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June 12, 1990


Chandler, Vice Chancellor.

The opinion of the court was delivered by: Chandler


Mary P. Dunleavy ("Dunleavy") moves to intervene and vacate the consent order dismissing a case filed in this Court, styled John P. Dugan, Jr., et al. v. Ann D. Dineen, Del. Ch., C. A. No. 10864. Dunleavy seeks both intervention and vacation, simultaneously, since they are wholly dependent on one another. The underlying declaratory judgment action, at which Dunleavy's motion is directed, was filed by John P. Dugan, Jr. ("John Dugan"), John Dugan's wife and John P. Dugan & Sons, Inc. ("Dugan Inc.") against Ann D. Dineen ("Dineen"), the executrix *fn1 of the estate of Rose F. Dugan ("Rose Dugan"). The underlying complaint sought a declaration that Rose Dugan made valid inter vivos gifts of Dugan Inc. stock to her son -- John Dugan. After deciding not to contest the action, Dineen, in her capacity as executrix, entered a consent agreement that was approved by this Court on October 16, 1989. Dunleavy moved to intervene and vacate ten days later.

Plaintiffs in the underlying action oppose intervention and vacation. Defendant Dineen takes no position. A rather detailed review of the factual background is required to fully understand the Dunleavy application.


A. Dugan Inc.

The dispute centers around Dugan Inc., a Maryland corporation, principally located in New Castle, Delaware, engaged in the ready-mix concrete business. Dugan Inc. was incorporated in 1954 by John Dugan, his father John F. Dugan, Sr., and Edmond P. Maguire. Of the 180 originally issued shares, John Dugan, Rose Dugan (John F. Dugan, Sr.'s wife) and Katherine Maguire (Edmond Maguire's wife) each held 60. In 1958 and 1959, John Dugan, Rose Dugan and Katerine Maguire were each issued an additional 40 shares, giving each 100 shares.

Then, on August 7, 1965, at the apparent direction of John F. Dugan, Sr., Katherine Maguire's 100 shares were transferred, in four blocks of 25, to each of Rose Dugan's four children (John Dugan, Dunleavy, Dineen and Jane E. Craft). This gave John Dugan 125 shares, Dunleavy 25 shares, Dineen 25 shares and Jane E. Craft 25 shares. Jane E. Craft and Dineen later gifted their shares to John Dugan, giving him a total of 175 shares.

In early 1972, John Dugan asked his mother, Rose Dugan, to give him all of her stock in Dugan Inc. John Dugan claims that his mother was aware that John F. Dugan, Sr., who died in 1966, had promised him all the stock in Dugan Inc. in return for his efforts in establishing the company. On April 19, 1972, through her attorney, Thomas J. Healy, Jr., Rose Dugan transferred her 100 shares of Dugan Inc., to John Dugan. In the presence of Mr. Healy, and with Mr. Healy witnessing her signature, Rose Dugan endorsed for transfer stock certificates 1 and 10 (representing her 100 shares of Dugan Inc.). Rose Dugan then purportedly gave certificates 1 and 10 to John Dugan.

Rose Dugan also owned 98 shares of Dugan Rental Corporation ("Dugan Rental"). John Dugan was the only other shareholder owning 102 shares. On April 30, 1972, Dugan Rental merged into Dugan Inc., with Dugan Inc. being the surviving corporation. Through the merger, the outstanding shares of Dugan Rental were converted into shares of Dugan Inc. John Dugan received 36.48 (certificate number 23) shares of Dugan Inc., and Rose Dugan received 35.52 (certificate number 22) shares. John Dugan alleges that Rose Dugan then gave him certificate number 22 which represented Rose Dugan's remaining interest in Dugan Inc. Although John Dugan claims that Rose Dugan delivered certificate number 22 to him, it is uncontested that she failed to sign the reverse of the certificate. Dunleavy contests whether her mother delivered, or ever intended to deliver, certificate number 22 to John Dugan. The underlying dispute is thus centered around the alleged transfer of certificate number 22.

John Dugan then had the stock, allegedly gifted from his mother, cancelled on the books of Dugan Inc. and registered in his name. Certificate number 24 was issued in John Dugan's name to evidence the 100 shares transferred to him on April 19, 1972. Certificate number 25 was also issued in his name to evidence the 35.52 (certificate number 22) shares allegedly transferred to him following the merger. At that point, Dugan Inc.'s books showed two stockholders of record: John Dugan who owned 347 shares and Dunleavy with 25 shares.

On May 30, 1972, Rose Dugan executed a will that she had asked her attorney, Mr. Healy, to prepare. The will excludes her son, John Dugan, and divides all her property among her three daughters -- Dunleavy, Dineen and Jane E. Craft. John Dugan points to this as evidence that his mother transferred all of her stock to him in lieu of his inheritance.

Rose Dugan was a director of Dugan Inc. until she resigned on April 25, 1985. During her tenure as a director, John Dugan maintains that his mother clearly understood that she was no longer a stockholder of Dugan Inc. He points out that she always had full access to Dugan Inc.'s books and records. In addition, she executed waivers of notice of Dugan Inc. directors' meetings. All such ...

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