26 Del. Ch. 270 | New York Court of Chancery | 1942
On February 19th, 1938, Bay Newfoundland Company, Limited, the complainant, the equitable owner of 1700 shares of Class A stock of Wilson & Co., Inc., filed a bill, challenging the validity, as against a non-assenting stockholder, of a plan of recapitalization of the defendant company. That plan had become effective on February 23rd, 1935, pursuant to a charter amendment approved by a large majority of the stockholders on February 19th, 1935.
Prior to the adoption of the amendment and the recapitalization plan objected to, Wilson & Co., the defendant, had three classes of stock outstanding: a 7% cumulative preferred stock, a Class A stock and a common stock issue. The preferred stock was entitled, annually, to the payment of dividends of $7.00 per share prior to the payment of dividends on either the Class A or common stock. At the time of the adoption of the recapitalization plan, the accrued and unpaid dividends on that stock amounted to $26.25 per share, or to the aggregate sum of $5,965,260.00. On liquidation, the 7% preferred stock had preferential rights over both the Class A and common stock. The Class A stock was entitled to dividends in the amount of $5.00 per share annually prior to the payment of any dividends on the common stock, and had cumulative dividend rights from and after November 1st, 1930. These rights were, however, junior to those of the 7% preferred stock. At the time of the adoption of the plan, the accrued and unpaid dividends on the Class A stock amounted to $21.25 per share, or, in the aggregate, to the sum of $6,656,264.00. On liquidation, the Class A stock was entitled to $75.00 per share, and “in addition thereto an amount which, together with the aggregate of the dividends paid upon such shares during the period following October 31st, 1930, will be equal to Five Dollars ($5.00) per share per annum from the date of cumulation of such stock to the date of distribution upon
“Perhaps the next time I am'in New York I will have more time than I had on this trip and we might go into the matter at a little more length with Mr. Penick in the hope that there would be a possibility of working out a price for the A stock that would be satisfactory to both parties.”
Wilson & Co. employed the Guaranty Trust Company of New York and the First National Bank of Chicago to attend to the details of exchanging the stock certificates necessitated by the plan, and incurred expenses in connection therewith amounting to $18,500. The change in the financial setup of the corporation also necessitated the printing of both new permanent certificates and script certificates for each class of stock provided for by the amendment, the cost of which was $9,470.00. There was also an additional expense of $22,800 for listing the new stock on the New York Stock Exchange. Wilson & Co., was committed to the payment of all of these expenses prior to the receipt of Hodge’s letter of March 5th, 1935.
The bill in Keller v. Wilson & Co., Inc., was filed in this court on March 13th, 1935; and the bill in Saperstein v. Wilson & Co., Inc., was filed in the same court on April 13th of that year. Suit was instituted in Dunn v. Wilson & Co., Inc., in the United States District Court for the District of Delaware in April of 1935, and is still pending. All of these cases attacked the legality of the defendant’s recapitalization plan. A decree, dismissing the bill in Saperstein v. Wilson was entered January 22nd, 1936¡ and the time for appeal expired on July 22nd of the same year. It has already been pointed out that Keller v. Wilson & Co., Inc., was finally disposed of on February 19th, 1937, and that the opinion of the Supreme Court, reversing the court below, had been filed on November 10th of the preceding year. 21 Del. Ch. 391, 190 A. 115. On January 13th, 1938, the complainant asked leave to intervene in Dunn v. Wilson & Co., Inc., pending in the District Court, but that application was opposed, and apparently refused.
Whatever the complainant’s apparent rights may be, when the aid of a court of equity is sought, its action is governed “by considerations of conscience, good faith and reasonable diligence” under the circumstances. Federal United Corp. v. Havender, 24 Del. Ch. 318, 11 A. 2d 331.
Unfair and prejudicial delay in bringing an action is not ordinarily permitted in that court. Bay Newfoundland Co. v. Wilson & Co., Inc., 24 Del. Ch. 30, 4 A. 2d 668. Whether relief will be granted depends on the equities of the case,
In Federal United Corporation v. Havender, supra, the Supreme Court said:
“Change of position on the part of those affected by non action, and the intervention of rights are factors of supreme importance. The promptness of action demanded of a stockholder objecting to the accomplishment of a proposed corporate act which, although unauthorized, is capable of ratification, is dependent in a large degree upon the effect of his delay on others; and where many persons will be affected by an act that involves a change of capital structure and a material alteration of rights attached to stock ownership, the stockholder, having knowledge of the contemplated action, owes a duty both to the corporation and to the stockholders to act with the promptness demanded by the particular circumstances.”
See also Romer v. Porcelain Products Corp., 23 Del. Ch. 52, 2 A. 2d 75.
Applying these principles to the facts, it is difficult to escape the conclusion that the complainant’s claim, though valid in the first instance, is barred by loches. See Federal United Corp. v. Havender, supra; Shanik v. White Sewing Machine Co., 25 Del. Ch. 371, 19 A. 2d 831. Many changes, materially affecting both the rights of Wilson & Co., and of third persons, had taken place prior to February 19th, 1938.. Thousands of shares of stock had been exchanged, pursuant to the plan prior to that date, and thousands of shares, having a tremendous market value, had been sold and purchased on the New York Stock Exchange. The
If it were necessary, other facts might be emphasized. Continued corporate action over the known objection of a stockholder is not alone involved.
Under the facts proved, the pending suits, involving the same questions, and the complainant’s continued negotiations with the defendant from about March 5th, 1935, to September 24th, 1937, cannot wholly excuse the complainant’s delay. Conceding that a known pending suit, involving the same questions, may sometimes excuse a reasonable delay by a complainant in filing a subsequent bill (4 Pomeroy!s Eq. Jur., 1 Eq. Rem. (2d Ed.) § 1455; 30 C. J. S., Equity, § 125, pp. 548, 549), that principle cannot be invoked here. All prior pending suits, with the exception of Dunn v. Wilson & Co., Inc., had been disposed of months before the complainant filed its bill; and that case had been pending since April of 1935. Independent of any other questions, too many intervening rights are involved to excuse the complainant’s delay. Other facts were proved, and other contentions were made by the defendant in defense of the complainant’s action, but it is unnecessary to consider them. Nor is it necessary to consider the complainant’s
The complainant’s bill is dismissed, and a decree will be entered accordingly.