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Star Pub. Co. v. Martin

Supreme Court of Delaware

March 26, 1953

STAR PUB. CO.
v.
MARTIN.

Proceedings on motion to vacate judgment on notes executed by corporation as co-maker with purchaser of all its stock from payee of notes, on ground that fraud had tainted the subsequent sale from co-maker to third persons, who were not parties to proceedings. The Superior Court denied motion, and movants appealed. The Supreme Court, Tunnell, J., held that judgment could not be entered in favor of parties allegedly victimized when they had not been made parties to the proceeding.

Judgment affirmed.

[48 Del. 107] Appeal from an order of the Superior Court denying a motion to open or vacate certain judgments. Affirmed.

Re-argument denied as to the matters covered by the former opinion in this case, handed down on March 5th, 1953, Del., 95 A.2d 465.

William E. Taylor, Jr., and Aubrey B. Lank, of Wilmington, for Star Publishing Co., appellant.

Daniel O. Hastings and August F. Walz, of Wilmington, for Joseph H. Martin, appellee.

SOUTHERLAND, C. J., and WOLCOTT and TUNNELL, JJ.

TUNNELL, Justice.

On October 3rd, 1946, Joseph H. Martin, the appellee (hereinafter referred to as ‘ Martin’ ), sold to one J. Edwin Carter (hereinafter called ‘ Carter’ ) all of the issued and outstanding capital stock of Star

Page 836

Publishing Company, the appellant (hereinafter called ‘ Star’ ). The price of the stock was $140,500, of which $35,000 was paid down, the balance being payable in twenty-one installments maturing serially over a period slightly exceeding ten years. The terms of the transaction were embodied in a formal contract executed by Martin, Carter and Star.

To secure payment to Martin of the deferred balance of the purchase price, the contract provided for a judgment note to be executed to cover each installment, each note to be signed by both Carter and Star. On the 15th day of November, 1946, the said judgment notes were all executed as the contract provided, [48 Del. 108] and on the 18th day of January, 1947, they were entered as judgments in the Superior Court of New Castle County against Carter and Star.

Under the Carter management Star paid Martin the first five installment payments as they came due. Its affairs went very badly, however, and by the autumn of 1949 it had not paid its August 1st installment to Martin and was unable to meet the demands of its general creditors. But bankruptcy proceedings were never instituted, and by the 12th day of October, 1949, Carter had arranged to sell to one Stanley Ross 87 1/2% of all the issued and outstanding stock in Star upon such terms as would release him, Carter, from any further liability to Martin on the above-mentioned judgments and would substitute Ross in his place as co-debtor along with Star. In negotiating this purchase Ross had acted as agent for certain principals whose identity was undisclosed. Carter was released from the judgments, and Star formally consented to such release, expressly coveranting on its own part to remain bound as before. Ross signed new notes to Martin, but the new notes were not entered as judgments against Ross. The old judgments, of course, still stood on the records against Star.

Star, under the management of the persons for whom Ross had acted, began paying the obligations to Martin as they matured, and continued doing so until the total unpaid balance had been reduced to approximately $50,000.00. By that time the new owners had become fully acquainted with the economic circumstances of Star and had become very much dissatisfied with the terms of the sale of Carter's stock to Ross. Thereupon, Star permitted two out of the series of judgments to become in default, and on March 24th, 1952, Martin caused execution to be issued on the said two judgments. On March 31st, 1952, Star filed a motion in the Superior Court alleging, inter alia:

(a) that the judgment notes were obtained from Star without consideration;

(b) that the judgments were invalid because the notes on which they were based had not been properly executed;

[48 Del. 109] (c) that the execution of the judgment notes was obtained by fraud, and that their entry in judgment, therefore, was a fraud upon the court;

and praying, inter alia:

(a) that the judgments be vacated; or

(b) that the judgments be opened and Star be permitted to interpose its ...


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