Court Opinion

ID: 8786685
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:37:16.795359+00
Date Added: 2024-06-11T17:03:06.920920
License: Public Domain

NOYES, Circuit Judge
(concurring in result). I think that the Supreme Court has never passed upon the real question presented in this case. In the other case the averments were to the effect that the wrongful transaction had been consummated in July, 1895, before any stock had been offered to the public. Upon those averments the conclusion necessarily followed that the corporation had no ground of complaint against the promoters because the same parties were on both sides of the bargain; no one was injured. Men may cheat themselves in morals but not in law’. But in the present case the facts are different. It now appears that although a contract had been entered into in July, 1895, the transaction was not then consummated; that the stock out of which the promoters obtained their profits was not issued until September, 1895; that the deeds conveying the property purchased by the stock were not delivered untid December, 1895, and that before either of such dates stock had been offered to the public and had been subscribed and paid for.
Clearly the status of the corporation in respect of the presence of innocent interests must be determined as of the time of 'the consummation of the transaction. Until the promoters took something out of the corporation and thereby made profits there were none to be accounted for. Until the stock was issued to the promoters in September the corporation had no cause of action against them. The July agreement remained executory. It might never have been carried out. When it was so carried- out that the corporation had ground of complaint the interests of third persons had become involved.
This is not a matter of technicalities. Much depends upon the accomplished fact. Subscribers for stock in a corporation may have no right to object to transactions carried out before they come in, while they may well call upon the directors to refuse to perform wrongful executory undertakings. In my opinion the crucial question is not whether innocent interests were involved when the agreement was entered into, but whether they were involved when it was carried out; when the w'rong was done; when the cause of action accrued.
For these reasons, briefly outlined, I think that the present case is materially different from the other case and that if there were nothing else to prevent it would be our duty to consider it upon the merits. I cannot regard the decision of the Supreme Court as denying the right of the complainant to recover provided there was a wrong done to any one.
There is, however, something to prevent us from considering the case. * I can see no other course than to agree that the defense of *181former judgment is established notwithstanding that the real facts are so different from those appearing in the other suit. That suit was based upon a part of the same transaction. The ground of liability was the same breach of fiduciary relation. The time of the consummation of the transaction was as directly involved there as here. That time was established upon the complainant’s own aver-ments to be July, 1895, and, consequently, before there were any innocent interests. It is true that it was established upon demurrer but the decision wént to the merits. And being so established the complainant cannot be heard to aver that the facts are different now. However unfortunate it may be that one promoter should escape a decree upon the real facts while his associate bears the burden of a heavy judgment, I am unable to see how the result can be avoided without disregarding established principles of the law of estoppel and of res judicata.