Irving Trust Co. v. Deutsch

73 F.2d 121 (2nd Cir. 1934)

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Nature of the Case

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Facts

P was a trustee in bankruptcy of a Delaware corporation called Acoustic Products Company. Acoustic found it essential to acquire product rights from De Forest Radio Company. To that end, it instructed its employees, directors, and contractors to negotiate a product and patent access agreement with De Forest. That was done, but it required Acoustic to produce a cash sum of $100,000 to purchase 200,000 shares of De Forest. The Acoustic board approved the transaction and Deutsch, the president of Acoustic was instructed to find the money to honor the agreement. The money could not be found, but it was allowed that the directors of Acoustic would step in the finance the deal thus acquiring the De Forest stock but giving Acoustic the product advantage that it sought. The directors paid for the stock, herein referred to as the Biddle syndicate. The Biddle syndicate made large profits in selling their De Forest shares. This complaint seeks to hold Ds jointly and severally liable to account for such profits. The trial court dismissed the decree in that Acoustic was unable to take advantage of the transaction of its own account. P appealed.