Court Opinion

ID: 4920077
Source: CourtListenerOpinion
Date Created: 2021-09-22 00:16:18.948533+00
Date Added: 2024-06-11T08:14:01.744878
License: Public Domain

On Petition for Rehearing.
Per Curiam.
— In the petition for rehearing it is asserted by counsel that the court in its opinion made a statement of fact that is not sustained, by the allegations of the bill.
This rather stringent review is not supported by the . record.
In the first place, the record shows that the bill had been one file for more than three, months and a half before the' order appointing a receiver was made. That a notice was given by complainant’s counsel to the parties defendant or their counsel by letter posted on November 28, 1917, two months after the bill was filed, of the intention to apply to the chancellor for the appointment of a receiver.
So far as the record discloses there was no demurrer to the bill, no answer interposed, nor is there evidence in the record that a pto confesso order was taken against the defendants, but the court appointed a receiver.
In making this order the court below considered that the bill contained equity. Now the petitioner through his counsel appealed from the order appointing a receiver *624and avers in liis petition for rehearing that there is no .allegation in the bill which ivarrants this court in finding from, this record the existence of the facts which this court in its opinion holds constitutes the basis of equity jurisdiction.
We announced in the opinion a proposition with which counsel seem to have no quarrel. It is one which appears to us to be perfectly consonant with the principles of right dealing between man and man, and that is, “where one accepts- the position of director of a corporation he contracts to give diligent attention to its concerns and to be faithful and honest in the discharge of the duties which the position imposes.” Now what does the record disclose? Williamson, the complainant, .although president of the Florida Development Company, did not reside in Florida, but Bressler and Beach “were directors and the active men in charge of the business and operations” of the corporation.
The chancellor was also mindful of the allegation that Williamson was not as well posted about the affairs (business and operation.) of the corporation as Bressler and Beach, the active men in charge. The bill definitely alleges that Bressler and Beach w~ged the complainant to enter into the agreement with Bressler, and that they represented to your orator and the other stockholders of said corporation” that it was for “the best interests of all parties concerned,” and that Williamson was “moved and induced by the representations.” It is definitely alleged that at this very time the “corporation was then without sufficient funds with which to pay the proper demands- made upon it, and without necessary funds to properly conduct its business, and owed large sums of money.” The chancellor assumed, and we think correctly, *625that Bressler and Beach knew that, because their diligence as directors would require them to know it, and that in this matter they were better posted than Williamson. Now if Bressler and Beach having superior information, more accurate knowledge of the corporation’s affairs, urged upon Williamson and the other stockholders that it Avas for the best interests of all parties concerned, to transfer all the assets to Bressler upon his promise to pay the debts, as the contract which, was attached to the bill and made a part of it definitely provides he would do, good faith and honesty required them to withold no information concerning the value of the corporation’s assets and entertain no secret purpose to speculate with those assets for their personal advantage. They owed the utmost of good faith to the stockholders and creditors of the corporation, which required them to disclose every detail of any enterprise which they contemplated entering upon involving the ocrporation’s assets conveyed to Bressler upon the representation by him that the purpose was to obtain the payment of the corporation’s debts. If counsel differ from us upon this proposition, we regret the fact.
Now Avhat does the record disclose as to the conduct of Bressler and Beach in this connection? They had entered into an agreement as referred to in the bill, which agreement had for its object the exploitation of the corporation’s assets, and other properties which were added to them, for the personal profit and advantage of the two directors of the corporation, which agreement so the bill alleges the complainant had no knowledge of,, and did not learn of its existence until long subsequent thereto. In the petition for rehearing counsel state: “It is of course probable that both Beach and Bressler thought *626that they could work out a profit from the lands by selling it by way of colonization as mentioned in the contract.” As directors of the corporation, why was it not their duty to try and work out a profit to the corporation, instead of to themselves personally, by selling the lands in large or small tracts by colonization or any other means, especially as the corporation, so the bill alleges, was attempting to sell the lands “in large or small tracts ?” If as directors they conceived a plan for making a profit from the lands, why should this plan be withheld by them from the stockholders and creditors in whose interest they, by reason of their positions were bound to act, Instead of openly submitting, it to them for endorsement or rejection? These directors of the corporation Beach and Bressler did not, according to the record, live up, to this standard of good faith and fidelity to the interests of those whom the law required them to serve with diligence and utmost good faith.
A mere casual reading of the contract shows, we think, that Bressler and Beach contemplated making a large profit from- the sale of the lands. The only difference between this court and counsel upon this point seems to be in the use of the adjective. We did not overlook the fact that the “contract between Beach and Bressler embraced lands in addition to those which Bressler derived from the Florida Development Corporation.” The opinion specifically refers to the fact and mentions the names of the persons from whom Bressler acquired such lands. But we did not mention how many acres were so acquired nor what was paid for them; indeed neither the bill nor the contract gives that information; the contract merely recites that the lands so acquired lay in certain sections, and no mention is made of their cost. There *627are, as we read the record, ample grounds for the conclusion reached by the chancellor that Bressler and Beach had in mind the making of profit to themselves, in the transaction, upon the corporation’s assets. Among other matters it is alleged that “Beach is now suing for large amounts under the contract made between him and Bressler with respect to the property formerly belonging to. the said” corporation. Yet under the terms of the contract Beach was to receive only 25% of the property and then only after Bressler had received in cash “net to him” a sum of money almost three times larger than the debts of the corporation. It would seem from this that Beach, one of the directors and co-workers of Bressler, was asserting in the courts that his part of the profits was a large amount. The chancellor concluded therefore in the absence of any denial on the part of the defendants that the profits contemplated and actually made were quite large, with respect to the property formerly belonging to the corporation. To hold that Bressler should be protected in the possession of these profits, or that Beach should appropriate the corporation’s assets to the liquidation of 'his own claims against his fellow director over the persons whom it was their legal, equitable and moral duty to protect first, is to give judicial sanction to a breach of faith; to protect a fraud upon the sophistical assertion that they had a right to buy the assets of the corporation. Officers of an insolvent corporation may have the right to buy the assets and properties of the corporation, but only after they have made a clean statement, to those most concerned, as to their beliefs concerning the value of the properties and possibilities for liquidation to the end that the transaction may be kept free from the possibilities of double dealing. Notwith*628standing- the views of the able counsel for appellant we have after reading the bill and exhibits again as requested, been confirmed in the opinion as rendered heretofore, so the petition is denied.
All concur.