Wilder v. Virginia, T. & C. Steel & Iron Co.

• Court: U.S. Court of Appeals — Fourth Circuit
• Citation: 46 F. 676
• Parties: WILDER et al. v. VIRGINIA, T. & C. STEEL & IRON CO. et al.
• Decision Date: 05 June 1891

46 F. 676

WILDER et al.
v.
VIRGINIA, T. & C. STEEL & IRON CO. et al.

United States Circuit Court, W.D. Virginia.

June 5, 1891

[46 F. 677]

Goode & Goode, for complainants.

John F. Dillon, Wager Swayne, R. S. Ayers, and John N. Staples, for defendants.

FULLER, Chief Justice.

This bill was filed August 4, 1890, in the circuit court of Washington county, Va., being the sixteenth judicial circuit, by Bailey and Wellington, citizens of New York, Jonas Wilder and Hawkins, citizens of Virginia, A. B. Wilder, of Vermont, and Sheen, of Tennessee, against the Virginia, Tennessee & Carolina Steel & Iron Company, a corporation of New Jersey, the Southern Atlantic & Ohio Railroad Company, the Bailey Construction Company, and the Bristol Land Company, corporations of Virginia, and certain citizens of New York, Massachusetts, Kentucky, Tennessee, Virginia, and South Carolina. Of the complainants, Bailey, the Wilders, and Wellington were stockholders; Bailey holding paid-up and assessable, Jonas Wilder paid-up stock, and A. B. Wilder and Wellington assessable stock, and Sheen, Hawkins, and Bailey were simple contract creditors of the New Jersey corporation, and joined in the bill as such.

The bill alleged that some of the defendants, on or about April 18, 1887, associated themselves by written articles, with intent to form a corporation under the laws of the state of New Jersey, to be known as the 'Virginia, Tennessee & Carolina Steel & Iron Company,' which articles were acknowledged and filed; that prior to the attempted formation of the corporation, three of the defendants, claiming to own and control large tracts of land in Virginia, Tennessee, and South Carolina, [46 F. 678] entered into an agreement with certain other of the defendants to form and float a corporation, to which the land should be sold at $720,000, $150,000 to be paid to said three of the defendants, and $570,000 to the other defendants named, styled on the bill 'promoters;' and that, after the agreement with the promoters, the articles of association as a corporation were entered into, and complainants charge that this was not done in conformity with the laws of New Jersey. Defendants pretend, however, that they had formed a legal corporation, and elected themselves as directors; that it was understood at the time of the agreement between the promoters that when the corporation was organized the lands should be sold to the company, and be paid for out of subscriptions for its stock; and, while a pretended sale was made, the lands were never purchased by the promoters of the company, who received $100,000 out of the subscriptions to the stock, and that $570,000 was taken out of said subscriptions, and divided between the promoters, whereby innocent subscribers to the stock of the company, and the stockholders therein, were made to pay in full for the land, and to pay the bonus which the promoters, by their control of the company, were enabled to draw from the subscriptions to the stock; that the individual defendants have continued to control the company, owning a majority of the stock and holding the excess thereof, and have conducted its affairs for their own benefit, and with intent to defraud the subscribers and stockholders of the company; that the promoters and directors of the company represented to the complainants who are stockholders, and to the public, that the company was duly organized, and invited subscriptions, and issued and published a circular, which is annexed, and induced by false and fraudulent representations certain of the complainants to subscribe for shares of the stock, and others to make large subscriptions, while the promoters were conspiring together to take wrongfully, from the moneys realized from subscriptions, the sums of $150,000 and $570,000; that the defendants have abused their trust as promoters and directors, and grossly mismanaged the property of the company; that they have loaned large sums of money of the company to the Bailey Construction Company; that they have unlawfully purchased with the moneys of the Virginia, Tennessee & Carolina Company more than $1,000,000 of the capital stock of the Southern Atlantic & Ohio Railroad Company, excepting a small amount issued by that railroad, and the Bailey Construction Company has been purchased with funds belonging to the Virginia, Tennessee & Carolina Company, and the latter company is, without right, assuming to own, operate, and enjoy the franchises of the railroad company and the construction company; that the credit of the Virginia, Tennessee & Carolina Company has been pledged for large amounts for the Bailey Construction Company, and the property and assets of the company mortgaged, without right, to the Bailey Construction Company; that the defendants, assuming to be directors of the Virginia, Tennessee & Carolina Company, have misappropriated and squandered many shares of the capital stock of the Virginia, Tennessee & Carolina Company, and the company has received no adequate consideration therefor, contrary to the laws of New [46 F. 679] Jersey and the laws of the state of Virginia, and in fraud of complainants and the stockholders and creditors of the Virginia, Tennessee & Carolina Company; that the Bristol Land Company was organized for the benefit of the promoters, and with intent to defraud the Virginia, Tennessee &...