Allied Chemical & Dye Corp. v. The Steel and Tube Co. of America

• Decision Date: 31 July 1923
• Citation: 122 A. 156,14 Del.Ch. 117
• Parties: ALLIED CHEMICAL & DYE CORPORATION, a corporation of the State of New York, and BY-PRODUCTS COKE CORPORATION, a corporation of the State of New York (Intervenor), v. THE STEEL AND TUBE COMPANY OF AMERICA, a corporation created by and existing under the laws of the State of Delaware, CLAYTON MARK, HERBERT H. SPRINGFORD, ARMIN A. SCHLESINGER, HARRISON WILLIAMS, W. M. L. FISKE, EDWARD G. WILMER, LEONARD KENNEDY, ANSON MARK, CHARLES F. FAWSETT, GEORGE P. MILLER, FRANK F. CORBY, ADDISON H. BEALE, D. R. MCLENNAN, HARRY COULBY, CHARLES T. BOYNTON, CLINTON S. LUTKINS, E. D. WINKWORTH and C. D. CALDWELL, Directors of the said the STEEL and TUBE Company of America; CLARENCE DILLON, ROLAND L. TAYLOR, JOSEPH H. SEAMAN, JOHN W. HORNER, JR., JAMES DEAN, R. W. MARTIN, WILLIAM A. PHILLIPS, W. M. L. FISKE, WILLIAM A. READ, JR., E. J. BERMINGHAM and J. v. FORRESTAL, co-partners doing business under the firm name and style of Dillon, Read & Company; CLARENCE DILLON, ARMIN A. SCHLESINGER, HERBERT H. SPRINGFORD and EDWARD G. WILMER, as Trustees, and THE YOUNGSTOWN SHEET & TUBE COMPANY, a corporation created by and existing under the laws of the State of Ohio
• Court: Court of Chancery of Delaware

122 A. 156

14 Del.Ch. 117

ALLIED CHEMICAL & DYE CORPORATION, a corporation of the State of New York, and BY-PRODUCTS COKE CORPORATION, a corporation of the State of New York (Intervenor), v. THE STEEL AND TUBE COMPANY OF AMERICA, a corporation created by and existing under the laws of the State of Delaware, CLAYTON MARK, HERBERT H. SPRINGFORD, ARMIN A. SCHLESINGER, HARRISON WILLIAMS, W. M. L. FISKE, EDWARD G. WILMER, LEONARD KENNEDY, ANSON MARK, CHARLES F. FAWSETT, GEORGE P. MILLER, FRANK F. CORBY, ADDISON H. BEALE, D. R. MCLENNAN, HARRY COULBY, CHARLES T. BOYNTON, CLINTON S. LUTKINS, E. D. WINKWORTH and C. D. CALDWELL, Directors of the said the STEEL and TUBE Company of America; CLARENCE DILLON, ROLAND L. TAYLOR, JOSEPH H. SEAMAN, JOHN W. HORNER, JR., JAMES DEAN, R. W. MARTIN, WILLIAM A. PHILLIPS, W. M. L. FISKE, WILLIAM A. READ, JR., E. J. BERMINGHAM and J. v. FORRESTAL, co-partners doing business under the firm name and style of Dillon, Read & Company; CLARENCE DILLON, ARMIN A. SCHLESINGER, HERBERT H. SPRINGFORD and EDWARD G. WILMER, as Trustees, and THE YOUNGSTOWN SHEET & TUBE COMPANY, a corporation created by and existing under the laws of the State of Ohio

