Ellis v. Penn Beef Co.

Citations

• 9 Del. Ch. 213
• 80 A. 666
• 1911 Del. Ch. LEXIS 24

Syllabus

<p>While the duty of a court of equity to appoint a receiver pendente lite to prevent injury to the thing in controversy is a delicate and responsible duty, it should be used unhesitatingly in a proper case.</p> <p>A stockholder of a corporation may sue in equity for the cancellation of an unlawful and -ultra vires issue of stock, even though the stockholder, when he acquired his interest, had knowledge of that fact.</p> <p>Where it is certain that a corporation will riot act, the stockholder need not apply to the corporation before suing to cancel stock unlawfully issued.</p> <p>Const. Art. 9, § 3, provides that no corporation shall issue stock, except for money paid, labor done, or personal property, or real estate or leases thereof. General Corporation Law, § 14, provides that subscriptions to or purchases of the capital stock of any corporation may be paid for by cash, by labor done, by personal property, or by real property, or by leases thereof, and that, in the absence of fraud, the judgment of the directors as to the value of such labor, etc., shall be conclusive. Stock in a corporation was issued for property which was never delivered to the corporation, and the issue was ratified by the directors. Held, that such issue was unlawful and ultra vires, and might be questioned by other stockholders; it being a fraud upon the State, if upon no one else.</p> <p>In a suit to cancel stock unlawfully issued, where the appointment of a receiver pendente lite was sought to preserve the property of the corporation, a court of equity can give that relief, where the corporation is before the Court and the stockholders whose stock is sought to be canceled filed affidavits and had actual notice of the proceedings, though not served with the rule for the appointment of the receiver.</p> <p>Where only one of three stockholders of a corporation paid value for his shares of stock; and the other two have entirely and permanently failed to deliver to the company the consideratio