Court Opinion

ID: 8808953
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:56:40.483611+00
Date Added: 2024-06-11T17:04:12.800931
License: Public Domain

WALKER, Circuit Judge
(dissenting). The object of this suit by the receiver of the American Mortgage & Loan Company (which will be called the Mortgage Company) is to recover the amount of loss alleged to have been sustained by that company as a result of its purchase of 4,647 shares of the stock of the Southern States Fire Insurance Company (which will be called die Insurance Company) and pledging that stock as security for money borrowed to pay the price of the stock bought, which was alleged to be greatly excessive. The stock in question belonged to the seven individual defendants, each of them owning part of it, three of them being directors of the purchasing company. Together they controlled the affairs of the corporation, the stock of which was sold. The evidence was to the effect that the Mortgage Company, in buying the stock, acted through representatives who had no personal interest ih the stock bought, and who, so far as appears from the evidence, were not subjected to any improper influence exerted in behalf of any seller of the stock. A finding that the purchase of the stock was to any extent the result of a breach of a fiduciary obligation owing by a seller to the purchasing company would be pure surmise or conjecture, unsupported by evidence. The evidence makes it perfectly plain that the purchase of the stock by the Mortgage Company was a step in the execution of a scheme of its own to acquire a controlling interest in the stock of the Insurance Company.
There was an absence of evidence indicating that any one interested as a seller of stock was in any way responsible for the Mortgage Company’s adoption and prosecution of the scheme to get control of the Insurance Company. The money of the Insurance Company which was used in paying debts made by the Mortgage Company in its purchase of stock was obtained after the latter had, by the election of a board of directors chosen by it, come into control of the affairs of the former. It was not made to appear that it was on the initiative of any one other than itself, acting by representatives having no personal interest in the Insurance Company stock bought, that the Mortgage Company became the debtor of the Insurance Company, a corporation then under the debtor’s control, and pledged shares of the stock of that corporation as collateral to secure the indebtedness incurred. Nor was it made to appear that the individual defendants, or any of them, had anything whatever to do with planning or carrying out the transactions by which that'result was accomplished. Though the individual *795defendants co-operated with the Mortgage Company in furthering the latter's scheme of acquiring a controlling interest in the stock oí the Insurance Company, this Tyould not make them liable to the Mortgage Company for the losses the latter sustained in carrying out á venture of its own; the Mortgage Company acting throughout on its own judgment and with full knowledge of the facts. It was not even alleged that the Mortgage Company was induced or influenced to make any purchase of Insurance Company stock by any fraudulent misrepresentation in regard to it.
Acting by its own chosen representatives, who, so far as appears from any evidence adduced, had no adverse personal interest and were subjected to no improper influence in behalf of any seller, the Mortgage Company bought Insurance Company stock and in doing so made debts, secured by all its available assets, and was swamped as a result of the assets turning out to be worth less than the debts they secured. The effort is to make the defendants responsible for losses resulting' to the Mortgage Company from the failure of a business venture of its own. The receiver of the Mortgage Company does not represent strangers to it who may have been prejudicially affected by the transactions in question. As receiver he is not entitled to charge the defendants with the consequences of the voluntary and uninfluenced conduct of the Mortgage Company itself. In the opinion oí the writer what the record discloses is wholly insufficient to warrant a reversal of the decree dismissing the bill. It cannot properly be said of the evidence that it clearly proved the material averments of the hill. Furthermore, if there was a conspiracy to effect a sale of the Insurance Company stock owned by the group of stockholders of that company which controlled it, and to use that company’s money in paying the price at which that stock was sold, the evidence which showed the existence of such conspiracy also showed that the Mortgage Company, a cl lug by representatives having no personal interest in such stock, and who, so far as appeared, were subjected to no improper influence in behalf of any seller, but influenced by a desire to acquire control of the Insurance Company, made itself a party to that conspiracy, and, after it was in control of the Insurance Company through a hoard of directors of its choice, got from the Insurance Company the money required to pay the debts made in the purchase of the stock by borrowing it from the Insurance Company on the Mortgage Company’s notes secured by the Insurance Company stock as collateral. The evidence indicated that Manasco and those associated with him in maintaining control of the Insurance Company were enabled to get more for their combined holdings of Insurance Company stock than the same amount of such stock held by others would bring in the market, because the acquisition of their stock and the securing of their co-operation enabled the purchaser to get in control of the Insurance Company. This was the result of the sale and of the. co-operation of the sellers in putting the buyer in control' of the Insurance Company, though the sellers had less ihau a majority of the Insurance Company stock.
The situation, then, is that the receiver of the assets of one conspirator is suing the other conspirators for losses sustained by the former in *796carrying out the conspiracy. The receiver has no better right to maintain the suit than the .Mortgage Company would have had if the receiver had not been appointed. One wrongdoer cannot maintain a suit against others who co-opprated with him in the wrongful conduct complained of. Whatever loss the Mortgage Company sustained was a result of its own voluntary action in entering upon and carrying out a scheme to get control of the Insurance Company and in thereby incurring an indebtedness greater in amount than the value which the assets it pledged turned out to possess. The pledging of the Insurance Company stock for money borrowed from that company by the Mortgage Company was the act of the letter when it was in no way controlled by the individual defendants, or any of them.