Court of Chancery of Delaware, New Castle

July 31, 1923

MOTION FOR A PRELIMINARY INJUNCTION. The complainants moved for a restraining order and preliminary injunction based on facts occurring since an order was entered dissolving the injunction in accordance with the opinion heretofore filed (ante p. 64). These facts are, that soon after the said order was entered, the directors of The Steel and Tube Company of America were notified of a special meeting of the board to be held in the City of Chicago on July 6, 1923, for the purpose of passing upon the following business, viz.: To ratify and approve all action taken by the officers and all instruments executed and delivered in connection with the sale to The Youngstown Sheet & Tube Company, and all action taken by the officers in connection with the litigation in this court, to provide for the distribution among the stockholders of the consideration received by the company from the sale and to that end to take such action as may be necessary or advisable for the purpose of reducing the capital stock of the company including the retiring and redeeming of all the preferred stock, to call a meeting of the stockholders for the purpose of considering and acting upon these matters, and to transact such other business as may properly come before the meeting. The directors convened in special meeting pursuant to the call. The meeting, among other things not important to mention, transacted business of the following nature: After receiving a report from the president of the corporation to the effect that upon the dissolution of the injunction heretofore issued by this court, the sale to The Youngstown Sheet & Tube Company had been consummated and The Steel and Tube Company of America had received the full purchase price of $ 32,950,441.57 in cash, the meeting then proceeded to adopt resolutions ratifying all the acts of the officers and directors done in connection with the sale and with this litigation, and favoring a reduction of the capital stock by retiring the entire outstanding issue of preferred stock at $ 110 per share and accrued dividends, and by reducing the outstanding common stock to 967.33 shares of the par value of $ 2 per share, the surplus in excess of such reduced capital stock or so much thereof as may be deemed expedient and advisable to be distributed. It was further resolved to call a meeting of the stockholders on August 7, 1923, to act upon the matters thus favored and recommended by the directors.

The preliminary injunction which is now asked on this state of facts seeks to restrain The Steel and Tube Company of America, its officers, etc., from distributing such part of the purchase price paid by The Youngstown Sheet & Tube Company "as will make it impossible for the said The Steel and Tube Company of America to make restitution to said The Youngstown Sheet & Tube Company in the event that the sale of the property and assets of the said The Steel and Tube Company of America to the said The Youngstown Sheet &amp Tube Company shall hereafter be decreed herein to be set aside," and also to restrain The Steel and Tube Company of America from "taking any action which will dissipate its assets so as to make it impossible to respond to any final or interlocutory decree which may hereafter be entered in this cause."

For opinion granting a preliminary injunction, see ante p. 1, and opinion dissolving the preliminary injunction, see ante p 64.

Motion for a preliminary injunction denied.

William S. Hilles, and with him, Frederic Cunningham, Jr., of New York City, for the complainants.

Robert H. Richards, and with him, Joseph P. Cotton, of New York City, for the defendant The Steel and Tube Company of America.

OPINION

THE CHANCELLOR

The theory which underlies this application is that The Steel and Tube Company of America ought not to be allowed to put itself into such condition as would make it impossible, in case the sale is eventually set aside, to restore to The Youngstown Sheet & Tube Company the money which has been paid as the consideration price; that if The Steel and Tube Company of America is permitted to reduce its capital to about 1,000 shares of the par value of $ 2 and distribute the excess to its stockholders as is proposed, then in case the complainants shall finally succeed in securing a decree that the sale should be set aside because of the unfairness of the price, relief in accordance with this finding could not be afforded because The Steel and Tube Company of America would be unable to make restitution to The Youngstown Sheet & Tube Company of the $ 32,950,441.57 cash, paid by it as part of the purchase price.

The appearing defendant opposes the application on two principal grounds. These are, first, that inasmuch as the theory upon which the application is based contemplates ultimate relief in the form of a decree setting aside the sale, the injunction ought to be denied because such relief cannot be had in this suit for two reasons, viz.: (1) The bill as it now stands seeks to restrain the completion of an executory contract of sale by one of the parties thereto, and would therefore not permit of a decree directed against the undoing of a contract of sale completely executed; and if it were possible under the present pleadings for the court to deal with the executed contract, yet an effective decree setting aside the sale could not be entered because it would not be operative against The Youngstown Sheet & Tube Company which is an indispensable party and is a non-resident beyond the jurisdiction of this court, it never having been served with...