In Banc. This case involves rights claimed by the plaintiff as embodied in her third amended complaint. A demurrer of the defendant the Joseph A. Strowbridge Estate Company, a corporation, to plaintiff's third amended complaint was sustained; and, as to said defendant, corporation, the cause was thereupon dismissed. Issues were joined by defendants, Strowbridge, and the cause was tried upon the issues thus joined in said third amended complaint, an amended answer, and a reply. After the taking of the testimony and the hearing of the arguments of counsel in this *Page 108 case, numbered L-3118 in the circuit court, a decree was entered dismissing the same as to defendants, Strowbridge. Plaintiff appeals from these orders of dismissal.
A companion case, numbered M-4811 in the circuit court, was tried in the lower court upon the same testimony and arguments as this one. The two cases were submitted in this court on one transcript.
In her third amended complaint, the plaintiff claims certain rights under alleged mutual wills with reciprocal provisions and her first cause of suit seeks to enforce the specific performance of the alleged agreement to make such wills and secure recognition of plaintiff's alleged rights thereunder. Plaintiff's second cause of suit adopts by reference the material allegations of her first cause of suit and presents the claim that she was induced to part with certain shares of stock in the defendant, corporation, by means of alleged false and fraudulent representations; and that such stock so surrendered by plaintiff was wrongfully reissued to defendants Strowbridge.
On June 30, 1903, Joseph A. Strowbridge, Sr., died leaving a widow, Mary B. Strowbridge (since deceased), and five children, George H. Strowbridge (since deceased) and the four surviving children, parties to this suit.
On July 8, 1903, the widow of Joseph A. Strowbridge and his heirs executed an agreement to which the parties hereto and thereto give different interpretations. The plaintiff contends that this agreement was temporary and effective only pending incorporation of the estate company and has been long since abandoned. Defendants contend that this agreement was permanent and has always been observed. *Page 109
On March 28, 1904, the estate of the ancestor, Joseph A. Strowbridge, Sr., was settled.
On April 5, 1904, the Joseph A. Strowbridge Estate Company was incorporated as a holding company to take over the assets of the Joseph A. Strowbridge estate.
On April 12, 1904, all properties of the estate were transferred to the Joseph A. Strowbridge Estate Company except lots 1, 2, 3 and 4 in block 162, Portland, which had been previously conveyed by all of said children to the mother, Mary B. Strowbridge.
Plaintiff claims that previous to May 11, 1905, she, plaintiff her mother, Mary B. Strowbridge, and her unmarried brother, George H. Strowbridge, entered into an agreement to make mutual wills with reciprocal provisions for the disposition of their properties after death.
Plaintiff also claims that on May 11, 1905, she, plaintiff her mother, Mary B. Strowbridge, and her brother, George H. Strowbridge, respectively, executed their respective mutual wills.
On May 31, 1912, George H. Strowbridge died.
Paragraph 10 of plaintiff's said third amended complaint reads thus:
"That said George H. Strowbridge died testate in the county of Multnomah, state of Oregon, on the 31st day of May, 1912, leaving property in said county consisting of the 25 shares of capital stock of said defendant company and other personal property, including a note and mortgage from defendant Alfred B. Strowbridge, and wife, on which there was then due and owing a sum in excess of $6,000.00, the exact amount of which is to plaintiff unknown; that after the death of the said George H. Strowbridge, the executrices of his will were advised by defendant Joseph A. Strowbridge, *Page 110 Jr., who was their legal adviser, that it was not necessary to probate said will and that the estate of said deceased could be distributed to the devisees and legatees without probate; that plaintiff and said Mary B. Strowbridge did not know that it was necessary to probate said will and relied solely upon the advice so given to them by said Joseph A. Strowbridge, Jr., and in accordance with said advice the capital stock owned by said deceased in said defendant corporation was distributed in accordance with the said will and the agreement above set forth, that is to say: 12 1/2 shares thereof were distributed to the plaintiff and 12 1/2 shares thereof were distributed to said Mary B. Strowbridge, and after such distribution the capital stock of the said defendant corporation was held as follows:
"Mary H. Strowbridge, now "Mary S. Muellhaupt, ____________________________________ 37 1/2 shares "Mary B. Strowbridge, ___________________________________ 37 1/2 shares "Joseph A. Strowbridge, Jr., ____________________________ 25 shares "Alfred B. Strowbridge __________________________________ 25 shares "Henry J. Strowbridge ___________________________________ 25 shares
"That at the time of the death of said George H. Strowbridge the said three wills and the said agreement, pursuant to which the same were executed, were, as originally drawn, and made, in full force and effect and observed by all parties thereto."
