Burbank v. Dennis

Citations

• 101 Cal. 90
• 35 P. 444
• 1894 Cal. LEXIS 988

Syllabus

<p>Corporations—Fiduciary Relation of Promoter.—A promoter of a corporation who brings about its organization and aids in procuring subscriptions thereto is considered in law as occupying a fiduciary relationship towards the corporation and its stockholders.</p> <p>Id.—Sale of Property to the Company—Duty of Promoter.—A promoter of a corporation or joint stock association may sell property thereto, but it is incumbent upon him, as a person occupying a fiduciary position, to make full and fair disclosure of his interest and position with respect to the property, and- not to make any false representations as to its cost price.</p> <p>Id.—Fraud of Promoter—Election of Remedy.—Transactions in which the promoters of a corporation suppress or misrepresent material facts, or otherwise deceive the corporation, or corruptly control its action, are fraudulent, and the company may elect either to set aside such transaction, or. to recover the promoter’s secret profits.</p> <p>Id.—Fraud Upon Stockholders—Knowledge of Directors—Ratification—Waiver.—Where fraud is practiced upon the stockholders by the promoters of the corporation, knowledge of it by the directors is not knowledge to the stockholders, and the fraud practiced upon the stockholders cannot be ratified or waived by the directors.</p> <p>Id.—Corporation for Purchase and Sale of Lands—Fraud of Promoters—Action by Stockholders.—Where a corporation was organized for the purchase and sale of lands by promoters of the corporation having contracts of purchase and deeds of various parcels of land which were conveyed to the corporation, and the promoters falsely reported to the corporation that they had paid a much larger sum on account of the purchase price of the lands than they had in fact paid, an action will lie at suit of a stockholder, after previous demand upon the corporation to commence the suit and a refusal upon its part to do so, to recover judgment for the difference between the amount actually paid and the amou