Brinckerhoff v. Roosevelt

Citations

• 131 F. 955
• 1904 U.S. App. LEXIS 4966

Syllabus

<p>1'. Corporations — Liability of Officers — Negligent Management of Corporate Business.</p> <p>Defendant was president and trustee of a building association, and, in connection with other trustees, who were authorized to transact the business of the association, made a sale of real estate, which constituted its only property, to a trust company, of which he was also president and a large stockholder, in exchange for certain securities, which were of doubtful validity and value. A bond and mortgage, however, were taken from the trust company as a guaranty of the collection of the securities to the amount of the agreed price of the property, but by agreement the mortgage was not recorded. The trust company desiring to sell the property, defendant procured the passage of a resolution by the trustees of the building association authorizing the cancellation of the mortgage, and it was so canceled, without the knowledge or consent of the stockholders. The trust company was or became insolvent, and nothing was ever realized by the building association from the securities. Held, that the cancellation of the mortgage operated as a fraud upon the association, by depriving it of its only valid security, and rendered defendant individually liable for the price of the property, which liability could 'be enforced at the suit of a stockholder; the association having refused to bring the suit.</p> <p>2. Same.</p> <p>Such suit could be maintained without first exhausting the remedy against the trust company, since the mortgage could have been similarly enforced</p> <p>3. Same. ■</p> <p>Shortly after the securities were transferred to the association the trustees caused the loans to be called and the securities sold at auction, the purpose being to cut off outstanding equities. They were bid in for the association for a sum fixed by the trustees, which exceeded or equaled the price for which the real estate had been sold. Held, that such sale did not bind the association as to the