Bayer v. Airlift Intern., Inc.

• Decision Date: 31 July 1970
• Citation: 111 N.J.Super. 461,268 A.2d 548
• Parties: Eric C. BAYER et al., Plaintiffs, v. AIRLIFT INTERNATIONAL, INC., et al., Defendants.
• Court: New Jersey Superior Court

Page 461

111 N.J.Super. 461

268 A.2d 548

Eric C. BAYER et al., Plaintiffs, v. AIRLIFT INTERNATIONAL, INC., et al., Defendants.

Superior Court of New Jersey,

Chancery Division.

July 31, 1970.

John W. Griggs and Richard J. Ryan, Hackensack, for plaintiffs (Morrison, Lloyd & Griggs, Hackensack).

Adrian M. Unger, Newark, for defendant Airlift International, Inc. (Milton M. and Adrian M. Unger, Newark).

Charles H. Hoens, Jr., Newark, for defendant Corporation Trust Co. (Lum, Biunno & Tompkins, Newark).

LYNCH, J.S.C.

This is an action by a stockholder against a corporation, Airlift International, Inc. (Airlift), and its transfer agent, Corporation Trust Company (C.T.C.), for alleged wrongful refusal to transfer stock. ¹ Originally plaintiff sought a mandatory injunction compelling the transfer, together with damages. During the course of this proceeding the stock was actually transferred to plaintiff and therefore plaintiff now merely seeks damages for the alleged wrongful refusal to transfer. In broad terms the alleged reason for refusal asserted by defendants is that the stock was subject to a 'voting trust' and plaintiff refused to accept the transfer without the legend noting that restriction. The matter is before this court on remand from the Appellate Division pursuant to its opinion dated January 10, 1968. ²

Defendants move for summary judgment on three grounds: 1) plaintiff's acceptance of transfer of his stock, subsequent to the alleged wrongful refusals to transfer, amounts to an 'election' which bars this suit for damages; 2) assuming that the refusals to transfer were wrongful, nevertheless plaintiff has suffered no recoverable damages and 3) Res judicata, based upon a Florida suit instituted by Airlift wherein plaintiff, though a named defendant therein, failed to counterclaim for the damages which he here seeks.

In urging ground #2 above, defendant Airlift adopts the tactics which proved successful for it in a comparable case wherein a stockholder's request to transfer was refused for reasons similar to those asserted for the refusals here. Cf., Berman v. Airlift International, Inc., 302 F.Supp. 1203 (D.C.N.D.Ga.1969). There the court granted Airlift's motion for summary judgment upon the ground that the plaintiff stockholder had suffered no damages.

The factual background is long and detailed. The Berman case recites its genesis at some length. For purposes of the issues here, the following facts suffice. On March 13, 1965, plaintiff acquired 150,000 shares of defendant Airlift for a purchase price of.$61,500 or 41cents per share. On December 15, 1965, he surrendered them for transfer but was refused because of the absence of the voting trust legend. On February 28, 1966, he sold the 150,000 shares, receiving in return the sum of $31,325 in cash and 37,000 shares of Airlift.

On July 14, 1966, plaintiff submitted the 37,000 shares for transfer and again transfer was refused because of the absence of the voting trust legend and plaintiff refused to accept any shares with the legend on them.

On December 24, 1965, plaintiff had instituted the within action seeking a mandatory action against defendants to compel transfer of the 150,000 shares without the voting trust legend and also for money damages by reason of the refusal to transfer as requested by him. After acquiring the 37,000 shares on February 28, 1966, plaintiff, on January 3, 1967, filed an amended complaint with respect to the refusal to transfer those shares in July 1966. On April 14, 1967, on plaintiff's motion for summary judgment, Judge Matthews ordered that the 37,000 shares be transferred to plaintiff free of restrictions. On April 19, 1967, plaintiff presented the shares to defendant C.T.C. for transfer. On April 20, 1967, the Appellate Division stayed the order of April 14, 1967, and defendants again refused transfer of the shares. On January 10, 1968, the Appellate Division reversed the April 14, 1967 order, holding in effect that there were factual and legal questions as to whether the 37,000 shares were properly subject to the voting trust at the time of the refusals to transfer.

On February 15, 1967, an action was started by defendant Airlift in the State of Florida for a declaratory judgment to establish the rights of 67 stockholders, including plaintiff Bayer, who held stock which was said to be subject to the voting trust. Bayer was named as a party defendant in that suit but apparently was not served and filed no pleadings therein. On October 3, 1967, an order was entered in the Florida action directing the transfer of the 37,000 shares to Bayer free and clear of any restrictions. Bayer and Airlift thereupon moved in the Appellate Division in this matter to vacate the restraint against transfer. The application was granted October 23, 1967, and the transfer to Bayer was made on that day. Bayer sold the 37,000 shares on October 24 and October 25, 1967, at approximately $6.25 per share, for a total gross price of $231,150.

