Kean v. Colt

On motion on bill and notice for an injunction and the appointment of a receiver, the affidavit of the defendant may bo read in opposition. To authorize an injunction and tho appointment of a receiver, there must be a well grounded apprehension of injury about to be done. Where the misconduct alleged in the bill occurred, if at all, several years before, and no act is threatened, or mischief impending, an injunction and receiver will not be ordered.

The bill in this cace, filed November, 1845, by John Kean, representing himself to be a stockholder in the Society for establishing Useful Manufactures, for himself and all other stockholders of the said society who shall come in and seek relief by and contribute to the expense of the suit, .states, that the society was incorporated on the 22d November, 1791 ; that it was the intention of the legislature that the society should themselves carry on manufactures; and that the society so understood the law, and under that understanding bought the old mill seat at Paterson, and upwards of 700 acres of land, .with the water incident thereto, both above and below the falls at that place. That in 1793, the society established a cotton factory at Paterson, on said lands, and in 1794, a printing, .bleaching and dye shop; but very soon thereafter, entirely discontinued manufacturing, and has not since resumed it, nor has any part of their capital been since employed in manufacturing purposes. That for many years, the affairs of tho society were entirely neglected, and so managed by the directors thereof, that the stockholders, entirely ignorant of its condition, placed little value on the stock of the society or its property ; and that about 1814, Roswell L. Colt bought up at a depreciated price a large proportion of the shares, and called the society together, and proposed to its members a plan for improving its affairs, which was, to abandon all hope of manufacturing, and to confine its operations to increasing the water power which it was supposed to ,®wn, and the number of sites for manufacturing purposes, to be used by others, and to lease to others the sites with water privileges for manufacturing purposes; which plan was adopted, and has ever since been- pursued", under the sole direction of Roswell L. Colt, who was then made governor of the society, and has continued such governor ever since. That by the adoption and pursuit of the said plan, a very large annual income has ever since been derived from the property of the society. That on the 22d February, 1814, the legislature passed an act, entitled, “An act to preserve the interest of this State now vested in the stock of the Society for establishing Useful Manufactures,” the preamble of which recites, that the state had invested in the stock of the society $10,000, being the amount of 1"00 shares; that the original design and intention of the institutioh had failed, and been for a long time abandoned ; that no dividends had ever been made, nor any satisfactory account rendered by the directors to the commissioner of the state, of the transactions of the society, or the situation of its property or funds; and that the society had lately sold and conveyed portions of its mal estate, and had neither made, nor offered, any dividend .of -the proceeds of the sale; and which act appoints E. Yanarsdale, esquire, a commissioner under the 15th section of the charter of the society. That under this act Mr.Yanarsdale made a report to the legislature, which was referred to a committee of the legislature, who, on the 19th of Jánuary, 1816, reported, that the personal and leased property of the society, (according to its statements, exhibited by its agents to Mr. Yanarsdale,) as existing on the 2d October, 1815, amounted .to $119,317 34. (The items constituting that sum are given by the committee, and stated in the bill.) That .the committee further reported, that there remained unsold, belonging to the society, 606,^ acres; and that the number of shares then consisted of 2266. That the committee recommended that .the legislature accept, from the society, a conveyance to the state of so much land as would be equal in value to the state’s shares of stock; which they estimated to be worth, in land, $11,000; and transfer to the society, or to such person as the society might appoint to receive the same, the state’s shares in the stock of the society. That on this report, the state, by act of the legislature, authorized the. acceptance of a conveyance of so much land as a majority of three persons, named in the act, should judge to be of the value of $11,000, and the transfer of its stock to the society, or to such person, &c. That on the 19th October, 1816, the persons named in said act reported to the legislature, that they had accepted a deed from the society to the state, for 301 — acres, and had transferred the state’s stock to Roswell L. Colt, agreeably to the directions of the society; and presented to the legislature the direction of the society, under their seal, to transfer the state’s shares to the said Colt. That this report was confirmed by the legislature October 25th, 1816: The