Crebs

The plaintiffs, minority stockholders, commenced an action in behalf of themselves and all other interested persons against the defendant corporation and the directors thereof to obtain a judgment setting aside a written transfer and to obtain an accounting. At the end of the plaintiffs’ case the trial court ordered a nonsuit. From the judgment entered thereon the plaintiffs have appealed.

In their complaint the plaintiffs did not plead actual fraud and on the trial they did not introduce evidence proving or tending to prove actual fraud. However, it was the theory of their case that the transaction complained of constituted constructive fraud.

In 1920 a number of men residing in Los Angeles were invited to attend an outing given by the Family Club of San Francisco. They were so pleased with the entertainment, accommodations, surroundings, etc., that they commenced to discuss the formation of a club of their own. The result of those discussions led to the formation of a club named “The Uplifters”. Soon after the club was organized it became advisable to consider the matter of incorporating. At that time the provisions of the federal statutes were such that admission fees to a…