State ex rel. Marine Bank & Trust Co. v. Go-Ro, Inc.

• Decision Date: 25 February 1924
• Docket Number: 25207
• Parties: STATE ex rel. MARINE BANK & TRUST CO. v. GO-RO, Inc
• Court: Louisiana Supreme Court

99 So. 875

155 La. 1072

STATE ex rel. MARINE BANK & TRUST CO. v. GO-RO, Inc

No. 25207

Supreme Court of Louisiana

February 25, 1924

Rehearing Denied by Division B April 30, 1924

Appeal from Civil District Court, Parish of Orleans; Wynne G Rogers, Judge.

Mandamus by the State, on the relation of the Marine Bank & Trust Company, against Go-Ro, Incorporated. Judgment for plaintiff and defendant appeals.

Affirmed.

A. D. Danziger and P. H. Stern, both of New Orleans, for appellant.

Terriberry, Rice & Young, of New Orleans, for appellee.

ST. PAUL, J., DAWKINS, LAND, and LECHE, JJ.

OPINION

ST. PAUL, J.

The case is thus stated and disposed of by the district judge, whose opinion we adopt:

"This is a proceeding by mandamus by which relator seeks to compel respondent to take up and cancel four of its certificates of stock and issue other certificates therefor. The defense is that certificates were illegally issued.

"The facts, briefly stated, are that the original Go-Ro Manufacturing Company was the owner of patents covering what is known as the 'Go-Ro heater' and had been in business in this city in a small way for a number of years manufacturing and distributing the heaters. The directors of the company decided to enlarge the business, and to that end formed a new corporation with a larger capital stock. This new corporation was styled the 'Go-Ro Company Incorporated.' Its board of directors was composed of the same gentlemen who had served the 'Go-Ro Manufacturing Company.'

"In order to create public interest, sell the new stock of the company, and to conduct a campaign to aid it financially, the firm of Smith. Luria & Co. was employed. They entered upon the task, advertised the stock, selling a number of shares. After some time had elapsed, the board of directors of the company, not being satisfied with the progress made by Smith, Luria & Co., decided to employ another firm of brokers, Phillips, Gerson & Phillips, represented by Mr. Phillips. This change was agreed to by Mr. Luria, who reserved his claim with the consent of all concerned for future disposition. Mr. Phillips, of the newly employed brokerage firm, objected to the financial scheme upon which the Go-Ro Company, Incorporated, was founded, and agreed to handle their business on condition that they would abandon the Go-Ro Company, Incorporated, and form a new company in accordance with the plan suggested by him. This was consented to by the directors of the Go-Ro Company, Incorporated, which was abandoned, and the 'Go-Ro, Incorporated,' was organized to take its place. The Go-Ro Company, Incorporated, had never been completely organized; its charter had never been recorded. The new company, 'Go-Ro, Incorporated,' took over all of its assets and its subscriptions to stock. The new company continued the business which had been intended for the old company, and derived the benefit of the advertisement, publicity and work of Smith, Luria & Co.

"In this situation the claim of Smith, Luria & Co. was presented for adjustment. It was never denied at any time by any director of the Go-Ro, Incorporated, not even by Mr. Goreau himself, that Smith, Luria & Co. was entitled to compensation. The board postponed the final settlement several times, but finally, at one of its meetings, it was voted to issue to Smith, Luria & Co. $ 12,500 of the stock of the corporation in full settlement. At this meeting Mr. Goreau cast the only dissenting vote.

"Upon the formation of Go-Ro, Incorporated, it had entered into a contract with the Go-Ro Manufacturing Company for the purchase of the patent covering the heater; the agreed consideration being $ 250,000 of the capital stock of Go-Ro, Incorporated. The Louisiana Securities Commission would not permit this stock to be turned over to the Go-Ro Manufacturing Company immediately but ordered it to be held in escrow by the Commission until such time as the new company should prove itself a growing concern.

"In accordance with the resolution of the board of directors of Go-Ro, Incorporated, it was out of this stock that the $ 12,500 of stock were to be issued to Smith, Luria & Co. The reason for this action was that the board considered the amount due by the Go-Ro Manufacturing Company, inasmuch as the formation of the Go-Ro. Incorporated, was primarily for the benefit of and to carry on the business of the Go-Ro Manufacturing Company. This plan was executed only after the Go-Ro Manufacturing Company had expressly agreed to it in writing.

"The Louisiana Securities Commission, after a full hearing entered an order permitting the...