Plaintiff also alleges that in April, 1925, plaintiff went to the office of the defendant company to inquire concerning cash collections on sales of her individual property and found defendants Joseph A. Strowbridge, Jr., Alfred B. Strowbridge and Henry J. Strowbridge there; that no directors' meeting had been called for said time and place; that at said time and place said Joseph A. Strowbridge, Jr., acting in concert with said other defendants with the fraudulent purpose and intent of defrauding plaintiff out of her property, told plaintiff in the presence of defendants Alfred B. *Page 111 Strowbridge and Henry J. Strowbridge that they thought they ought to have their share of the stock of George H. Strowbridge and that they wanted it and requested her to get her stock certificate, which she did at once; that said defendants had previously represented to plaintiff that they had all made great personal sacrifices that they could ill afford in the interests of said estate and in plaintiff's interests all to the end that the affairs of the said defendant company and of plaintiff should be in all things protected and cared for and that this had been done and that the affairs of the defendant company were in excellent condition and that the services of all defendant officers of said defendant company had been honest and painstaking and faithful. * * * That plaintiff had always had implicit confidence and faith in her said brothers, and had in all things entrusted the control and management of said defendant company to them and believed that they had been faithful and honest, and she had at that time no reason to suspect that their management had been other than honest and faithful and in the best interest of all interested therein, and she believed that they had made personal sacrifices in that connection and had in all things looked after and preserved her interest. She believed that the affairs of said company were in excellent condition and, so believing, relied upon statements and representations of defendants as stated and made and delivered her certificate of stock to said defendants. * * * At the time said certificate was issued to plaintiff at the request of defendant Joseph A. Strowbridge, Jr., she endorsed her name on the same in blank and at said time she thought it was necessary to sign the same in order to own said stock, etc. That the existence of an undistributed surplus of approximately $20,000 was *Page 112 known to said defendants, but was unknown to plaintiff but was kept secret from plaintiff by said defendants with the intent to falsely and fraudulently induce plaintiff to part with her said stock and then to distribute the said surplus after the surrender of the said stock on the basis of each stockholder holding 37 1/2 shares. * * * That the assets so distributed exceded $27,000. The said distribution was made without notice to plaintiff or her attorney in fact the Security Savings and Trust Company, a corporation of Portland, Oregon.
On August 4, 1916, Mary B. Strowbridge died.
Plaintiff alleges that on April 25, 1923, defendants by representations relied on by the plaintiff, but subsequently found to be false, induced plaintiff to surrender 9 3/8 of her shares of the capital stock of the Joseph A. Strowbridge Estate Company to the corporation, which then reissued said stock to the three brothers. At that time the plaintiff was the legal owner and holder of 46 7/8 shares.
The amended answer of the answering defendants admits the allegations of the third amended complaint as to the maiden name, date of marriage and present name of the plaintiff, as to the organization and existence of the defendant corporation, as to the death intestate of Joseph A. Strowbridge, Sr., as to the identity of his next of kin and heirs at law, as to the death testate of George H. Strowbridge, as to the ownership of real and personal property of large value by said Joseph A. Strowbridge, Sr., at the time of his death, as to the appointment of administrators of the estate of Joseph A. Strowbridge, deceased, as to the probate proceedings of said estate, as to the distribution of the entire property of said estate, both real and personal, to *Page 113 the widow and five children of said deceased share and share alike each receiving an undivided one-sixth thereof in accordance with an agreement made and entered into by said widow and children, except lots 1, 2, 3 and 4, block 162, in the city of Portland, which had been conveyed by all of said children to Mary B. Strowbridge, as to the incorporation of the Joseph A. Strowbridge Estate Company for the purpose of operating various properties formerly owned by said Joseph A. Strowbridge, Sr., as to the amount of capital stock of said corporation, the manner in which the same originally was divided and to whom and in what number of shares it was issued.
