Hopper v. Brodie

Thomas, J., delivered the opinion of the Court. The bill of complaint in this, case was filed by the receiver of the Atlantic Ice Comp>any against certain stockholders of that company to recover the amount due on their stock. The record is an unusually large one,—containing more than four hundred printed pages.—but a large part of it has but little bearing on the important question to be determined on this appeal. The material facts in the ease are that in 1909 a number of holders of certificates issued by the receiver of the Baltimore Plate Ice Company, with the view of protecting their interests, formed an association for the purpose of bidding for the property of that company at a sale to be made by the receiver on the 11th of November, 1909, and Peter L. Hopper and Edwin M. Lilly were appointed a committee to attend the sale, and bid for the property.

The committee purchased the property for $34,500.00, and made the cash payment thereon of $5,000.00 required by the terms of the sale. $3,000.00 of this, cash payment of $5,000.00- was contributed by Peter L. Hopper and John N. Spencer; $100 by Daniel H. D-oyle; $500 by George E. Plitt; $700 by Edwin M. Lilly; $500 by Burton G. Buck; $100 by Herman Wagner and $100 by David Lescallett. On the 26th of February, 1910, the members of the association incorporated the Atlantic Ice Company, with a capital stock of $25,000.00', “divided into twenty-five hundred shares, of the par value of ten dollars each,” and on the 22nd of March, 1910, they entered into the following agreement: “This Agreement, made this 22nd day of March, 1910, by and between John B. Spencer, P. L. Hopper, Edwin M. Lilly, Samuel G. Messerschmidt, George Plitt, Herman Wagner, David Lescallett, Alexander L. Tinsley, Burton G. Buck, Daniel H. Doyle, Samuel ²⁹² Adler and Frederick M. Supplee, or suck of them as shall join in this agreement, parties of the first part, and The Atlantic Ice Company, party of the second part. “Whereas, The parties of the first part, being holders of certificates issued by Edgar Ziellian, receiver of the Baltimore Plate Ice Company, did on or about the -day of November, 1909, enter into an agreement and form an association to protect their respective interests in the property and assets of said company, by virtue of which agreement, through their committee, Edwin M. Lilly and P. L. Hopper, they did upon the 11th day of November, 1909, become the purchasers of said property for the sum of $34,500.00, which sale has been ratified by Circuit Court No. 2 of Baltimore City, as will appear by reference to the proceedings had in the case of Bernard Flakover vs. The Baltimore Plate Ice Company of i’ecord in said court. “And whereas, The said parties of the first part for the more convenient management of said property have formed The Atlantic lee Company, a corporation, to take over all their respective right, title and interest therein, as well as their interest in the receivers’ certificates which they have deposited with Edwin M. Lilly, John N. Spencer and P. L. Hopper, with the intent that the proceeds thereof shall be applied to the purchase money and carrying charges of said property. “And whereas, The said parties of the first part have agreed in lieu of the amount which may be realized on said certificates and of the amounts which they have heretofore or may hereafter contribute to said purchase money and charges to accept shares of the common stock of the said The Atlantic Ice Company equal to the proportion which their respective contributions bear to the whole amount of said purchase money and charges. “Now .This Agreement Witnesseth, That in consideration of the premises and the sum of one dollar the undersigned parties of the first part do respectively grant and assign to the said The Atlantic Ice Com ²⁹³ pany all tlieir joint and several interests in the property and receivers’ certificates aforesaid and they hereby direct the committee holding said certificates to deliver them to said company, and they further direct Edwin M. Lilly and P. L. Hopper, the purchasing committee aforesaid, to convey to said company said property free and discharged of any claim or interest which they or either of them might have therein. And for their said contributions for said purchase money, including the proceeds of their said certificates, they respectively agree to accept shares of common stock of said company of an amount equal to the proportion which their respective contributions bear to the whole amount of the purchase money and carrying charges aforesaid.” On the date of the above agreement the stockholders of the Atlantic Ice Company held their first meeting', and the minutes of that meeting are as. follows: “Baltimore City, Md., 8 o’clock P. M., “March 22nd, 1910. At the office of “Buck Brothers in South Street. “This being the first meeting of the stockholders of The Atlantic Ice Company, the following named stockholders were present: Messrs.

