GR 18028; (April, 1922) (Digest)
G.R. No. L-18028; April 26, 1922
C. A. PARTRIDGE, LEON J. LAMBERT, J. D. McCORD, JOHN A. WATSON and JOHN R. EDGAR, plaintiffs-appellants, vs. THE SQUIRES BEINGHAM COMPANY, a partnership, THE STAPLES-HOWE PRINTING CO., Inc., a corporation, C.D. SQUIRES, JOHN C. HOWE, GEORGE SEAVER, E.C. McCULLOUGH, and T. J. FOX, defendants-appellees.
FACTS
Plaintiffs were stockholders of John R. Edgar and Company, a corporation formed in 1911 to take over the book and stationery business of John R. Edgar. The corporation’s capital stock was subscribed to by Edgar’s creditors. It is alleged that there was an agreement among the parties that no stockholder would hold or vote more than 49% of the outstanding stock. Plaintiffs sued defendants, alleging that the defendants conspired to sell and transfer their stock to defendant E.C. McCullough, a business rival, in violation of this agreement, allowing McCullough to own more than 49% of the stock. Plaintiffs claimed McCullough’s subsequent management led to the corporation’s failure and receivership, causing them to lose their investment. They sought to recover their losses from the defendants based on an alleged conspiracy to wreck the corporation.
ISSUE
Whether the defendants are liable to the plaintiffs for damages arising from an alleged conspiracy to violate a stockholding agreement and to wreck the John R. Edgar and Company corporation.
RULING
No. The Supreme Court affirmed the trial court’s judgment in favor of the defendants. The evidence did not sustain the plaintiffs’ allegations. The Court found that the evidence did not prove that McCullough ever owned more than 49% of the capital stock or that there was a conspiracy among the defendants to wreck the corporation for McCullough’s benefit. Such a conspiracy would have also injured the defendants, who were major stockholders and creditors. The trial court’s findings of fact, based on its assessment of the witnesses’ credibility, were upheld. The plaintiffs could not recover losses resulting from an error in business judgment.
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