Lindsay

This is an action by a California corporation to cancel an issue of certain of its shares of treasury stock—shares that it had issued to the four defendants, Lindsay, Corbaley, Maeseher, and McKinney, in exchange for certain shares that they owned of the capital stock of the State Investment Company. The theory of the complaint is that the issue of plaintiff’s stock in exchange for stock of the State Investment Company was in direct contravention of a permit that had been granted by the commissioner of corporations, and that, therefore, under the provisions of the Investment Companies Act, commonly known as the blue sky law (Stats. 1913, p. 715), the issue was a nullity. The appeal is by the defendant Lindsay.

The case, as presented by the complaint and found by the court, is substantially as follows: At a time when plaintiff’s board of directors was dominated and controlled by one Pearson, the latter, for his own illegal profit and gain, caused 57,226 shares of plaintiff’s treasury stock to be issued to the four above-named defendants in exchange for 71,532 shares of the capital stock of the State Investment Company that theretofore had been issued to and were then owned by…