Court Opinion

ID: 8187150
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:09:45.61471+00
Date Added: 2024-06-11T16:40:27.641759
License: Public Domain

Winslow, J.
This is an action by stockholders on behalf of a corporation, whose officers refuse to sue, to recover of promoters a large amount of illegal profits alleged to have been made by said promoters in fraud of the corporation. The allegations* seem entirely sufficient to charge the promoters with liability, under the repeated decisions of this court. At least, no contention to the contrary is here made. But it is claimed that the complaint nowhere connects Mr. Krause with any fraud or wrong committed upon the corporation, and with this contention we are forced to agree. The specific fraud charged is that certain “ promoters ” obtained secret options upon real property at a certain price, and then formed a corporation to buy the property, and obtained subscriptions to stock upon the basis of a certain purchase price of the land, much in excess of its actual *432price, the fact of which excess was concealed from the new subscribers, and thus obtained their stock for nothing, when, as matter of fact, they should have paid, and gave out and pretended that they were paying, about $50,000 therefor. Nowhere in the complaint is it specifically charged that Mr. Krause was one of the promoters, or that he obtained any of the fraudulent stock. As pointed out by th,e appellant’s counsel, his name is mentioned but three times: First, in the title; second, in the opening paragraph; and, third, in the list of the first board of directors of the company, given in the seventh paragraph. It is true that it is alleged generally in paragraph 3 of the complaint that the “ above-named defendants and one Henry Texter were promoters of said corporation,” and subsequently through the complaint that the wrongs complained of were done by “said promoters,” but in the fifth paragraph of the complaint the agreement which the promoters made with each other is set forth at length and the names of the promoters given, and the name of the defendant Krause is not to be found; in the sixth paragraph the original list of subscriptions to the capital stock inade by the promoters is given, and the name of the defendant Krause does not appear; and in the eighth paragraph of the complaint, where the full fruition of the fraudulent scheme of the promoters is alleged, it is stated that “the said promoters” caused said 1,410'shares of stock to be issued to themselves, and the exact number of shares •issued to each promoter is given, and not a single share is charged to have been issued to' Krause, although the whole 1,410 shares are accounted for. It might well be claimed that were the general statement in paragraph 3, to the effect that the defendants were promoters, the only statement upon the subject in the complaint, it would be sufficient, in connection with the subsequent allegations of fraud by the “ said promoters,” to charge Krause with liability as a promoter; but when the complaint specifically sets forth the *433written agreement made between the promoters, by which their rights were to be governed and their interests fixed in the enterprise, and it appears thereby that Krause was not one of them, and when the complaint also sets forth the division of the spoil between the promoters, and shows that appellant was not one of them, these statements must certainly be held as controlling, and settling the question conclusively as to who were promoters, for the reason that they are special allegations upon a particular subject, and must be held to control mere general allegations. They settle the fact that Krause was not a promoter, and as all the wrongs complained of were done by promoters, it is evident that no cause of action is stated against Krause, and that his demurrer should have been sustained.
By the Court.— Order reversed, and action remanded with directions to sustain the demurrer to the complaint.