
    No. 147
    CARNIOLA REALTY CO. v. KAUSEK et
    No. 19548.
    Supreme Court
    On motion to certify.
    Dock. Jan. 9, 1926;
    4 Abs. 40.
    313. CORPORATIONS — Where misrepresentations are made by promoters of a prospective corporation to obtain subscriptions to capital stock and by virtue of such misrepresentations the promoters issue to themselves stock which they do not pay for but seek to make it appear are paid for, will a court of equity cancel such stock certificates, or merely order the promoters to pay for such stock?
    Attorneys — Frank T. Cullitan and M. J. Grdina for Company; Elmer W. Waite and Robert M. Morgan, for Kausek et al; all of Cleveland.
   Anton Kausek and others were the promoters of The Carniola Realty Company. It was alleged that the promoters had induced other stockholders to subscribe for and purchase $25,-000 worth of stock in the company on the representation that said promoters would sub-subscribe for and purchase $30,000 worth of stock; that with the proceeds together with a loan for the difference a certain farm was to be purchased for $70,000; that in fact only $40,000 was being paid for the farm; that the company was incorporated and the farm purchased with the proceeds of the loan and the payment of the subscriptions of four stockholders other than the promoters; that the promoters concealed the real transaction and for no consideration issued to themselves 300 shares of stock at a par value of $30,000, such stock never was certificated under the Blue Sky Law by the Division of Securities.

The prayer asked for a temporary injunction, restraining the promoters from transfering, pledging or otherwise disposing of the stock certificates pending final hearing and that upon final hearing the stock certificates be declared null and void and the promoters be required to surrender said certificates.

The Cuyahoga Common Pleas granted a temporary restraining order but refused to cancel the certificates. The Appeals continued the injunction and rendered a personal judgment for an amount which it was determined the promoters owed for the stock.

The Company, in'the Supreme Court, in support of its objection to the decree, contends:

That a wholly new theory of relief is en-grafted against the protest of the plaintiff and that the decree does not afford equitable or adequate relief, because the promoters are not financially responsible.  