bill charges, that these shares, being conveyed to the said Colt in consideration of lands- of the society conveyed to the state, must be considered as belonging to the society; and the said Colt be considered as holding the said shares only as trustee for the society. The bill charges that the said Colt has converted the said stock, and the dividends thereof, to his own use. That by the 10th and 11th sections of the charter it is provided, that there shall be thirteen directors, and that in elections for directors, each share shall have one vote, and that five of the directors, the governor or deputy governor of the society being one, shall constitute a hoard for business. That the said Colt,, by buying up a majority of the stock, obtained the entire control of the society; and that after having done so, and examined the condition of the society, he found that its stock was of much, greater value than the public, or stockholders, supposed; and, for the purpose of inducing the stockholders to sell their stock, represented that the society had lost a great deal of money by embarking in the business for which they had been incorporated, and had. abandoned their business, and had lost a large amount in their lottery concern, and that the stock was valueless; though, at the same time, it was worth par; and that the said Colt, by such false representations, succeeded in purchasing a very large majority of the stock. That being the owner of such majority, he has, for more than thirty years caused himself, and such others as he chose and could control, to be elected directors; in most instances irresponsible persons and persons who would obey his direr»lions, and elect such persons as he should name governor and deputy governor; and that the said Colt has, for all that period, been, and still is, such governor; and that, at times, one Joseph Smith, a clerk of the said Colt, has been deputy governor; and that the complainant is informed and believes, that the other directors are' mere instruments and agents of the said Colt, having no actual interest in the society; and who, if they hold any stock, are mere trustees for the said Colt. That by the charier, the cashier or treasurer of the society is required to give security in $20,000. That Joseph Smith is now such, cashier or treasurer, and that lie has never been required to give security. That the charter requires, that there shall be a yearly dividend for the first five years, and thereafter a half-yearly dividend, of so much of the profits of the society as to the directors' should seem expedient. That for a large number of years last past, the profits of the society have been very large. That the charter authorized lotteries, to raise, for the benefit of the Society, $100,000. That large sums of money have been received by the said Colt, under some arrangement with D. S. Gregory and others, in reference to the lottery privilege granted by the charter, and have been appropriated by him to his own use, except a few thousand dollars which, the complainant is informed and believes, has been paid to certain agents, to obtain influence with the legislature to prevent their putting a stop to the lotteries. That the rents, profits and resources of the society have come to the'hands of the said Colt, and have been expended by him in objects wholly distinct from the interests of the society; to the building of a house and fixtures costing over $100,000, for the' residence, as he states, of the governor of the society ; and which are now in his possession, and the care and improvement of which is a subject of charge, by the said Colt, on the profits of the society; and that he furnished the said house extravagantly with the money of the society; all which the complainant charges to' be fraudulent, and in violation of his rights. That the said Colt has expended on a small farm owned by the society in the vicinity of Paterson, $30,000 of the funds of the society, in costly improvements, and in purchasing cattle and other stock, the whole of which, with the farm, would not now sell for more than $80,000. That Coll pretends'that all tills was done in pursuance of resolutions of the board of directors; whereas the complainant charges, that if there are any such resolutions, they were procured to be passed by Colt, he having the control of a majority of the stock, and by the votes of directors put in by him, and who held their offices at his will. The bill charges that the said Colt, being indebted to the executors of Robert Oliver, deceased, in a large sum, did, on the 14th of November, 1839, agree to give them a bond and mortgage of the society for $100,000, and also sundry leases of the society, amounting to $14,995, in part payment of., his said individual debt; and further, that the said executors should have the control of the board of directors of the society. That the said Colt, for the purpose of enabling himself to pay his individual debts, procured or induced the board of directors of the society to give him a mortgage on the propeity of the socie-1 ty for $100,000, and to execute to him hvc bonds of the society, amounting to $80,000; and to