Before WOODBURY, FORMAN and ALDRICH, Circuit Judges.
The extensive factual background of this litigation is fully set out in the opinion of Circuit Judge Maris, who sat as the district court, and is found in Schaffer v. Below, D.C.V.I.1959, 174 F.Supp. 505, 508.*fn1
Briefly stated, Charles Redfield Vose, Cory Bishop and David Jenckes entered into a joint venture on July 27, 1953, for the development of land on the island of St. John. Bishop and Jenckes, who were partners, contributed about 850 acres of land and Vose $50,000 in cash. Profits were to be divided on the basis of 30% to Vose and 35% each to Bishop and Jenckes.
On September 2, 1953, they agreed to expand their venture by purchasing 635 acres of land in St. Thomas with money to be advanced by Vose, who was to be repaid by the joint venture.
On November 25, 1953, the three joint venturers fromed a corporation, Antilles Enterprises, Inc., according to the laws of the Municipality of St. Thomas and St. John. Antilles was authorized to issue capital stock of $10,000 consisting of 100 shares, each having a par value of $100.*fn2 Vose subscribed for 30 shares, Bishop and Jenckes for 35 shares each.
On the same day they entered into a stockholders' agreement, which appears in full in the district court's opinion. In pertinent part it provided as follows:
"'The consideration for the issuance of all shares shall be the transfer of all interests in Estates Rustenberg, Beverhoudtsberg, Guinea Gut and Sans Souci (St. John) to the Corporation and the transfer by Bishop to the Corporation of the $50,000 paid by Vose for his interest in the aforementioned estates. Bishop and Jenckes are immediately to endorse their certificates for their shares and deliver same to Vose to hold until Vose is repaid his advances, when the stock is to be redelivered to them. Meanwhile, they have the right to vote on stock, but all dividends, if any, are to be applied to reduction of debt due Vose. Any salaries to be paid shall be reasonable and approved by the parties hereto. Accountings shall be rendered to Vose of corporate activities and finances at least every three months.
"'2. The stockholders agree that so long as they are alive, each shall not without consent of all otherwise encumber or dispose of the stock he now owns, or may hereafter acquire, except he may transfer all or part as gift to or for benefit of wife or other member of his direct family, who shall hold it subject to terms of this agreement. No stockholder may sell his stock until indebteness to Vose has been paid off, except with his written consent, and all certificates of stock of the Corporation owned by stockholders shall be endorsed with following statement:
"'"The shares of stock represented by this certificate are subject to the terms of an agreement between the stockholders and corporation dated November 25, 1953, a copy of which has been filed at the Office of the Corporation."'"
"'4. In the event of death of Vose, the survivors, together, or by the other, if one refuses, shall have the right to purchase from Vose Estate, his stock at a price which shall be the unpaid amount of moneys advanced by him, plus Vose' share of undistributed actually realized profits of Corporation up to the time of his death, to be calculated by book value on said date.'"
"'In case of death of either Bishop or Jenckes, Vose and the other survivor, together, or the other if one refuses, shall have the right to purchase from decedent's estate, his stock at book value, but no allowance for good will, payments to be made one-quarter (1/4) on exercise of option to purchase and within six (6) months from qualification of deceased's representatives, and by three (3) notes for balance, one for each of three (3) successive years with interest, and with privilege of prepayment. While not in default, purchaser shall have voting and dividend rights, and on full payment, shall receive decedent's stock duly endorsed for transfer.'"
"'6. All matters involving the major policies of the Corporation or the sale of the assets thereof, shall be determined upon by the unanimous consent of the stockholders of the Corporation.'" Schaffer v. Below, 174 F.Supp. 505, 509-510.
In accordance with their agreement the land in St. John and the $50,000 in cash contributed to the joint venture were made over to Antilles, the new corporation. The land had been purchased by Bishop for $24,000 subject to a mortgage of $19,000. It was placed on the books of Antilles at a valuation of $135,666.67 and the mortgage of $19,000 was carried as a liability. Vose's cash contribution of $50,000 was so recorded. The sum of $10,000 was credited to capital stock in payment for the shares subscribed by Vose, Bishop and Jenckes respectively and the balance of $156,666.67 was carried as surplus.
On June 12, 1954, a second stockholders' agreement was executed by Vose, Bishop, Jenckes and Antilles. That agreement is identical with the first except that it reflects a transfer of 20 shares of stock from Jenckes to Vose who then held 50 shares compared to Bishop's 35 and Jenckes's 15.
On July 19, 1954, Bishop made an assignment to Lind Weber of ten of his shares subject to the stockholders' agreement of June 12, 1954. No certificate was issued to Weber at that time, but on December 24, 1955, one was issued to him by Vose who signed as Treasurer of Antilles.
On April 6, 1955, Bishop granted an option to purchase five of his remaining shares to Jenckes who assigned it to Vose, who exercised it in January 1956.
On April 16, 1955, Bishop assigned to George T. Kelly, III, Trustee for Ethel May Pressey Below (Bishop) ten of his shares of stock in Antilles, subject to the terms of the stockholders' agreement of June 12, 1954. The assignment was occasioned by the following circumstances: Bishop, whose true name was Cornelius Comstock Below, deserted his wife Ethel May Pressey Below in 1939. At the time of the joint venture he was living with a woman named Mildred T. Bishop who signed the conveyance of land as the wife of Cory Bishop, who had assumed her name. The appearance of the legal wife, Ethel May (who apparently adopted the name Bishop adopted by her husband), brought to light the defective conveyance by Mildred and Cory Bishop and made it necessary to obtain a waiver of dower from Ethel May to the property purportedly conveyed by Cory and Mildred Bishop as husband and wife. Ethel May Bishop signed a release of her dower on April 29, 1955. The assignment of the ten shares by Bishop to the trustee, Kelly, was in connection with the procurement of this release. On April 26, 1955, Kelly executed a declaration of trust declaring that he held the ten shares for Ethel May Bishop for her life with remainder to her daughter. In July, Bishop, Ethel May, their daughter and her husband all joined in an instrument revoking and terminating the trust, declaring the entire title to the trust property in Ethel May Bishop absolutely and discharging the trustee. However, no certificate of stock in Antilles was ever issued to Ethel May Bishop or her trustee for the ten shares.
The relationship between Vose and Bishop suffered marked deterioration because of their conflicting views concerning policies to be pursued by the corporation. Bishop's activities in connection with its finances and the disclosure of his domestic difficulties caused the rift between them to widen.
On January 21, 1956, Vose concluded a purchase of Jenckes's remaining 15 shares. Vose's holdings now consisted of his original 30 shares, plus 20 shares previously transferred from Jenckes in June of 1954, plus this last purchase of 15 shares from Jenckes. He also exercised his option, obtained from Jenckes, to purchase five of Bishop's shares. In January of 1956, therefore, Vose had acquired a total of 70 shares as against 10 held by Lind Weber and 20 still in the name of Bishop, including the 10 shares assigned by him without certificate to Ethel May Bishop.
On January 23, 1956, a special meeting of the stockholders of Antilles was held. Jenckes's resignation as secretary and director, dated January 18, 1956, was offered and accepted. Vose presented charges and evidence against Bishop and Jenckes concerning their misconduct as directors and officers of the corporation. The charges were sustained and a new board of directors was elected replacing Bishop and Jenckes.
On May 5, 1956, as will be seen more fully later on, the capitalization of Antilles was increased to $100,000, consisting of 1,000 ...