Albert W. FOSTER, Plaintiff,
DELAWARE VALLEY DRUG CO., Inc., a Delaware corporation, Defendant.
Supplemental Opinion May 18, 1955.
Proceeding on stockholder's complaint seeking appointment of receiver for wholesale drug distributing corporation on grounds of insolvency, mismanagement and failure of corporate purpose. The Court of Chancery, Seitz, Chancellor, dismissed complaint upon showing that corporation, which had current liabilities of approximately $111,000, would have $10,000 additional capital available within two weeks and another $9,500 within six months, that over 90 per cent of creditors in amount had agreed to execute moratorium on past due bills and to extend substantial credit on regular terms, and that there would be available in near future about $30,000 to fill inventory needs and to meet operational requirements.
James R. Morford of Morford & Bennethum, Wilmington and Herbert A. Fogel of Edmonds, Obermayer, & Rebmann, Philadelphia, Pa., for plaintiff.
Clement C. Wood, and H. Albert Young of Young & Wood, Wilmington, for defendant.
This is the decision after final hearing on plaintiff-stockholder's complaint seeking the appointment of a receiver for the defendant corporation. Plaintiff seeks a receiver on one or more of the following grounds:
3. Failure of corporate purpose
This case was tried for three and one-half days and because of the impact of the suit on the corporation's business I agreed to hear argument immediately after the close of the testimony and to render my decision on the following day. This is it.
In view of my approach to this problem, it would serve no present useful purpose to narrate at length the great amount of testimony taken. I merely summarize it.
[35 Del.Ch. 194] Defendant corporation is a wholesale drug distributor operating largely in Delaware and environs. It only commenced operation in late 1952. While there is some doubt about it, it appears that it was not undercapitalized at the time. It ran into numerous difficulties, such as failure to set forth a definite plan of action based on any adequate sales' survey of the area. This relatively new corporation also lacked sufficient aggressive and experienced management. It met with division of authority and internal disputes because its seventeen stockholders were also directors of the corporation. Its trouble also arises, in part, from the fact that it is a new operation competing in a field where the emphasis is on skilled salesmanship and where experienced and stiff competition are found.
At the present time it has current liabilities of approximately $111,000. Plaintiff claims that its assets are such that if liquidated it would be able to pay the creditors in full and provide about forty-five cents on the dollar for the stockholders. Plaintiff is a substantial stockholder. Defendant claims that if liquidated these assets would not be sufficient to pay ...