Court Opinion

ID: 3991696
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:51:25.814608+00
Date Added: 2024-06-11T07:44:24.924565
License: Public Domain

Adhering to the view expressed in the Departmental opinion that:
"Both companies, however, were under the personal domination and control of the Pierces. The personnel of the boards of trustees of both companies was identical — or, at least, a majority of the members of the board of one company comprised a majority of the board of the other. The members of the boards of both companies were mere figureheads, taking no active part or interest in the management of the companies. For all practical purposes, the affairs of both companies were handled by the Pierces as their own private enterprises, with a callous indifference to the rights of the corporations and of the bondholders of the securities company and the preferred stockholders of the discount company. . . .
"With respect to the money demands made by appellant in this action, we have this situation. Pierce, the individual, was using the two corporate legal entities solely for his own purposes, using the funds of both interchangeably to serve his own purposes. Now that a final balance must be struck between the two corporations as a result of the illegal use of the funds of each for the ostensible benefit of the other, neither can, in equity or good conscience, be permitted to profit at the expense of the other,"
I am unable to agree with the result reached by the majority.
The petition for rehearing makes it clear that General Discount and Mortgage Corporation received moneys from Washington Loan  Securities Company, which have not been repaid, to the amount of $15,708.81. The securities company received no consideration *Page 392 
whatever for this money; it was advanced as a gratuity to lure the investing public into the purchase of preferred stock of the discount company. The fact that the representation was made to the public that the discount company's administrative expenses would be defrayed by the securities company does not, to my mind, form any legal or equitable basis for sustaining a gift of $15,708.81 by the latter to the former.
We have before us two innocent groups of investors (the preferred stockholders of the discount company and the bondholders of the securities company), who parted with their money upon almost identical representations. The money of neither was used for the purposes represented. On the contrary, their moneys were interchanged and intermingled indiscriminately. Now that each group is trying to salvage what it can, neither should be allowed to profit at the expense of the other. As I see it, the decision in this case permits the preferred stockholders of the discount company to retain, without consideration, $15,708.81, belonging to the bondholders of the securities company.
MITCHELL, MAIN, and STEINERT, JJ., concur with BLAKE, J. *Page 393