The allegations of the third amended complaint as to the personnel of the corporate officers are also admitted, except that it is denied that Mary B. Strowbridge was a director of said corporation; that Joseph A. Strowbridge has, in addition to discharging the duties of president, acted or discharged the duties as general manager of said corporation, or has supervised or kept the record of said corporation including the receipts and disbursements of funds, and that Joseph A. Strowbridge, Jr., and Alfred B. Strowbridge, or either of them, held or maintained or had physical control of any of the documents belonging to said corporation. The answering defendants also admit that plaintiff had faith and confidence in the defendants and particularly in Joseph A. Strowbridge, Jr.; admit that Joseph A. Strowbridge, Jr., is an attorney at law; admit that plaintiff had faith and confidence in Alfred B. Strowbridge; admit that a partial audit of the affairs of the said corporation was rendered during April or May, 1924. Except the facts thus admitted, the answering defendants deny all of the allegations set forth in plaintiff's third amended complaint. *Page 114
As a first affirmative defense to plaintiff's first cause of suit, the answering defendants allege that the books and documents belonging to said corporation were at all times subject to the physical control of its board of directors and board of managers and that no action whatsoever affecting the corporation, property or interests of any one, or at all, was ever taken save and except upon full notice of the board of directors of the proposed action, and, thereafter, upon resolution of the board of directors duly adopted with all facts placed before said board authorizing the transaction of each particular piece of business; that at all times since the incorporation of the Joseph A. Strowbridge Estate Company, plaintiff has been and is now a stockholder and director thereof and has had full and free access to the corporate books and records; that she is well versed and was at all times well versed with all of the transactions of the corporation, and fully understood and realized each transaction to which she assented.
That the note and mortgage referred to in paragraph 10 of the complaint was transferred by George H. Strowbridge to the corporation prior to death; that after the death of the said George H. Strowbridge, at a meeting of the board of directors of the defendant corporation held on the 27th day of May, 1915, all of the surviving directors thereof were personally present, including plaintiff; that at said meeting by resolution of the said board, concurred in by all the directors including plaintiff, it was resolved that the said indebtedness be and the same was thereupon canceled and the said note was returned to Alfred B. Strowbridge, the maker thereof, with the consent and knowledge of plaintiff. *Page 115
That prior to the death of George H. Strowbridge, he personally made a gift of 12 1/2 shares of his stock in the Strowbridge Estate Company to Mary B. Strowbridge, the mother of the individual parties involved in this controversy, and that thereafter the said Mary B. Strowbridge with the notice, the knowledge, the acquaintance and consent of plaintiff refused to accept or receive as her own the said 12 1/2 shares of stock formerly belonging to said George H. Strowbridge, but transferred the same to the defendant corporation so that all of the stockholders should equally benefit thereby. At the same time the said Mary B. Strowbridge also transferred and delivered to the defendant corporation the original 25 shares of stock which she, the said Mary B. Strowbridge, had up and until that time held as her own.