give him another mortgage on a house and 40 acres of land of the society, to secure the last mentioned bonds; and that on the 1st of February, 1840, he induced the board to convey to him a large number of leases and building lots of the society, amounting to $200,000; all which several bonds and mortgages, leases, building lots and property were, very soon after, conveyed by the said Colt, in payment of his individual debts, to the said executors of Robert Oliver and Margaret Colt and Emily Gibbs. That at the time the said bonds and mortgages, conveyances and transfer of leases were made, the board consisted of the said Roswell L. Colt, and a brother and two sons of the said Colt, and William L. Clark, Elisha B. Clark, and Daniel Ridgway. That on the 14th of November, 1839, the said Roswell L. Colt, to carry out his arrangement to give the control of the board to the executors of Robert Oliver, caused and procured four of the then directors, viz. William L. Clark, Daniel Ridgway, Robert O. Colt and James C. Colt, to resign; and the said Charles Oliver and Thomas Oliver and John Glenn and Thomas S. Gibbs to be elected in their places. That by the 3d section of the charier it is enacted, that the society shall not deal or trade except in such articles as itself shall manufacture, and the materials thereof, and as shall be really and truly received in payment and exchange therefor. That the said bonds, mortgages, conveyances, and transfers of leases to the said Roswell L; Colt, were not made by a quorum of disinterested directors; and that the said directors had no authority under the'eharter to make the same, and that the same are' fraudulent and void as against the stockholders, and a breach of trust in'the directors who made them,-and in the said Roswell L. Colt who received them. That the complainant has been informed and believes, that the said Roswell L. Colt afterwards, either himself or through an agent, bought back the said real estates, leases and other’ property, at a depreciated value, and paid for the same with the money or property of the society, and -now holds the same for his own benefit. That'the said Roswell Li Colt has bought a large number of shares of the stock of the society, with the funds of the society, and has by that means obtained the entire control of the society ; and as there is no provision in' the charter requiring a director to be a stockholder, life elects persons for directors who own no stock,-but who are his agents, instruments, and dependents. That by way of consideration for said'bonds and mortgages, &c. made by the directors to him, the said Roswell L. Colt presented claims against the society to the'amount of- $305,000, wholly unfounded and unjust; and, if any settlement was made between him and the directors, it was erroneous, fraudulent and void, and a mere contrivance of the said Roswell L. Colt, to obtain a conveyance or transfer of the property to him. That on the 17th March, 1840, the said John O. Colt was the acting deputy governor of the society ; and on that day the society purported to convey, under the seal of the society and the'signature of the said John, as deputy governor, to said Roswell L. Colt, for the consideration-of $50,000, a large number of building lots-in Paterson belonging to the society, and in the deed'conveying’the same there were full-’covenants of warranty;- and that'omthe'same day, there was also conveyed by deed, im the same manner, to said Roswell L. Colt, for the consideration of $150,000, twenty-two feet of water in the Passaic ; and on the same day, the said Roswell L. Colt and his wife conveyed', the whole of said building lots and water to the executors of Robert Oliver, inpayment of a debt due from the said Roswell L. Colt, individually, to the said Robert Oliver in his life time. The bill charges, that nothing has ever been paid by the said Roswell L. Colt to the society, towards the consideration mentioned in said conveyances; and that said executors took the said conveyance from Roswell L. Colt and wife to them with knowledge that nothing had been so paid ; that said Roswell L. Colt had no authority to cause the same to be so conveyed to them as aforesaid ; and that he had no title thereto, or right to pass the same to them. That the said conveyances were not made by a regular order of the board; that a quorum of the board did not vote for the same; that the said Roswell L. Colt himself was one of the number by whose votes the resolutions were passed ; and that the others whose votes passed the same, were merely nominal directors, acting under the dictation and control of the said Roswell L. Colt, and voting on his stock. That the property of the society, notwithstanding the extravagant, expenditures of the said Roswell I/. Colt, increased between 1814 and 1845, from $108,208, to $■---, and that the dividend to which the stockholders were entitled was •----per cent.; but that the said RoswellL. Colt prevented the directors from declaring any larger dividend than live per cent, on the said 2266 shares, in order, .as the complainant believes, to enable the said Colt to boy up the stock at, a depreciated