After remand to this court defendants moved for summary judgment upon the three grounds stated at the outset of this opinion. Upon the argument of the motion, this court, conceiving that some factual issues as to the propriety of the refusal to transfer would probably survive the motion (R. 4:46--2) and wishing to reach the questions as to 'election' and 'damages' as urged by defendants, resolved that the motion for summary judgment should be renewed, but upon an assumption that all refusal to transfer the stock were actually wrongful. With that assumption the questions of 'election' and 'damages' are ripe for decision. The court therefore directed that testimony be taken on the issue of damages. Upon such proofs defendants were to renew their motion for judgment. Subsequently proofs were taken, defendants moved for judgment in their favor, and it is that motion which we are here deciding.

At the outset, plaintiff contended that the alleged wrongful refusal to transfer his stock occurred on three separate dates: a) December 15, 1965, with respect to the 150,000 shares which he originally acquired; b) July 14, 1966, when transfer of the 37,000 shares was first refused and c) again upon submission for transfer of the same 37,000 shares on April 19, 1967, in and about the time of this court's previous order for summary judgment and its stay by the Appellate Division.

In response to plaintiff's reliance upon the dates of December 15, 1965, and July 14, 1966, defendants contended that, as of those dates, plaintiff suffered no damage, even assuming the wrongful refusals to transfer, because he ultimately received more for the shares than he might have received at either of those two times. ³ After some disputation of this assertion by plaintiff, at oral argument on May 8, 1970, he conceded that defendants' position was correct and no damages would flow to him, assuming a wrongful refusal to transfer on those dates.

Plaintiff now stipulates that the only date of alleged wrongful refusal to transfer upon which he relies is April 19, 1967. The stock was selling for approximately $10 per share on that date.

Defendants assert that any alleged wrongful refusal to transfer on April 19, 1967, cannot give rise to a cause of action for damages for the reason that the tort which plaintiff asserts against defendants is that of conversion, and that tort was 'complete' on July 14, 1966, when the 37,000 shares were presented for transfer and it was first refused. Once having been completed on that day, say defendants, no new cause of action for another conversion of the same stock could arise on the subsequent date of April 19, 1967.

We shall consider Seriatim defendants' three grounds upon which they urge a dismissal of the complaint.

(A)

DEFENDANTS' ARGUMENT THAT PLAINTIFF'S ACCEPTANCE OF THE

STOCK CONSTITUTED AN ELECTION BARRING DAMAGES.

In this respect defendants' argument is that in cases involving a wrongful refusal to transfer the stockholder is confronted with an election, I.e., he may either accept the stock or sue for damages in conversion and recover the value of the stock, but he may not get the stock and 'damages' as well. They rely heavily upon Siegel v. Riverside Box & Lumber Co., 89 N.J.L. 595, 99 A. 407 (E. & A. 1916) and Virginia Public Service Co. v. Steindler, 166 Va. 686, 187 S.E. 353 (1936). Defendants' reliance upon Siegel is misplaced.

The court said, 89 N.J.L. at p. 596, 99 A. at p. 408:

The rule of damages in cases of this kind depends on the nature of the action. If the plaintiff claims special damages only and seeks to retain the stock, it would obviously be wrong to allow him to recover The value of the stock and retain the title too. If, however, the plaintiff claims for a conversion of the stock, so that upon payment of a judgment in the action the title would pass to the judgment debtor (2 Kent Com. (12th ed., note 1) 388; Singer Manufacturing Co. v. Skillman, 52 N.J.L. 263, 19 A. 260; Bauer v. Hess, 76 N.J.L. 257, 69 A. 966), he may recover its value. (Emphasis added).

Defendants misread Siegel. It was not a case, such as here, where plaintiff obtained the stock and then sued for Special damages. Rather the plaintiff sued for the Value of the stock. It is perfectly logical that, in that context, the plaintiff is not entitled to both the value of the stock and the stock itself. While defendants cite the case for the proposition that the special damages here sought are barred by reason of the Siegel decision that case is cited in 12 Fletcher, Cyclopedia of Corporations, § 5523, p. 572, n. 93 (1957), for the proposition that: 'And it has been held that instead of suing as for a conversion he may elect to retain the stock and sue for special damages only.' That is what plaintiff seeks here.

Since plaintiff here is not suing for the Value of the stock Siegel is no bar to his recovery of special damages.

As to plaintiff's reliance upon Virginia Public Service Co. v....