That this transaction was well known to the plaintiff; that she made no objection or protest thereto; that she received the benefits thereof and kept the said benefits thereunder without objection or protest, and that at no time did the plaintiff inform any of these defendants, or claim, or assert, that there were mutual wills or that the wills, pretended to be described in the third amended complaint, ever existed or that any agreement existed between the plaintiff Mary B. Strowbridge and the said George H. Strowbridge for any such division of their properties as plaintiff now asserts; that the remaining 12 1/2 shares of stock formerly owned by George H. Strowbridge were delivered to plaintiff as security for a loan of $6,000, which plaintiff made to the defendant corporation; that the said sum of $6,000 borrowed by the said corporation from plaintiff was used in the preservation, the protection and improvement of corporate property; that plaintiff *Page 116 well knew the purpose of obtaining said loan, well knew of defendants' application and acquiesced therein and consented thereto and received the 12 1/2 shares of stock formerly belonging to her deceased brother, George H. Strowbridge, as security only for the loan so made. The plaintiff held and retained the said 12 1/2 shares as such security until the said indebtedness was paid by said corporation about the 18th day of July, 1921, and thereafter continued to hold said stock until an alleged family settlement was made about the 25th day of April, 1923. The answering defendants set out a copy of the agreement, executed by the surviving wife and all the children of Joseph A. Strowbridge, Sr., bearing date July 8, 1903, and allege that Mary B. Strowbridge was actuated by the alleged intent and purpose of all of the members of the family alleged to be reflected by the terms of this agreement in transferring her 37 1/2 shares of corporate stock as therein-before set forth and that plaintiff knew of such understanding and agreement and actively, consciously and purposely participated in the consummation thereof and received and accepted the benefits thereof and now retains large benefits derived by her individually because of such understanding and agreement which benefits are more particularly thereinafter described. That about the year 1921, the surviving children, at a common meeting of the family and of the directors of the defendant corporation, met and at said time plaintiff was not then married; that it was discussed among the surviving children that plaintiff had no home and thereupon each of her surviving brothers and herself discussed the situation of the Joseph A. Strowbridge Estate properties and decided that in furtherance of the common family agreement and of the purpose to *Page 117 furnish plaintiff with a home there should be transferred to her lots 1 and 2 in block 162, in the city of Portland, Oregon, and that there should be given to her without reserve all of the furniture, household equipment, the kitchen utensils, the family keepsakes, the jewelry, which the father had given the mother, and the contents of said home, and thereafter said company was authorized and did transfer to plaintiff the said lots 1 and 2 of said block, and that plaintiff was permitted, without question, to exercise the rights of ownership and to receive and control all of the household furniture, fixtures and the contents of the said home, the same being of the value of $50,000; that as part of said agreement and settlement, lots 3 and 4 of said block 162, Portland, Oregon, were transferred to Alfred B. Strowbridge and Joseph A. Strowbridge, Jr., and Henry J. Strowbridge, share and share alike, and that the said properties, so received by the said three surviving brothers, were of the value not to exceed $15,000.
The answering defendants further allege that prior to the death of Mary B. Strowbridge she disposed of 37 1/2 shares of the corporate stock of the Joseph A. Strowbridge Estate Company, as hereinbefore set forth; that the said Mary B. Strowbridge, now Mary S. Muellhaupt, became at the death of her mother and was and is now entitled to and has received the following stock from said corporation, to wit:
*Page 118Her original subscribed shares __________________________ 25 shares One-fourth of original subscribed shares from her mother _______________________________ 6 1/4 shares One-fourth of original subscribed shares from her brother ______________________________ 6 1/4 shares ______ 37 1/2 shares
On May 10, 1923, plaintiff married O.W.T. Muellhaupt.
In March, 1924, plaintiff returned to Oregon, from a wedding trip, having been abroad from the date of her marriage.
In April or May, 1924, plaintiff insisted on an audit of the corporate books, which had never been audited, and a verbal and partial report of the accountants' revealed irregularities, embezzlements and misappropriations of funds in excess of $30,000.
In March, 1925, a written report of accountants disclosed additional misappropriations of $15,000 and charges against the funds of the corporation in the further sum of $60,000 for which there are no vouchers.
On July 23, 1925, plaintiff filed this suit for an accounting and for specific performance of the alleged mutual wills contract. The first question we will determine is whether the lower court erred in sustaining the demurrer of defendant, the Joseph A. Strowbridge Estate Company, a corporation, to the third amended complaint. This being a case wherein part of the relief sought consists in the cancellation of certain corporate stock issued to defendants, Strowbridge, and the reissuance thereof to plaintiff, the corporation is an indispensable party defendant: St. Louis S.F.R. Co. v. Wilson, 114 U.S. 60 (5 S. Ct. 738, 29 L. Ed. 66);Crump v. Thurber, 115 U.S. 56 (5 S. Ct. 1154, 29 L. Ed. 328).
Moreover, an accounting is sought which pertains to the assets and transactions of the corporation. We, *Page 119 therefore, hold that the lower court erred in sustaining the corporation's demurrer to plaintiff's third amended complaint.
