Court Opinion

ID: 5194697
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:41:31.485462+00
Date Added: 2024-06-11T08:27:02.267153
License: Public Domain

Patterson, J.
(concurring):
I am unable to concur :in the opinion of Mr. Justice Hatch, and my judgment in this case inclines me to concur in the result reached "by Mr. Justice Ingraham.
It seems to me that the radical defect in the plaintiffs’ case is that they do not show themselves to be ¿ntitíed either originally or derivatively to the relief tliey demand. Taking the allegations of the complaint reciting facts, and separating them from mere characterizations and conclusions, it seems to me to be apparent that there can be no cause of action inhering in the plaintiffs, unless one inhered in the corporation. I do not see how a right to maintain' this action resided in the corporation. Suggestions, charges, epithets and imputations in the complaint must all yield, as I view the case, to the contents of Exhibit A (annexed to the complaint), which only constitutes between the signatories to that paper and Moore & Schley a private contract that the former would take the number of shares set opposite to their several signatures of preferred stock and of common stock in a corporation to be organized to mannfacture and deal in malt with a capital of $30,000,000, out of which capital all but $2,500,000 of preferred and $1,250,000 of common stock, to be reserved for future corporate uses, would be applied to . acquiring malt properties of which Moore & Schley controlled options (or their value as Moore & Schley might determine in lieu of any thereof that might not be acquired), and that the stock so to be issued, namely, $9,000,000 of preferred and $4,250,000 of common stock, would be sold upon the terms above stated, deliverable when issued. What wouldzbe understood by this private contract entered into between Moore & Schley and those who signed it ? As soon as it was put out by Moore & Schley, and they invited responses, those who signed the paper knew precisely what they undertook in the way of an obligation. When they signed, they did not agree with a corporation, but they agreed to take from Moore. & Schley, When a corporation should be formed, the number of shares set opposite their names respectively, and they agreed as to what and how much stock should be issued for the options. It seems to me that this is a simple contract by which Moore & Schley agreed to furnish shares of stock in respect of which those agreeing to take knew fully what the capitalization was to be and what would be *407paid in stock to get in the malt properties, which could tie acquired only through the options which were held or controlled by Moore & Schley. There is no false representation and there is no suppression of fact. It is a mere characterization to say that Moore & Schley made an unlawful secret profit out of a situation which it is not shown they were bound to disclose to the signers of Exhibit A.
I fully concur with Mr. Justice Hatch in the abstract rules of law which he has stated, and in the very admirable and learned classification and array he has made of the cases bearing upon the subject of the liability of a promoter of a corporation. I see no reason to dissent from anything he has said on that general matter, and I regard his opinion in that respect as a very useful and valuable contribution to the literature of that subject. But I cannot bring this case within any one of his classifications. My view is that the corporation which was organized had no right of action against Moore & Schley, and that hence these plaintiffs, as stockholders, derive no right of action from that company. If a wrong has been done, it is one to be remedied in favdr of those who signed Exhibit A, or those claiming directly under them, and there is no complaint emanating from them.. For these reasons, I think the demurrer should have been sustained, and, as a consequence, I concur in the conclusion reached by Mr. Justice Ingraham.