Page:The Green Bag (1889–1914), Volume 15.pdf/624

 Wrong Without Remedy: A Legal Satire. the one hundred thousand dollars paid him. Banks immediately called on his attorney and laid the matter before him. Banks said that while the realty occupied by the cor poration was now unsaleable, at the time they had bought from Allison it was well worth the purchase price paid. .He was ad vised that under the law a contract between a director and the corporation was scrutin ized with care and was set aside by the courts if in any manner unfair to the corporation; that some States upheld such a contract if it appeared to be perfectly fair, while other States held all sales made to a corporation by one of its directors as void ab initio. Ore gon was one of these latter States. The Supreme Court of Oregon in the case of Stanley i: Luse, 36 Oregon 25, had squarely held that such a sale should be set aside as constructively fraudulent, even where the corporation paid only the fair value of the property sold. The manner in which Allison happened to be a director was pronounced wholly immaterial. Banks was further ad vised that in case the corporation did not rescind and sue Allison, that Anderson would have a standing in court to do so. "If the hundred thousand dollars were re covered, to whom would it belong?" he asked. • ''To the corporation," was the answer. "We could distribute it in dividends, then, could we not? That would give Anderson a few hundred dollars and nearly all of the remainder to Mr. Elverson and myself. We could take Allison's note to ourselves for our dividends and make the matter one of bookkeeping except for the small sum paid Anderson. Isn't that the way out of this dif ficulty?" "J see only one objection," said the attor ney. "By section 3231 of our code the direc tors of a corporation are made personally liable for its debts if they distribute dividends to such an amount as to make the corpora

573

tion insolvent, or even to diminish its capital stock. Is the financial condition of your company such that you can distribute one hundred thousand dollars in dividends with out impairing your capital?" "No," said Banks, "it is not. We owe a great deal and we cannot collect our ac counts. Elverson and I cannot afford to make ourselves personally responsible for the corporate debts." "Then see Allison, explain matters to him and let him protect himself." Allison was astonished when he learned what Banks had to tell him. He consulted counsel and made up his mind that he was liable, if sued. The realty would be his again, but he well knew it could not now be sold for fifty thousand dollars. He could not raise one hundred thousand dollars, and all he had in the world was at stake. Moreover, he owed a good deal of money, and the mere bringing of the suit would impair his credit and seriously embarrass him. He saw in a minute that Anderson was a blackmailer and that it was necessary to buy him off. Allison hunted up Anderson and made one proposition after another, all of which were rejected by Anderson. Allison had but little money, and his offers were not particularly alluring. Finally Allison bethought him that he had thirty-five hundred a.cres of timber land in Tillamook County, Oregon, valued at twenty-five thousand dollars. It was subject to a mortgage for five thousand dollars, c.nd the interest and taxes were burdensome to Curry. There was no railroad anywhere near the property, and Inaccessible timber was hard to sell in the present condition of the money market. Allison offered Ander son this property subject to the mortgage, an-,1 Anderson accepted the offer, after send ing out a timber cruiser and getting a favor able report on the land. The stockholders of the Banks-Elverson Company met and mianimouslv ratified the sale of the Portland