value. That in order nominally to comply with their charter, dividends have been declared from time to time, of about five per cent, on the amount of the capital stock of the society. The bill charges, that-Colt is unable to account for the waste and misapplication by him of the property of the society ; and tiie complainant says he is apprehensive, that if the property of the society is suffered to remain under the control of Colt, and such directors as he may appoint, there will be serious loss to the complainant and the other,stockholders. That the facts before stated show such an entire control by Colt over the board, and such entire subserviency of the board to his will, as renders the property of the society very unsafe in the hands of such depositaries. The bill charges, that Colt caused to be invested in United ■States bank stock' a large sum of the moneys of the society, •and by means of the sale of the said stock, or by buying the notes of the said bank, with the funds of the society, much below their par value, and passing them to the bank at their par value, .in payment of his own debt, made over |100,000. • The bill prays that said Roswell L. Colt may set forth the particulars of the personal estate of the society which have come •to his possession or use ; and whether any moneys of the society -have been placed at interest, and in whose name, and what sums have been received for interest, and by whom; and that he may set forth whether he hath not applied all, or some, and what part of the real or personal estate of the society to or for his own use ; and that he may be removed from the office of director and governor of the society, and be decreed to .replace ail such parts of the personal property of the society as may have'been sold by him; and that he may account for all the revenues, rents and profits of the estate of the society which have come to his hands or use; and for all the moneys received by him for or on account of any sale or assignment of the right to draw lotteries, or of the lottery privileges granted b.y the charter; and for all premiums he may have received at exhibitions of articles of the growth or manufacture of the society, or the product of its property, or of labor paid for by the money of the society; and for all breaches of trust, and misapplication of the funds of the society; and for all moneys made by him by the purchase and sale by him of any of the property of the society with the funds of the society ; and that the said deeds, conveyances and mortgages to the said Roswell L. Colt may be declared void; and that the deeds, conveyances, and mortgages of the property of the society, made by the said Colt to the executors of Robert Oliver, deceased, and Margaret Colt and Emily Gibbs, may be declared void; and that an inventory may be taken of all the property of the society ; and that the said mansion, appurtenances, furniture, &c., and the said farm and stock, may be sold, and in case the proceeds of the sale be inT sufficient to pay the costs thereof and of maintaining the same, that the said Colt may be decreed to account for the deficiency; and that a receiver may be appointed of all the rents, issues and profits of the property of the society^ real and personal, and to take possession of the said mansion house and the lands attached thereto, and of the said farm and the stock thereon, and of all the lands, property and estate of the society conveyed by said Colt, or by him a-nd his wife, to the executors of Robert Oliver and Margaret Colt and Emily Gibbs, and to receive the rent from the lessees of land or water of the society, on the leases which have been assigned by the said Colt, or by his procurement or consent, to the executors of Robert Oliver, or to Margaret Colt and Emily Gibbs, or any of -them ; and that the affairs of the society be wound up, and its property he sold, and the proceeds thereof, after the payment of its debts, be divided among the stockholders ; and that the said Colt may he restrained from expending any of the money of the society in &c.; and from selling, assigning, conveying or mortgaging any of the real estate of the society; and from assigning or transferring any of the leases of water, or water rights of the society ; and from using the funds, credit or name of the society, for any purpose Whatever; and that the society be restrained from pa} ing money to the said Roswell L. Colt, or to his agents, in the shape of salary or otherwise; and from parting with any of the funds or property of the society, except by order of this court. Subpoena is prayed against Roswell L. Colt, John O. Colt, Charles Oliver, Thomas Oliver, Robert M. Gibbs, Emily Gibbs, and the Society for establishing Useful Manufactures. On the filing of this bill, the complainant gave notice of a motion, founded on the charges of the bill, for an injunction, and the appointment of a receiver, pursuant to the prayer of the bill. On the hearing of the motion, and after the reading of the bill, two affidavits of Roswell L. Colt, and an affidavit of Joseph Smith, an agent 'of the society, were offered in opposition to the motion, and were objected to.