Davis v. Smith
| Decision Date | 13 November 1931 |
| Docket Number | No. 28514.,28514. |
| Citation | 239 N.W. 150,184 Minn. 422 |
| Parties | DAVIS v. SMITH et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Hennepin County; W. W. Bardwell, Judge.
Action by Mary R. Davis against Hassel M. Smith and others. Findings for the defendants. From an order denying her motion for a new trial, plaintiff appeals.
Order affirmed.
George S. Grimes, of Minneapolis, for appellant.
Junell, Oakley, Driscoll & Fletcher, of Minneapolis, and Doherty, Rumble, Bunn & Butler, of St. Paul, for respondents.
Appeal from an order denying a motion for a new trial. This action was brought to rescind, cancel, and set aside the sale of 4,228 shares of stock of the Cedar Lake Ice Company, claimed to have been made by the executors of the estate of John B. Robbins to respondents Smith and Mitchell, who were two of the executors of the estate at the time the original transaction was had; also for appropriate remedies in case such sale was set aside.
The respondent Cedar Lake Ice Company is a Minnesota corporation; the Cedar Lake Ice & Fuel Company (with 20,000 shares of capital stock of no par value) is a Delaware corporation duly qualified and admitted to transact business in the state of Minnesota. In May, 1928, it purchased from the Cedar Lake Ice Company all of the latter's property and business on terms not here important. Each holder of stock in the old company received as part payment a proportionate number of shares in the new company so that the relative holdings of each shareholder remained the same.
John B. Robbins, who was president of the Cedar Lake Ice Company, died testate March 18, 1921. His widow (then Mary S. Robbins, now Mary R. Davis, appellant) was the sole legatee under the will. William D. Mitchell and respondents Hassel M. Smith and John R. Mitchell were appointed and duly qualified as the executors of the estate, and letters testamentary were duly issued to them. William D. Mitchell, who actively handled the administration of the estate, was in no way related to John R. Mitchell.
The Robbins' estate was heavily involved, the outstanding certain liabilities exceeded $310,000; there were also heavy contingent liabilities. Robbins had been engaged in various lines of business and controlled several corporations, much of his stock being pledged to secure payment of his indebtedness.
At the time of his death Robbins was the owner of 12,684 shares of the capital stock of the Cedar Lake Ice Company of the par value of $50 a share; 9,946 of these shares of stock, representing a controlling interest in the company, were pledged by him to various parties as security for indebtedness aggregating $119,725.90; the remaining 2,738 shares were clear and unpledged. The stock had value but was not readily marketable. Executor William D. Mitchell, acting for and on behalf of the estate, negotiated a sale of the Robbins stock, and in November, 1921, the executors entered into a written contract signed by them as sellers and James H. Ellison, Simon Meyers, John D. Barrett, and Moses Zimmerman (who were already stockholders in the Cedar Lake Ice Company), as purchasers, by the terms of which the 12,684 shares of stock were sold to the purchasers at $22.50 a share; the total price thereof being $285,390. Under the terms of the sale a cash payment of $133,332.33 was made, and, with money borrowed by the purchasers from a bank and cash contributed by them, the pledged stock was released to them and each of them became the owner of one-fourth thereof.
These four men were apparently the only purchasers that could be found for the stock; there was no intimation or suggestion as to the existence of others. The negotiations for the sale were carried on between William D. Mitchell, representing the executors, and Simon Meyers, representing the group of final purchasers. John R. Mitchell took no part therein, he being in Washington, D. C., acting as a member of the Federal Reserve Board, and only rarely in Minnesota during the administration of the estate. Hassel M. Smith lived in Minneapolis and was attending to the activities of the various Robbins' corporations and worked under William D. Mitchell in details connected with the administration of the estate. William D. Mitchell talked estate matters over with Smith and secured information from him as to the condition of the company's affairs. Mrs. Robbins, now Mrs. Davis, appellant, was kept fully advised as to the course of negotiations and acquiesced in the sale.
An assignment was made on the back of the certificates, evidencing the stock sold, signed by the executors as assignors to Ellison, Barrett, Zimmerman, and Meyers, as assignees. At that time no new certificates were issued to them. The four purchasers then owned the controlling interest of the company, and the assigned certificates were placed in a safe of that company.
On January 27, 1922, a written agreement was entered into between Ellison, Meyers, Barrett, and Zimmerman wherein (following a recital of the reasons therefor) it was agreed that a sale should be made of a certain number of shares not to exceed in number 4,228 (one-third of the 12,684 shares), at the price paid therefor by them, said sale to be made to...
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