P. L. Hopper, John 1ST. Spencer, Edwin M. Lilly, Samuel Gf. Messerschmidt, George E. Plitt, Burton G. Buck, Alexander L. Tinsley, David Leseallett, Daniel H. Doyle, and by proxy held by P. L. Hopper the following: Herman Wagner, Frederick M. Supplee and Samuel Adler, representing all the outstanding shares of the capital stock of this company. “Mr. Hopper called the meeting to order and Mr. Lilly was appointed secretary. “Mr. Doyle offered the following resolution: “ Whereas, by agreement made the 22nd day o'f March, 1910, the associated holders of certificates issued by Edgar Zielian, Receiver of the Baltimore Plate Ice Company, have agreed to accept in lieu of the amounts which they have heretofore or may hero- ²⁹⁴ after contribute to the purchase money of the property of the said company and the carrying charges thereof, shares of the common stock of The Atlantic Ice Company equal to the proportion which their respective contributions bear to the whole amount of said purchase money and charges. Be it therefore resolved that the officers of The Atlantic Ice Company issue to said certificate holders respectively certificates for shares of common stock of said company in proportion to their respective contributions as the same shall be paid in.’ “On motion the resolution was unanimously adopted. “Mr. Buck offered the following resolution: “'Whereas, John H. Spencer and Peter L. Hopper have offered to lend this company for four months the sum of $20,000.00, less the discount thereon, upon its promissory notes, for and in consideration of a bonus of 1,351 shares of its capital stock; be it therefore resolved, that this company accept said loan upon the conditions aforesaid, and that the officers of the company issue to the said John H. Spencer and Peter L. Hopper its four promissory notes for $5,000.00 each at four months and also a certificate for 1,351 shares of its capital stock.’ “On motion to adopt the resolution the vote was as follows: Messrs.

Spencer and Hopper not voting. Yeas: Messrs. Tinsley, Doyle, Lescallett, Plitt, Buck, Messerschmidt, Wagner, Supplee and Adler ; Hay, Mr. Lilly. Those voting-in the affirmative being a majority in interest of the stockholders who voted on the resolution and representing a majority of all the stock outstanding and entitled to vote, the resolution was declared adopted. “On motion, the meeting was adjourned subject to call. “E. M. Lilly, Secretary.” It appears from the memoranda in the minute book and from other evidence in the case that at that meeting' of the stockholders Daniel Hi Doyle voted six shares of stock, David ²⁹⁵ Leseallet-t six shares, George E. Plitt- thirty-one shares,, Burton G. Buck thirty-one shares-, Herman Wagner six shares and Edwin M. Lilly forty-four shares-, and it- also appears from the minute hook that at a meeting of the directors' o-f the Atlantic Ice Company, held immediately after the- first meeting of the stockholders,, the following officers- were elected: Peter L. Hop-per, president; John 1ST.

Spencer, treasurer, and Edwin M. Lilly, secretary, and that the- president, and secretary were directed to execute four notes- of the company for $5,000.00 each, at four months-, to the order of John 1ST. Spencer and P. L. Hopper, in accordance with the resolution of the stockholders-, and that the president wasi requested to secure the necessary blank stock certificates, a seal and minute book for the use o-f the company. The minute hook shows that in accordance with s-aid resolution, the following stock was issued on the 4th of August, 1910: to John E. Spencer and Pet-er L. Hopper, 1,538 shares; to Edwin M. Lilly, forty-four shares; to George E. Plitt, thirty-one shares; to- Burton G. Buck, thirty-one shares; to Daniel H. Doyle, six shares; D'avid Leseallett, six shares, and to Herman Wagner, six shares. The number of shares issued to Hopper and Spencer included the 1,351 allowed as a bonus for the loan of $20,-000.00, and 181 shares representing their contribution to- the cash payment fo-r the property purchased from the receiver of the Baltimore Plate Ice- Company, and the stock issued to the other stockholders represented their contribution to said cash payment.

