Cleveland Printing Ink Co. v. Phipps ( 1928 )

VICKERY, J.

"We cannot help but come to a different and contrary conclusion that these shares of stock were issued to Phipps in accordance with his agreement with Baumgardner and Phipps was the owner of three hundred shares and Baumgardner was the owner of three hundred shares.

It is now claimed by the board of directors that they had no right to issue these six hundred shares of stock for the formula and process for manufacturing' this ink, for they had not complied -with the Blue Sky Law of Ohio and that, therefore, the stock was never issued. This is a singular plea and comes rather late in the day and with very bad grace, for the resolution of the board of directors shows that this formula and process was reasonably worth $6,000, and this resolution was passed by the Board of Directors who had become all the stockholders in the corporation, and the six hundred shares of stock were issued for the process or formula which thereupon became the property of the company and was to be transferred and assigned to the company.

It is alleged and argued now that such assignment was never made. Well, if it was not made it is the fault of the directors of the corporation and they could have gone into court at any time and could come now into the court of equity and compel an assignment of this formula. The evidence, without any doubt, shows that this corporation was formed upon the distinct understanding and agreement between all the parties that $6,000 was to be raised outside, which Phipps raised, and the formula and process were to be regarded as of the value of $6,000 and Baum-gardner in his testimony says it is worth that and much more.

Now after the corporation was formed and this formula was used by them for the entire period of time in which they ran this corporation and had the use of it and the stock had been transferred to Baumgardner and Phipps in accordance with their contract, and they had become officers of the corporation and voted this stock in the corporation, it is rather late for the directors to say that they had not complied with the law, after they had reaped the benefits of this stock. In other words, they are estopped, even if the transaction was contrary to the Blue Sky Law, which I do not concede.

The decree will be drawn for the defendant.

(Sullivan, PJ., concurs. Levine, J., not sitting.)