As to the alleged agreements of plaintiff, her mother and her brother, George H. Strowbridge, to make mutual wills, the testimony in support of plaintiff's claim in that regard is confined to plaintiff's own testimony, the testimony of Dr. McMerdo, that, while in professional attendance upon plaintiff's mother, she told him of such an agreement; and the further fact that George H. Strowbridge actually executed his will in favor of plaintiff and her mother. The witnesses named by plaintiff, as having attested her will and that of her mother, are unable to remember such attestation. One of these alleged witnesses, Judge Charles H. Carey, is an attorney, who, plaintiff claims, prepared the three wills. Judge Carey is unable to remember that he ever prepared such wills. Moreover, plaintiff accepted a deed to the home property executed by the corporation after the death of her mother, said home property having been part of her mother's estate when the alleged agreement to make mutual wills is said to have been made. This is inconsistent with plaintiff's contention that plaintiff herself owned the property by virtue of the alleged agreement concerning mutual wills. Without discussing other features of the testimony on this phase of the case, we hold that the alleged agreement concerning mutual wills to be executed by plaintiff, her mother and her brother George H. Strowbridge has not been proven. It is therefore unnecessary to decide whether plaintiff received one-fourth of her mother's stock by inheritance or by virtue of the alleged transfer thereof to defendant Joseph A. Strowbridge, Jr., in trust to be equally divided among the four surviving children. *Page 120
It is urged by the answering defendants, in explanation of plaintiff having 12 1/2 shares formerly owned by George H. Strowbridge, that the same was pledged to her as security for a loan of $6,000 to the corporation. It is stated, however, in the answering defendants' amended answer that this loan was paid July 18, 1921; and that plaintiff retained said stock until April 25, 1923.
The purported corporate minutes of January 22, 1923, expressly state that at that time plaintiff was the owner of 46 7/8 shares of stock. Defendant J.A. Strowbridge testified that George H. Strowbridge told him that he, George H. Strowbridge, had transferred his stock to plaintiff and her mother in equal shares: Transcript of testimony, p. 220.
A careful consideration of the circumstances of this case, as disclosed by the evidence, in the light of the pleadings of the respective parties, leads us to the conclusion that at the death of George H. Strowbridge plaintiff was and ever since has been entitled to the 12 1/2 shares of the stock in said corporation, being one-half of the stock originally issued to the said George H. Strowbridge; and that at the death of her mother plaintiff was and ever since has been entitled to an additional 9 3/8 shares, being her distributive portion of the stock originally issued to Mary B. Strowbridge as the stock owned by her in her own right and the stock transferred to Mary B. Strowbridge by George H. Strowbridge.
In determining whether such fraud has been proven as to invalidate the surrender of plaintiff's stock, we fully realize that the innocent may be affected; but the record discloses that one of the defendants, while *Page 121 sane, falsified the records of the corporation and tortiously converted many thousands of dollars. The record also discloses that plaintiff had confidence in and trusted this defendant and her other brothers. This conversion of funds was wholly unknown to plaintiff when she surrendered the stock in question. Three phases of the defaulting defendant's relation to the corporation present themselves: one concerning a note for $7,380; another, because of the shortage reported by accountant Rae in the sum of $24,377.13; and the third on account of the further and earlier shortage in the sum of $15,395.62 reported by accountant Tourtellette through witness J.T. Pasquill. Plaintiff had no knowledge or notice of these transactions or any of them when she surrendered her stock. It is stipulated that at the time of such surrender of stock by plaintiff defendant Alfred B. Strowbridge was sane. Quoting from the transcript of testimony, page 701:
"Mr. Kavanaugh: I will tell you now that I intend to show, I intend to show that he was sound physically and mentally at that time (time of examination of life insurance), if you will admit that.
"Mr. Logan: I will admit that so far as the record shows he was sound — so far as the record shows.
"Mr. Kavanaugh: The record in this court is that he was insane from June, 1926. That is all you claim for it, is it?
"Mr. Logan: That is all we claim."