On the 15th of August, 1910, the following certificate was recorded among the charter records of Baltimore City: “This is to certify that The Atlantic Ice Company lias within thirty days prior to the date hereof issued 1,351 shares of its capital stock of the par value of ten dollars in payment for the following described services, to wit: “In consideration and as a bonus for a loan of $20,000.00 upon its four promissory notes of $5,000.00 each. ²⁹⁶ “Witness the signatures of the President and Secretary of the Atlantic Ice Company this 15th day of August, 1910. “P. L. Hopper, President. “David Lescallett, Secretary Pro Tern. “(Affidavit of John W. Spencer, treasurer of The Atlantic Ice Company, attached.)” In May, 1910, the Atlantic Ice Company contracted with John B. 'Smithman for the repair of the gas engines in its plant and agreed to pay him for the work $1,000.00, in two payments of $3,500.00 each. The evidence shows that the holders of the receiver’s certificates who purchased the property expected the receivers of the Baltimore Plate Ice Company to accept their certificates in part payment of the purchase money, and that because of the refusal of the receivers to do so, the Atlantic Ice Company, to whom the certificates were subsequently assigned, was compelled to borrow the money necessary to pay the purchase price, interest thereon, insurance, taxes, ground rent and other expenses on the property. Instead of realizing the full amount of the certificates, the Atlantic Ice Company ultimately received, in 1912, only a dividend of forty per cent., and the minutes of the meeting of the board of directors of the Atlantic Ice Company, held on the 16th of July contain the following reference to the dividend: “The president reported that Messrs. Doyle, Plitt, Lilly, Tinsley, Buck, Supplee and Drennen desired to withdraw the dividends on the receivers’ ■ certificates heretofore assigned by them to this company upon which a dividend of 40% had been allowed in the settlement of the affairs of the Balto.

Plate Ice Co., and that they had employed attorneys and were threatening proceedings against the company, which proceedings were without foundation, but would seriously affect the company’s credit to its great disadvantage. It was therefore resolved that the persons above men ²⁹⁷ tioned be allowed to withdraw the amount of the dividends declared upon their respective certificates. “John 1ST. Spencer, Secretary.” It appears that the parties to whom the receiver’s certificates were issued were allowed to withdraw the dividends thereon received by the Atlantic Ice Company, and that the stockholders of the Atlantic Ice Company, to> whom stock had been issued for their contributions to the cash payment of $5,000.00, sold their stock to Peter L. Hopper and- John £7. Spencer, so that Hopper and Spencer became the owners of all the capital stock issued by the company with the possible exception of one share allotted to.

Clarence Tv. Wright, who on August 16th, 1912, was elected a director of the company in the place of David Lescallett. As already indicated, the property of the Baltimore Plate Ice Company was not purchased by the holders of the receiver’s certificates, or by the Atlantic Ice Company, with the view’ of operating the ice plant, but for the purpose of protecting their interests', and the officers of the Atlantic Ice Company made numerous efforts to sell the property. On the 2nd of May, 1911, Peter L. Hopper, the president, reported to the board of directors that he had sold the property of the company to the Independent Ice Company of Baltimore City for $10,000.00 cash and “$25,000.00 par value of preferred stock—and, $25,-000.00 par value o-f the common stock” of the latter company.

His action was ratified by the board, and he was directed to bold tbe cash and stock mentioned subject, to such disposition thereof as should be thereafter made by the Atlantic Ice Company. On August 16th, 1912, the board of directors, composed of Messrs. Hopper, Spencer and Wright, approved the action of Messrs. Hopper1 and Spencer in exchanging 250 shares of the common stock of the Independent Ice Company for $5,000.00 cash and 170 shares of the preferred stock of that company, and on the 17th of September1, 1912, the board of directors., composed of Messrs.

Hopper, Spencer1 and Wright, who were tbe holders, of all the stock issued by the ²⁹⁸ Atlantic Ice Company, accepted the offer of Messrs. Hopper and Spencer to pay $75.00 per share for its preferred stock of the Independent Ice Company and to assume the liability of the Atlantic Ice Company on all outstanding notes of the company, amounting to $28,750.00, and on a bond of indemnity for $5,000.00. The Atlantic Ice Company refused to pay Smithman for the work done by him under the contract of May, 1910, on the ground that he did not comply with the contract and that by reason thereof the company had suffered damages in excess of