Law School Case Brief
Old Dominion Copper Mining & Smelting Co. v. Lewisohn - 210 U.S. 206, 28 S. Ct. 634 (1908)
A corporation cannot avoid in equity a purchase of property sold to it by its promoters, at a large profit, while they owned all the stock, in contemplation of a large issue to the public, since the corporation thus had full knowledge of the facts, and remained unchanged and unaffected in its identity by the changes in its members due to purchases of the stock by the innocent public, and for the further reason that, if the corporation succeeds, all the stockholders, guilty as well as innocent, will profit.
Old Dominion sought to rescind its purchase of certain mining rights and land from the stockholders. It alleged that the stockholders formed the corporation that they might sell certain properties to it at a profit, that they made their sale while they owned all the stock issued, but in contemplation of a large further issue to the public without disclosure of their profit, and that such an issue was in fact made. The lower court dismissed the action, the dismissal of which was affirmed by the appellate court. Old Dominion sought further review by the United States Supreme Court.
Can the corporation rescind its purchase of mining rights on the ground that the stockholders owned all the stock issued during the sale?
The Court affirmed the previous rulings, holding that: (1) the corporation had assented to the transaction with full knowledge of the facts; (2) at the time of the sale, there was no wrong done to anyone as the stockholders were on both sides of the bargain and could issue to themselves as much stock in their corporation as they liked in exchange for the conveyance of their property; (3) the corporation remained unchanged and unaffected in its identity by changes in its members due to the purchases of the stock by the innocent public; and (4) if the corporation succeeded, the guilty as well as the innocent would profit.
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