Manson v. Curtis

119 N.E. 559 (1918)

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Nature of the Case

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Facts

The Bermuda-Atlantic Steamship Company was formed in December 1910, as the successor of a corporation with the same name. Manson (P) was a director. Curtis (D) was a director, a lawyer and the general counsel to the corporation and at all the times involved had full knowledge of the corporate affairs and financial condition. An agreement, known to D, existed between the P and Culver that they would act as a unit in the management of the corporate affairs. Culver agreed to acquiesce in and follow the acts of P and Culver would not dispose of any of his shares without first giving P a first option to buy all or any part of the shares. Culver agreed he would vote his shares as P voted his. D requested P's permission to purchase Culver's shares, which would give D the majority of the outstanding shares. To that end P and D agreed there would be no change of management for at least one year, that any President of the corporation to be thereafter elected should be only a nominal head as President, and be no more active in conducting the affairs of the corporation than the then President Abel I. Culver had been, and that such President should not change, alter, molest, or interfere with P's methods of managing the corporate business affairs nor interfere with P as such General Manager for said one year etc. The directors would remain passive or do whatever P dictated. D violated the agreement in that he refused to sell the twenty shares of the stock to P. Things fell apart quickly, and in June 1912, the corporation was adjudicated a bankrupt. P alleged that D when making the agreement did not intend to carry it out and intended to use his voting power in so injuring the corporate business and reducing the value of the stock and was looking to make a secret sale to another group. When the agreement was made, the shares of P had a market value of the sum of $215,000 and had become valueless. P sued D and D demurred. D claimed that the agreement was illegal and void. The court agreed and dismissed the complaint. P appealed.