The conclusion is irresistible that one of the defendants participating in the transaction involved, by which transaction all answering defendants profited and in whom plaintiff reposed confidence, concealed from plaintiff and failed to reveal to plaintiff a state of affairs, which, if known to her, would have had a *Page 122 strong tendency to cause her, as a reasonably prudent person, to decline to make the requested surrender of stock.
Defendant Henry J. Strowbridge was asked:
"At the time that that transfer was made you didn't know anything about any irregularities in the business, did you?"
To which he answered:
"I certainly did not or I wouldn't have accepted it," etc. Transcript, pp. 859-60.
We are impressed with the improbability that on January 22, 1923, plaintiff took such action in regard to her stock as the purported corporate minutes of that date indicate. The stock was not surrendered until April 25, 1923. Naturally, plaintiff's approaching marriage would have been considered and discussed by the brothers as an event justifying a readjustment of the stockholders' interests. This event was not made known in January of that year. The announcement of plaintiff's approaching marriage was made about three weeks before it occurred: Transcript of testimony, p. 1073. The date of her wedding is May 10, 1923.
The transfer of plaintiff's stock on April 25, 1923, was induced by an erroneous belief, on plaintiff's part, as to the condition of the corporate affairs, which belief, in part, was engendered by the concealment from plaintiff and the failure to reveal to her the truth in respect thereto by at least one of her brothers, whose moral and legal duty it was, under the admitted circumstances of kinship and confidence, to make full and complete disclosure to plaintiff. This vitiated the transaction and rendered it invalid. *Page 123
Answering defendants cite: Cohen v. Maus, 297 Pa. 454 (147 A. 103); Davenport v. Newton, 71 Vt. 11 (42 A. 1087);Fanning v. Osborne, 102 N.Y. 441 (7 N.E. 307); 4 Fletcher, Corporations, 3774, § 2536; 2 Machen, Corporations, §§ 1642, 1644; Burckhardt v. N.W. Nat. Bank, 38 F.2d 568; Peltonv. Gold Hill Canal Co., 72 Or. 353 (142 P. 769).
These cases announce the rule that a director of a corporation is not individually liable for torts of the corporation in which such director did not participate.
In the case of Cohen v. Maus, supra, the director participating in the tort was held amenable.
Davenport v. Newton, supra, and Fanning v. Osborne, supra, are cases wherein the directors sought to be charged, did nothing by participation or advice to make the wrongful acts their own.
In Burckhardt v. U.S. Nat. Bank, supra, certain stockholders, not sustaining the fiduciary relations of kinship and personal trust and confidence, sought relief against directors not shown personally to have profited by the transaction.
Pelton v. Gold Hill Canal Co., supra, is a case instituted to recover the value of wheat stored in the warehouse of a foreign corporation. In the opinion we find this statement:
"There is nothing to indicate that the directors, or any of them, had personal knowledge or information as to the deposit of the grain in question until long after it had been ground and disposed of. In fact, the testimony indicates that they were entirely ignorant of the deposit or conversion until long after the grain had been sold." p. 360.
In the case at bar, the answering defendant had knowledge of the transfer of plaintiff's stock at the *Page 124 time it was transferred, and each of them individually profited thereby. It would be inequitable to permit answering defendants to retain the stock thus procured.
The subsequent settlement with defendant Alfred B. Strowbridge, at which time plaintiff was represented by Judge Charles H. Carey, was made before the defalcations reported by Mr. Rae were known to plaintiff or Judge Carey. When these other defalcations were reported by Mr. Rae, plaintiff declined to approve any settlement thereof and since then no settlement thereof has been approved by her. In this state of the case, plaintiff is not deprived of her right to rescind the transfer of her stock and to insist upon its reissuance to her. It is true that plaintiff was a director of the corporation, had access to its records, and at one time remained in its office for several weeks during the absence of Joseph A. Strowbridge, Jr., but this does not destroy the obligation resting upon her brothers in whom she reposed implicit confidence, each of whom was more experienced in business methods than plaintiff and one of whom is an attorney at law, fully to disclose to her all the facts known to them with reference to the corporate affairs when taking from her the stock in question.
