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Home > Journals > Michigan Law Review > MLR > Volume 43 > Issue 5 (1945)

 

Abstract

In 1926 Bovay, one of the complaining trustees in bankruptcy herein, organized an Arkansas corporation to construct and operate a vehicular traffic bridge across the Mississippi River. Defendants agreed to finance the project but were dissatisfied with the voting control of the Arkansas corporation lodged in Bovay and organized a Delaware corporation, the bankrupt herein, to take an assignment of the bridge franchise. The bankrupt issued 60,000 shares of no par value common stock, 40,000 shares going to defendants though no consideration was paid, and 20,000 shares to Bovay. Defendants also named five of the nine members of the board of directors. The bankrupt sold $7,500,000, $100 par value debenture and first mortgage bonds at 90 to the defendants who already had contracted for their resale at more than par. The defendants also fleeced the bankrupt of $275,000 for alleged divers expenses in organizing the Delaware corporation. Though insolvent from its conception by virtue of the frauds perpetrated by the defendants, the bankrupt operated the bridge in an incompleted state until 1934 when it was finally adjudicated a bankrupt by a federal court in Mississippi. The trustees in bankruptcy filed a plenary suit against the defendants for breach of fiduciary trust, but the complaint was dismissed for lack of jurisdiction in June 1936. For some unknown reason permission to sue in the Delaware courts was not granted until January 1939 when Plaintiff's complaint was promptly filed. The trial court dismissed the bill on the ground that since the cause of action was not within the exclusive jurisdiction of equity, the three years statute of limitations was conclusive of laches. Held, reversed. Bovay v. H. M. Byllesby & Co., (Del. 1944) 38A. (2d) 808.

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