60 F.2d 106 (S.D.N.Y. 1932), Rogers v. Guaranty Trust Co. of New York

Citation:60 F.2d 106
Party Name:ROGERS v. GUARANTY TRUST CO. OF NEW YORK et al. SAME v. AMERICAN TOBACCO CO. et al.
Case Date:February 16, 1932
Court:United States District Courts, 2nd Circuit, Southern District of New York
 
FREE EXCERPT

Page 106

60 F.2d 106 (S.D.N.Y. 1932)

ROGERS

v.

GUARANTY TRUST CO. OF NEW YORK et al.

SAME

v.

AMERICAN TOBACCO CO. et al.

United States District Court, S.D. New York.

February 16, 1932

Richard Reid Rogers, of New York City, pro se.

Chadbourne, Stanchfield & Levy, of New York City, for defendants Hill, Riggio, Harvie, Boylan, and American Tobacco Co.

William M. Parke, of New York City, for defendant Taylor.

Victor J. Dowling, Louis S. Levy, George W. Whiteside, and J. Arthur Leve, all of New York City, and J. Edward Ashmead and Merritt Lane, both of Newark, N. J., of counsel, for defendants Hill and others.

Davis, Polk, Wardwell, Gardiner & Reed, of New York City, for defendants Guaranty Trust Co., and Parker.

PATTERSON, District Judge.

This suit is brought by a stockholder of the American Tobacco Company suing in his derivative right against the company, its directors and certain trustees who hold some 56,712 shares of its common stock. The suit was commenced in the New York Supreme Court, and came here by removal proceedings. The plaintiff's object is to enjoin the distribution of the shares among the directors and others connected with the company and to obtain the cancellation of the shares. Issue having been joined, the case comes up on the plaintiff's motion to strike out four defenses pleaded by the defendants and for judgment on the pleadings.

According to the amended bill, the American Tobacco Company is a New Jersey corporation, but its principal office is in New York where the chief executives have their headquarters, the board of directors hold their meetings, and the corporate records are kept. The board of directors, at a meeting on June 25, 1930, passed a resolution declaring the advisability of increasing the number of shares of common stock and reducing the par value of each share, and also a resolution formulating and declaring advisable a plan of issuing and selling shares of common stock to employees and those actively engaged in the conduct of its business. This plan, styled the 'Employees' Stock Subscription Plan,' made reference to New Jersey Laws of 1920, chapter 175, p. 354 (Comp. St. Supp. N. J. § 47-183 et seq.), to the effect that a corporation may provide a plan for issuing or selling stock to those working for it and for aiding them in paying for the stock, and that to carry out the plan the directors may formulate it, pass a resolution in favor of it, and thereafter call a stockholders' meeting, the plan to become operative in case two-thirds in interest of the stockholders vote for it. The 'Employees' Stock Subscription Plan' in this case recited that the board of directiors might offer and allot shares for subscription to such employees and those actively engaged in the business as the president might determine, by

Page 107

way of additional compensation for their services; that no one should be deemed ineligible because he was a director; and that the price of the shares should be not less than par value.

The next step in corporate sequence referred to in the amended bill was the stockholders' meeting on July 28, 1930. At this meeting more than the requisite number of each class of stockholders voted in favor of both measures recommended by the board of directors--the increase in number of shares to 6,000,000 with the reduction of par value to $25 per share, and the adoption of the 'Employees' Stock Subscription Plan.' At a meeting of the board of directors held on January 28, 1931, the plan was put into execution. The...

To continue reading

FREE SIGN UP