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Bayard v. Martin

Court of Chancery of Delaware, New Castle County

July 15, 1953

BAYARD et al.
MARTIN et al.

Proceeding by present stockholders and another to enjoin defendants from proceeding with executions upon certain judgments on judgment notes, executed by corporation and buyer in connection with sale of outstanding stock of corporation, pending determination of proceeding in Superior Court on motion to vacate such judgments. The Court of Chancery, New Castle County, Bramhall, Vice-Chancellor, held that evidence was insufficient to establish reasonable probability of success in establishment of plaintiffs' claim so as to warrant issuance of preliminary injunction.

Preliminary injunction denied.

Page 781

Action by Alexis I. DuPont Bayard, Erwin M. Budner, Stanley Ross, and Star Publishing Company, a corporation of the State [33 Del.Ch. 583] of Delaware, plaintiffs, to enjoin Joseph H. Martin and J. Edwin Carter, defendants, from proceeding with executions upon certain judgments of record in the superior court to collect obligations alleged to be due thereon pending determination of proceeding in the superior court of the State of Delaware, in and for New Castle.

William E. Taylor, Jr., Wilmington, for plaintiffs.

August F. Walz and Clarence W. Taylor (of Hastings, Stockly & Walz), Wilmington, for defendants.

BRAMHALL, Vice-Chancellor.

On October 3, 1946, defendant Joseph H. Martin (hereinafter referred to as ‘ Martin’ ), sold to defendant J. Edwin Carter, (hereinafter referred to as ‘ Carter’ ), all of the issued and outstanding stock of the plaintiff Star Publishing Company (hereinafter referred to as ‘ Star’ ). A formal contract was executed by Martin, Carter and Star providing for the payment of the balance due by installments and further providing that a judgment note signed by both Carter and Star should be executed to cover each installment. These judgment notes were entered of record as judgments in the superior court of New Castle County against Carter and Star on January 18, 1947. Star, under the Carter management, paid Martin the first five installments as they became due. However, Star was unable to pay the August 1st installment and was generally unable to meet the demands of its creditors. On October 12, 1949, Carter sold to plaintiff Stanley Ross, (hereinafter referred to as ‘ Ross'), acting as agent for the plaintiffs Bayard and Budner, 87% of the outstanding capital stock of Star then owned by Carter. By agreement of the same date Martin released Carter from all liability under the October 3, 1946, agreement, executing a separate release to Carter in which Star consented to Martin's discharge of Carter. Carter signed new notes to Martin, but the old judgments remained of record against Star.

Bayard and Budner assumed the management of Star and paid the obligations to Martin as they became due until some time in the early part of the year 1952, when Star permitted two of the judgments to become in default. On March 24, 1952, Martin

Page 782

caused [33 Del.Ch. 584] execution to be issued thereon. On March 31, 1952, Star filed a motion in the superior court praying, inter alia, that the judgments be opened or vacated and that all executions thereon be stayed. Star alleged, among other things, that the judgment notes were obtained by fraud and that the entry of judgment thereon was a fraud upon the court. After the filing of affidavits, the taking of depositions and argument, the superior court on November 6, 1952, denied the petition of Star to vacate or open the judgments. Motion for reargument being denied by the superior court on November 12, 1952, Star appealed to the supreme court. In two opinions, one dated March 5, 1953, 95 A.2d 465, the other dated March 26, 1953, 95 A.2d 835, 838, the supreme court affirmed the judgment of the superior court.

With the exception of the affidavit of Ross, which affidavit was excluded from consideration in the opinion of the supreme court, the record before this court appears to be substantially the same as that before the supreme court. The parties are however different; Bayard, Budner, and Ross have been added as plaintiffs and Carter as a defendant. As to the record before the supreme court, that court in its opinion dated March 26, 1953, said:

‘ * * * the record as it now stands-lacking support from the Ross deposition, which we excluded-is, as the trial judge found, utterly devoid of any specific proof of any fraud at all on the part of Martin, either in 1949 or at any other time.’

The supreme court has found that there was no fraud shown in the record other than in the Ross deposition, which it did not consider. Since Ross is now a party plaintiff and Carter is now a defendant along with Martin, I must consider the deposition of Ross in determining whether or not plaintiffs are entitled to a preliminary injunction.

In order to determine the rights of plaintiffs to a preliminary injunction I must consider the probability that plaintiffs will prevail on final hearing, either in this court or in the action now pending in the superior court. I shall also determine whether or not, unless this court enjoins ...

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