Opinion
Decided January 2d 1929.
The shares of stock in question having been illegally issued, held, that they should be canceled, the company paying the holders of the stock the amount paid therefor, together with legal interest and less any dividends received.
On bill of complaint. On final hearing.
Messrs. Higbee Higbee, for the complainants.
Mr. Carlton Godfrey, for the defendants.
The Hotel Stanley Corporation was incorporated on the 13th day of July, 1917, for the purpose of conducting the Stanley Hotel. Prior to July 1st, 1924, there had been issued nine hundred and twenty-seven shares of capital stock, of which the present complainants held four hundred and eighty-four shares, and the defendant and his wife and other associates held four hundred and fifty-three shares. The company may be considered as having been a close corporation, with the said George L. Kleinginna as manager of the hotel, and to a greater or lesser degree, acting as and for the corporation.
The bill is filed to set aside and cancel the following shares of stock: Fifteen shares issued to Kleinginna and fifteen shares to Mrs. Kleinginna on May 1st, 1926; twenty shares issued to Mr. and Mrs. Kleinginna on May 29th, 1926, and thirteen shares to Mrs. Kleinginna on May 2d 1927. The shares were issued at par, although it is alleged that the actual value thereof was much greater.
At the time of the hearing, the real issue appeared to be an attempt to obtain control by the Kleinginna interest of the company, by obtaining a voting majority of the stock.
Later I was advised by the solicitor of defendant "that one of the above complainants sold out his interest in the litigation to my client, which gave the defendant the entire control. Afterwards a meeting was held and the other two complainants were placed on the board of directors and I saw no reason after that situation occurred for filing a brief."
My attention is now called to the fact that the two remaining complainants desire a determination as to the validity of the issuance of said shares of stock.
I find as a fact that said sixty-three shares of stock were illegally issued and should be canceled.
I will advise a decree that upon the payment by the company to the holders of said stock, of the amount paid therefor, together with legal interest thereon — less any dividends received, said stock shall be canceled.
In the event of the refusal of the company to make such payments, the complainants may make application for further relief.