We can not concur with defendants' construction of the agreement dated July 8, 1903, and executed by the children and widow of Joseph A. Strowbridge, Sr. This agreement, dated July 8, 1903, provides:
"After (payment of) all taxes, liens, improvements, costs of administration and other expenses that from time to time shall be levied against said estate, the balance or remainder that shall be left is to be divided and distributed equally, share and share alike, to said mother and children aforesaid, and to their heirs of their body." *Page 125
The estate was fully settled on March 28, 1904. It is alleged in the third amended complaint (par. 5), and admitted in answering defendants' amended answer thereto (par. 5):
"That the entire property of said estate, both real and personal, was distributed to the widow and five children of said deceased share and share alike, each receiving an undivided one-sixth of said estate, in accordance with an agreement entered into by said widow and children," etc.
No other agreement appears in the record executed by these parties; hence, we conclude that this distribution carried out and consummated the agreement of July 8, 1903.
The practical construction given to this last named agreement by the parties thereto, as well as the express terms thereof as quoted, refutes the idea that such agreement imposed a perpetual restriction upon any transfer which would render unequal the respective interests of stockholders in a corporation not yet formed.
Answering defendants allege that 12 1/2 shares of stock, in addition to the 25 shares originally issued to plaintiff, were pledged to plaintiff as security for a loan. This would have been a futile gesture if perpetual equality of interest on the part of each stockholder was imperative.
The funeral expenses of George H. and Mary B. Strowbridge were advanced by plaintiff and afterwards paid to plaintiff from the funds of the corporation. As to the estate of Mary B. Strowbridge, there is nothing inconsistent in this with the distribution of said estate to the four children in equal shares, or in plaintiff's equal participation as one of the cestui que trustent under the transfer claimed by defendants to *Page 126 have been made by their mother to J.A. Strowbridge in trust for the four children, except that plaintiff thereby defrayed more than her share of such expense.
As to the estate of George H. Strowbridge, it is evident that plaintiff relied upon the advice of her brothers and did not know that the effect of the course pursued might be to constitute a waiver of her rights. This payment by the corporation may be adjusted by an accounting.
We have not overlooked the fact that, since the disclosures of the Rae and Tourtellette audits, plaintiff has been the recipient of money from the corporation, but the record discloses an offer on her part to return the same; and the defenses interposed herein support the conclusion that a return thereof would not be accepted; hence, plaintiff can not be held to have ratified the acts of defendant so as to estop her from prosecuting this or other suits or proceedings; nor should she thereby be held to have waived her rights herein.
As stated, this case has been submitted with another case upon one transcript of testimony. In the companion case, all of the defendants joined issue upon the facts. In respect to the reissue of plaintiff's stock, the cancellation upon the corporate books of the stock issued in lieu thereof, and an accounting, the relief sought herein may be afforded in that other case, unless the defendant corporation interposes a tenable defense thereto.
It is ordered that the judgment and decree of the lower court be reversed; that a decree be entered declaring that at the date of the death of George H. Strowbridge on May 31, 1912, plaintiff became and ever since has been the owner of 12 1/2 shares of stock *Page 127 in the Joseph A. Strowbridge Estate Company, a corporation, which said 12 1/2 shares of stock theretofore belonged to said George H. Strowbridge; that upon the date of the death of Mary B. Strowbridge on August 4, 1916, plaintiff became and ever since has been the owner of 9 3/8 shares of stock in said corporation being one-fourth of the stock therein theretofore owned by Mary B. Strowbridge; that upon the formation thereof plaintiff became and ever since has been the owner of 25 shares of stock in said corporation, plaintiff's stock therein now aggregating 46 7/8 shares thereof; that said attempted transfer and cancellation of plaintiff's stock occurring in April, 1923, was and is and is hereby decreed and declared to have been and to be invalid; that plaintiff recover judgment against defendants Strowbridge for her costs and disbursements in the circuit court and in this court; and that the judgment and decree hereby rendered herein is and is hereby declared and decreed to be without prejudice to plaintiff's right to an accounting and recovery thereupon, or to an order appointing a receiver of said defendant corporation; or to any other right or privilege enforceable in law or equity.
ROSSMAN, J., did not participate in this decision.
RAND, J., dissents. *Page 128