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Alexander v. Petty

Court of Chancery of Delaware, New Castle County

November 5, 1954

Robert L. ALEXANDER, Maxwell L. Grossman, George Freedman, Helen M. Bertram and Joseph Raskin, Plaintiffs,
v.
Dennis H. PETTY, Gene M. Briggs, Jack M. Highley, John W. Scott, Charles Sturm and Capitol Hill Oil Corporation, a Delaware corporation, Defendants. Maxwell L. GROSSMAN, Helen M. Bertram, Joseph Raskin, Leo Lippman and Robert L. Alexander, Plaintiffs,
v.
Dennis H. PETTY, Gene M. Briggs, Jack M. Highley, John W. Scott, Charles Sturm and Sooner State Oil Co., Inc., a Delaware corporation, Defendants. Joseph RASKIN, Robert L. Alexander, Leo Lippman and George Freedman, Plaintiffs,
v.
Jay D. PETTY, Dennis H. Petty, Gene M. Briggs, Jack M. Highley, John W. Scott and Central Oklahoma Oil Corporation, a Delaware corporation, Defendants.

Actions against corporations and their officers and directors for alleged conspiracy to dominate and control defendant corporations for the personal benefit of officers and directors and for wrongfully diverting to individual defendants corporate opportunities, wherein defendants filed counterclaims for damage to individual and corporate defendants in their business and reputation allegedly resulting from maintenance of principal actions. On plaintiffs' motions to dismiss such counterclaims, the Court of Chancery, Seitz, Chancellor, held that counterclaims did not state a claim on which relief could be granted in absence of allegation that principal actions on which claim of malicious prosecution was based had terminated favorably to counterclaimants.

Motion to dismiss counterclaims granted and sequestration obtained by counterclaimants vacated.

Page 576

[35 Del.Ch. 6] George T. Coulson of Morris, Steel, Nichols & Arsht, Wilmington, for plaintiffs.

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

SEITZ, Chancellor.

This is the decision on the motion of plaintiffs to dismiss defendant's counterclaim. While there are three cases and several plaintiffs and defendants, it is agreed that the problem presented is common to all and it will be so treated by the court.

The original complaints charge in substance that the individual defendants as officers and directors of defendant corporations conspired [35 Del.Ch. 7] to and did in fact dominate and control defendant corporations for their personal benefit and also wrongfully diverted to themselves certain corporate opportunities. The answers of defendants deny plaintiffs' allegations and by way of counterclaim allege that plaintiffs have unlawfully conspired to institute these actions for the purpose of preventing defendant corporations from securing any underwriter other than one Ivan Israel to market issues of the common stock of defendant corporations. This allegedly would give Israel the opportunity to obtain commissions and favorable subscription agreements for stocks or warrants to be issued by defendant corporation to their underwriters as part of a public offering. Defendants' counterclaim alleges further that the result of the conspiracy is to prevent defendant corporations from obtaining working capital with resultant suspension of operations and damage to the corporate defendants in their business and reputation and damage to individuals in their business and personal reputations and to force defendants to incur expenses in defending these actions.

Plaintiffs have moved to dismiss the counterclaims on two grounds:

(1) failure to state a cause of action upon which relief may be granted

(2) this court is without jurisdiction over the subject matter of the counterclaims.

Plaintiffs say that by their counterclaims defendants have, in effect, attempted to state a cause of action for ‘ malicious prosecution’ . This term is applied to both criminal and civil proceedings. Plaintiffs go on to contend that such a suit may not be instituted until termination of the antecedent action upon which it is based. They rely on the opinion of the Supreme Court of Delaware in Craig v. Ginn, 3 Pennewill 117,48 A. 192, 194,53 L.R.A. 715. The high court there had before it an independent action by a plaintiff seeking damages for malicious prosecution in a criminal action. The court said in part:

‘ It is essential to the maintenance of such an action [for malicious prosecution]

Page 577

that the plaintiff shall prove, among other [35 Del.Ch. 8] things, that the prosecution was not only terminated, but ...


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