Court Opinion

ID: 3767449
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:21:22.387666+00
Date Added: 2024-06-11T18:04:48.943202
License: Public Domain

I do not agree with my colleagues in sustaining the demurrer to the second amended petition on the ground that the second amended petition does not state a cause of action.
The Legislature denounced technicalities in pleading by enacting Section 11305, General Code, which provides, in substance, that causes of action shall be stated in ordinary and concise language. The second amended petition in question, among many specific allegations for a cause of action, alleges plaintiff to be a stockholder of the company affected by the misconduct of the defendants as officers and directors, and brings the action on his behalf and on behalf of the other stockholders.
The law is settled that the utmost good faith is required of officers and directors toward the corporation which they are chosen to serve.
The complaint is that the defendants made a secret profit in the refinancing of The Gruen Watch Company. That the stockholders authorized the issuance of stock and the use thereof to secure certain creditors, among them several banks, and arranged with one of the banks to turn over to it a block of 363,750 shares of stock, par value $1 per share, to secure such banks in the refinancing; the defendant officers, without the consent of the stockholders, entered into an agreement by which one-third of the stock should be placed in the hands of an escrow trustee; that such one-third should be taken up by the company at the price of $3 per share, or three for one; that upon the full payment of the value of the one-third escrow stock, which *Page 164 
would be the equivalent of the full value of the 363,750 shares, the bank should retain the one-third as its own property.
It is further alleged that all of these transactions were provided in a contract between the defendants and the creditor bank, which contract further provided that upon the final payment and delivery of the stock to the bank, that in consideration of the defendants as officers and directors of The Gruen Watch Company giving their very best services to the company, the bank would assign and turn over two-thirds of the stock to defendants, all of which was done, all without the knowledge or consent of the stockholders, thereby enriching the defendants personally in the amount of the value of such shares, all in violation of their duties and trust as officers and trustees.
An accounting is prayed for.
I have only set forth a part of the allegations, all of which by the demurrer are admitted to be true.
How can it be said that a cause of action is not pleaded? It may be that plaintiff cannot prove the allegations, but that is not the question here. The question here is: Has plaintiff a right to his day in court to attempt to prove the allegations of the amended petition and receive equitable relief?
It may be stated here that the trial court sustained the demurrer on the ground of defect of parties. The majority opinion finds that the demurrer was not sustainable on that ground, which was the ground stressed by counsel at the trial in this court orally and in their brief, and little was urged as to the insufficiency of the cause of action.
The majority opinion further ignores the provisions of Section 11345, General Code, which provides in part that pleadings shall be liberally construed, with a view to substantial justice between the parties.
The decision in this case ignores the civil code of Ohio and tends to defeat rather than promote justice. *Page 165