Alexander v. Petty

• Decision Date: 05 November 1954
• Citation: 108 A.2d 575,35 Del.Ch. 5
• Parties: 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.
• Court: Court of Chancery of Delaware

Page 575

108 A.2d 575

35 Del.Ch. 5

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.

Court of Chancery of Delaware, New Castle County.

Nov. 5, 1954.

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 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] that the plaintiff shall prove, among other things, that the prosecution was not only terminated, but terminated in his favor.'

See also Rhodes v. Silvers, I Har. 127; Wells v. Parsons, 3 Har. 505.

The quoted principle applies here, of necessity, even though the alleged malicious prosecution here is civil in nature. See Mayflower Industry v. Thor Corp., 15 N.J.Super. 139, 83 A.2d 246. It would seem to follow logically from this premise that a counterclaim sounding in malicious prosecution may not be interposed in the very action which is the basis of the claim. See 54 C.J.S., Malicious Prosecution, § 54. Moreover, Chancery Court Rule 13, Del.C.Ann., governing counterclaims speaks of 'claims' and of necessity defendants do not yet have a legal claim. Compare Stabler v. Ramsay, 32 Del.Ch. 547, 88 A.2d 546. They have a hope, but the orderly administration of justice is...