Proceeding by stockholder to cancel stock issued under plan adopted by requisite statutory vote on ground that plan was illegal because it constituted oppressive exercise by majority stockholder of admitted legal right, and that stock was sold under plan for grossly inadequate consideration. The New Castle Court of Chancery, Seitz, Chancellor, held that where pleadings and affidavits raised substantial factual dispute as to legal propriety of motives of corporate defendant and controlling stockholder in issuing additional stock, the rights of the parties would be resolved by hearing.
Defendants' motion to dismiss and for summary judgment denied.
[34 Del.Ch. 8] Aaron Finger, of Richards, Layton & Finger, Wilmington, Homer H. Woods, of Hodgson, Russ, Andrews, Woods & Good-year, Buffalo, N. Y., for plaintiff.
James R. Morford and William Marvel, of Morford, Bennethum & Marvel, Wilmington, and John H. Cantrell and Roy L. Sullivan, of McInnis, Cantrell, Thompson and Sullivan, Oklahoma City, Okl., for defendant Breuil Petroleum Corp.
James R. Morford, of Morford, Bennethum & Marvel, Wilmington, and C. A. McKenzie, Oklahoma City, Okl., for defendants James F. Breuil, Sr., Maxine M. Breuil, James F. Breuil, Jr., Alicia Breuil Lammerts and Leland K. MacFarland.
By his complaint, plaintiff, William H. Bennett, seeks to cancel stock issued under a plan adopted by the requisite statutory vote. Plaintiff claims the plan is illegal because it constitutes an oppressive exercise by the majority stockholder of an admitted legal right. Plaintiff further claims that the stock sold under the plan was sold for a grossly inadequate consideration.
[34 Del.Ch. 9] This was originally an action between the plaintiff and corporate defendant to restrain the issuance of stock under the plan and to prevent the defendant corporation from treating the plaintiff's option as terminated pending final decision. At the preliminary injunction argument it appeared that the stock had been issued prior to service of the restraining order. This court therefore filed a memorandum opinion deciding that since the relief requested could not be granted the restraining order should be vacated and the preliminary injunction denied. Before any order was entered on the opinion the plaintiff sought and obtained an order permitting him to amend his complaint, over objection, to convert it into a complaint for cancellation of stock. As a part of the amendment plaintiff added as parties defendant all the stockholders receiving the ‘ new’ stock. Thereafter counsel agreed to permit the restraining order to remain extant pending disposition of the corporate defendant's motions to dismiss and for summary judgment. Still later the individual defendants filed similar motions and adopted the corporate defendant's objections plus others. This opinion disposes of the motions of both the corporate and the individual defendants.
The disposition of defendants' motions requires a rather long statement of the material facts. If the complaint sets forth a legally recognized claim for relief and if any material fact is in dispute, the defendants' motions must fall. Unless otherwise indicated the factual statement may be taken to have been admitted by the parties.
Prior to the adoption of the plan in dispute the corporate defendant, Breuil Petroleum Corporation, had authorized and outstanding 1,000,000 shares of $1 par value stock held as follows:
| William H. Bennett (plaintiff) || 423,500 |
| James F. Breuil, Sr || 562,000 |
| Maxine M. Breuil (wife) || 2,500 |
| James F. Breuil, Jr. (son) || 1,500 |
| Alicia Breuil Lammerts (daughter) || 1,500 |
| Leland K. MacFarland || 1,000 |
[34 Del.Ch. 10] Mr. and Mrs. Ott are not parties because they did not purport to exercise their option under the plan hereafter described. The defendant, James F. Breuil, Sr., is alleged to dominate and control the defendant corporation. Reference to ‘ Breuil’ will embrace only Breuil, Sr. Defendants deny any improper domination and control. The shares held by Breuil's wife, son and daughter were gifts from him. The defendant, Robert P. Lammerts, is his son-in-law and Leland K. MacFarland is a salaried employee of the defendant as well as being vice president, secretary and treasurer. The Board of Directors consists of Breuil and his wife, plus Robert P. Lammerts, Leland K. MacFarland and William H. Bennett. (Bennett's present status is clouded by his purported resignation.)
Plaintiff and Breuil were associated in business for many years. They organized the present corporate defendant in 1949 to engage in the production of crude oil. Plaintiff alleges and defendant deny that during the last few years relations between plaintiff and Breuil became strained; that plaintiff had difficulty in obtaining recognition in the corporate defendant's business; that Breuil's wife, son-in-law and MacFarland, as the other directors, have been completely responsive to Breuil's will. Defendants contend ...