Carpenter v. Danforth

Headnote

Injunction.—Constructive Fraud.

Where a defendant fully answers, in words, the equities of the complaint, it does not follow necessarily that an injunction should be dissolved, particularly ■where its continuance could be of no pecuniary damage to the defendants, and is necessary to the full satisfaction of the plaintiff’s demand.

Though the relation of trustee and cestui que trust does not strictly exist between parties, yet their relation to each other, and the subject-matter of the transaction, may be such as to require the fullest disclosure of facts known by one party, to preclude the presumption of fraud.

Motion to dissolve an injunction.

‘ The complaint of the plaintiff, Francis B. Carpenter, set up the following facts: that he was the administrator of Lloyd Glover, who had during his lifetime formed with the defendant, George H. Danforth and others, the “National Bank Note Company that the plaintiff’s decedent and Glover had both been active trustees in the management of the company; that the company had declared no dividends, applying all its profits to the enlargement of its business and accumulation of materials ; that at the time of Glover’s death he owned 136 shares of the stock, of the par value of §50 per share, subject, however, to liens to very nearly the amount of its par value; that after Glover’s death there being no market quotations of the stock, and the plaintiff being utterly ignorant of the affairs of the company, he was induced, by the representations of the defendant Danforth of his friendliness to Mr. Glover’s children, and by his concealment of the state of the company, to sell the stock to him at $60 per share; that at the time of the sale the assets and condition of the'company, as known to the defendant Carpenter, rendered the stock of much higher value; and that within five months after, it declared a dividend of 310 per cent., and again within thirteen months of 200 per cent.; that the

defendant had used pressure to procure the sale to be made immediately, and had had the stock conveyed to the other defendant, James A. Williamson, but for his, Danforth’s, use.

The complaint asked for restitution of the stock, and an accounting for the dividends received upon it by the defendants, and an injunction.

An injunction was accordingly granted, restraining the defendants from transferring, or disposing, or using the stock.

The defendant Danforth answered, admitting the purchase, and that he was one of the trustees of the company, but denying any special knowledge of the pecuniary affairs of the company beyond that of any stockholder; denying all pretences of friendly feelings towards Mr. Glover’s children; and setting up that the condition of the company at the time of the purchase was such, owing to the worthless nature of a large portion of their assets, and the contingent nature of another part, that $60 per share was a good price, and larger than others were willing to pay, and added letters to show'that the whole transaction was free from fraud or overreaching on his part.

On the answer and on affidavits, the defendants moved that the injunction be dissolved.