promoters organize n corpo-
ration for the purpose OF selling prop
erty or options they own. and make an
agreement with themselves. as promo
tcrs or stockholders. for the company
80 buy their property or options. at a
profit. and do not disclose TO the share
holders or subscribers. other than
themselves. the terms Of said agree
ment. such failure TO disclose IL
fraud and the agreement void and the
amount OF the profit made by the pro-
moters may be recovered In equity. At
the suit OF the stockholders. where the
proper officers refuse To act
After n review OF the facts In the
ease. Justice Galbraith. who Is the au-
thor OF the opinion. refers TO the boom
In sugar stocks az the time OF the or
EanizatiOn OF the company which the
defendants set up as an excuse for
their actions. The court says:
Much stress - laid upon the fact
THAT the time this company was organ
lied was one Of active expansion In the
sugar industry: that speculation ran
riot and prosperity in all OF Its de-
iishtful luxuriance was here: that the
major part Of the population OF the
isia nds were eager and anxious to buy
0EEar stocks: that the plaintiffs and
many others who bought shares In the
KamaIO Sugar Company. Limited. did
so without asking any questions and
II a privilege 10 have shares
allotted 20 them. that the transaction
was all n gamble and when the excite
ment subsidized the plaintiffs discovered
that they had failed TO realize on their
exaggerated expectations and by this
suit seek 20 avoid the responsibility OF
their own folly and TO shift the burden
Of .hetr losses To the defendants.
We are not much impressed with
this argument. II finds as little sup
port In morals as in law. IL Is no
doubt true that at the time In question
tNCrc was much reckless speculation
In corporation shares. but IL was not
given out BY the defendants and we
assume. In the absence OF proof. that
none Of the plaintiffs had any reason
Il believe or did believe that the Ka-
nsa.lo Sugar Company was organized as
n lottery or a gambling enterprise The
public who were invited To buy the
shares % this company had a right
To- presume that 81 vas promoted "a a
legitimate enterprise IN whose man
agemcni. business integrity. II no;
ability and prudence. were to be i'm
p"riaEt constituent clements. Counsel
have neglected 20 cite any authority
supporting the assumption that the
character a. = transaction. whether II
- right or wrong. honsst or dishonest
La sui or unlawful. - 20 BE- determined
- IA. degree uf prosperity existing tn
~" community. We understand that.
IN ihe law. TiEht and wrong. fraud and
theft. efDb @zt.fueut and perjury are
The same IN sunshine and In rain. la
i!'n.g % plenty and ia famine. and that
the couduc; 81 these defendants must
b. measured - g dxcd standard with
out reference 10 the degree OF com
merciai activity az ne time Of their
operations.
The court goes a. length into the
relation between promoter and corpo-
ration. and finds shat the defendants
uid not cease 60 De- promoters until
The corporation had been fully organ
Ecd. Concluding. the court says:
Applying the principles established f,
5y the authorities 90 the facts OF this
-asc. the conclusion - inevitable that
he defendants were fduciarles % the |
plaintiffs and the Kamalo Sugar Com /
pany. Limited. that the duties imposed !
upon them as such fiiuciaries were not |
By a failure 20 issue a pros /
pcctus and BY not misreprcscnting the |
'acts. that they Were bound under the /
aw 90 disclose fully and completely /
he facts; that Frank Hustace. ]. J. |
Fean and Frank II. Foster could not /
make valid agreement with the ka-
nalo Sugar Company. Limited. at the /
lime acting in the dual capacity for the |
promoters and the company. whereby /
hey as promoters we're given n profit /
4 t15. eco in cash and 5000 shares OF
paid MP stock. without disclosing the
acts TO those interested other than
themselves. and obtaining their consent
hereto. that the failure 90 disclose the
acts was n fraud. whether actual or