Heimbaugh v. Hitchcock

• Decision Date: 12 January 1924
• Docket Number: 24,917
• Citation: 115 Kan. 182,222 P. 114
• Parties: C. S. HEIMBAUGH, Appellee, v. C. O. HITCHCOCK, Appellant
• Court: Kansas Supreme Court

222 P. 114

115 Kan. 182

C. S. HEIMBAUGH, Appellee, v. C. O. HITCHCOCK, Appellant

No. 24,917

Supreme Court of Kansas

January 12, 1924

Decided January, 1924.

Appeal from Reno district court; WILLIAM G. FAIRCHILD, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

CORPORATIONS--Conduct of Majority Stockholder to Disadvantage of Minority Stockholders--Liability of Majority Stockholders to Minority Stockholders for Losses. A stockholder who owns all of the preferred stock and a large majority of the common stock in a corporation and who at a stockholders' meeting, not attended by the minority stockholders, votes to cancel the preferred stock and in lieu thereof to issue common stock to himself and secures such cancellation and issue of stock to his own financial advantage and a corresponding disadvantage to the minority stockholders, is liable to the latter for the losses sustained by them.

J. R Beeching, J. F. Rhodes, and W. H. Burnett, all of Hutchinson, for the appellant.

C. M. Williams, and D. C. Martindell, both of Hutchinson, for the appellee.

OPINION

MARSHALL, J.:

The defendant appeals from a judgment in favor of the plaintiff for $ 1,100 in an accounting between the plaintiff and the defendant, stockholders in the Hutchinson Implement Company, a corporation organized under the laws of this state.

The corporation was organized with a capital stock of $ 10,000, consisting of fifty shares of common stock of the par value of $ 100 each and fifty shares of preferred stock valued at $ 100 each. C. O. Hitchcock owned all of the preferred stock and forty-six shares of the common stock and controlled all the remainder of the common stock except one share owned by the plaintiff. In the course of time, the common stock reached a value of $ 1,100, while the preferred stock remained at par. In February, 1920, at a meeting of the stockholders, not attended by the plaintiff, it was voted to retire the preferred stock, held by the defendant, and to issue to him fifty shares of common stock in lieu thereof. A resolution to amend the charter of the corporation to that effect was then adopted. The preferred stock was cancelled, and common stock was issued in its place. The effect of retiring the preferred stock held by the defendant Hitchcock and issuing to him common stock in lieu thereof was to increase greatly the value of the preferred stock and to decrease the value of the common stock from $ 1,100 to about $ 600 for each share. Afterward, C. O. Hitchcock contracted to sell to T. R. Withroder one hundred shares of the common stock of the corporation. This included the share held by the plaintiff.

The journal entry of judgment contains findings of fact as follows:

"The court finds that the plaintiff is the owner of one certificate of stock in the Hutchinson Implement Company, said certificate of stock being No. 7, and dated the 28th day of December, 1916, that the value of said certificate of stock at this time is the sum of $ 1,100.00.

"The court further finds that the defendant, C. O. Hitchcock sold the assets and stock of the Hutchinson Implement Company for $ 60,000.00, that there should be deducted from said sale the sum of $ 5,000.00 being the preferred stock in said company and that the balance should be proportioned among the original stockholders of the common stock of 50 shares of said company, plaintiff's share amounting to $ 1,100.00."

The court rendered judgment--

"That the plaintiff do have and recover of and from the...