Commonwealth Title Insurance & Trust Company v. Seltzer
| Citation | 76 A. 77,227 Pa. 410 |
| Decision Date | 14 March 1910 |
| Docket Number | 150 |
| Parties | Commonwealth Title Insurance & Trust Company v. Seltzer |
| Court | Pennsylvania Supreme Court |
Argued January 18, 1910
Appeal, No. 150, Jan. T., 1909, by Charles M. Seltzer and J Haseltine Carstairs, defendants, and appeal, No. 183, Jan T., 1909, by the Commonwealth Title Insurance & Trust Company, and Frank L. Lyle, Executors of Charles E. Ellis, deceased, plaintiffs, from decree of C.P. No. 4, Phila. Co., Dec. T., 1905, No. 4,952, in case of the Commonwealth Title Insurance & Trust Company and Frank L. Lyle, Executors of Charles E. Ellis, deceased, the Fidelity Trust Company, Trustee for Charles N. Davis, Kate C. White and Mary W. White, Executrices of William J. P. White, deceased, and Benson W. Conrad, stockholders of the Continental Hotel Company on behalf of themselves and all other stockholders of said company v. the Continental Hotel Company and Charles M. Seltzer, J. Haseltine Carstairs, Frank Haseltine, William Dulles and Eli K. Price, officers and managers of said company. Affirmed.
Bill in equity filed by certain stockholders of a corporation against the corporation and certain of its officers, alleging that in a sale of the corporate property the defendant officers had fraudulently received a special profit and praying that these officers be required to account to them directly for their proportion of the profits, or that a receiver should be appointed for the corporation and that an accounting for the profits be required to be made to such receiver. Before AUDENRIED, J.
The court held that two of the defendants, Charles M. Seltzer and J. Haseltine Carstairs, had made an illegal profit and that the plaintiffs were entitled to their proportionate share of these profits, and denied the prayer for the appointment of a receiver.
The facts appear in the opinion of the Supreme Court.
The court entered the following decree:
And now, March 30, 1909, this cause came on to be further heard at this time and was argued by counsel, and upon consideration thereof, it is ordered, adjudged and decreed as follows:
1. So far as it involves the claims of the plaintiffs for an accounting by the defendants Frank Haseltine and Eli K. Price and by the representatives of the defendant William Dulles, deceased, and so far as it relates to the defendant the Continental Hotel Company, the bill is dismissed. The costs of the said four defendants shall be paid by the plaintiffs who shall contribute thereto in the following proportions, viz: Charles E. Ellis, one-fourth; Kate C. White and Mary W. White, executrices of William J. P. White, deceased, one-fourth; Benson W. Conrad, one-fourth; and the Fidelity Trust Company, trustee for Charles N. Davis under the will of Charles W. Poultney, deceased, one-fourth.
2. The defendants Charles M. Seltzer and J. Haseltine Carstairs shall pay to the plaintiff Charles E. Ellis, the sum of $1,540.78; to the plaintiffs Kate C. White and Mary W. White, executrices of William J. P. White, deceased, the sum of $357.19; to the plaintiff Benson W. Conrad, the sum of $286.64; and to the Fidelity Trust Company, trustee for Charles N. Davis under the will of Charles W. Poultney, deceased, the sum of $286.64 and the said Charles M. Seltzer and the said J. Haseltine Carstairs shall pay the costs of each of the said plaintiffs.
The defendants, Charles M. Seltzer and J. Haseltine Carstairs, appealed, assigning as error the decree of the court.
The Commonwealth Title Insurance & Trust Company and Frank L. Lyle, executors of Charles E. Ellis, deceased, plaintiffs, appealed assigning as error the refusal to appoint a receiver.
All the assignments of error in both of the appeals are overruled, and the decree of the court below is affirmed. The appellants in each instance to pay the costs of their respective appeals.
John G. Johnson, for Charles M. Seltzer and J. Haseltine Carstairs, appellants.
M. Hampton Todd, with him G. Heide Norris and John H. Sloan, for plaintiffs as appellees and for the executors of Charles E. Ellis, deceased, appellants. -- Directors and officers of a corporation will not be permitted to make any profit for themselves out of a transaction in which their corporation is interested: Simons v. Vulcan Oil & Mining Co., 61 Pa. 202; Rice's App., 79 Pa. 168; Bird Coal & Iron Co. v. Humes, 157 Pa. 278.
No demand by the stockholder for action by the corporation was necessary in this case, the officers of the corporation being themselves guilty of the wrong complained of: Warner v. Hopkins, 111 Pa. 328; Wolf v. R.R. Co., 195 Pa. 91; McCloskey v. Snowden, 212 Pa. 249.
James F. Hagen and John Marshall Gest, for the estate of William Dulles, appellees.
Before BROWN, MESTREZAT, POTTER, ELKIN, STEWART and MOSCHZISKER, JJ.
Two of the defendants have appealed from a decree ordering them to pay to the plaintiffs certain sums representing illegal profits found to have been made by these defendants as officers of a corporation in which the plaintiffs were stockholders. One of the two defendants was the president and the other was a director of this corporation. The corporation had practically its whole capital invested in a valuable piece of real estate. The first of the defendants came in contact with the agent of another corporation which desired to buy this real estate. The defendant was informed of this fact, and although he knew that his company was willing to sell its property, instead of treating with the agent on that basis, he led him to believe that the real estate could not be purchased. After this, negotiations were carried on between the two which resulted in a written contract whereby the agent was granted an option to purchase from the defendant a sufficient number of the shares of stock of the corporation to control it. This contract on its face bears evidence of its real purpose, which was to place the agent or his constituent in a position to secure the desired real estate. The defendant conceived the scheme of buying in enough stock to gain control of his corporation immediately after his first meeting with the agent of the other corporation. Not having sufficient funds to properly finance the matter, he took in the other defendant, and thereafter they were associates in common in the enterprise, each bound by the knowledge and actions of the other. Together they accumulated the stock covered by the written contract. The deal went through exactly as desired: the agent secured enough stock to control the corporation which owned the real estate, and its property was duly deeded to the corporation represented by him; the purchase price, which was not found to be inadequate, being subsequently divided among the stockholders of the former corporation. Certain of the stockholders, believing that the officers had so manipulated the sale of the property as to make a secret and illegal profit for themselves at the expense of their corporation, filed a bill against the defendants in question and several of the other officers of the company. The corporation was also included as one of the defendants for the purpose of securing the appointment of a receiver. The bill came on for hearing with answers filed by the several defendants denying all of its serious allegations.
The trial judge filed an adjudication with full and elaborate findings of fact, which we do not deem it necessary to further outline here at any great length. The important findings upon which the decree against the two defendants must either stand or fall are to the effect that from the inception of the negotiations between the defendant, who was the president of the real estate owning corporation, and the agent of the company which desired to purchase the real estate, it was understood that the effort to get control of the stock of the former was solely for the purpose of forcing the sale of its property to the latter, and the accumulation and transfer of the large block of such stock was made in order to facilitate and effectuate...
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