Bouree v. Trust Francais Des Actions De La Franco-Wyoming Oil Co.

• Court: Court of Chancery of Delaware
• Writing for the Court: THE CHANCELLOR
• Citation: Bouree v. Trust Francais Des Actions De La Franco-Wyoming Oil Co., 127 A. 56, 14 Del.Ch. 332 (Del. Ch. 1924)
• Decision Date: 27 November 1924
• Parties: HENRI BOUREE and ADOPLHE DE CHAZOULIERE, v. TRUST FRANCAIS DES ACTIONS DE LA FRANCO-WYOMING OIL COMPANY, a corporation created by and existing under the laws of the Republic of France, the defendant Company, and FRANCO-WYOMING OIL COMPANY, a corporation of the State of Delaware

127 A. 56

14 Del.Ch. 332

HENRI BOUREE and ADOPLHE DE CHAZOULIERE, v. TRUST FRANCAIS DES ACTIONS DE LA FRANCO-WYOMING OIL COMPANY, a corporation created by and existing under the laws of the Republic of France, the defendant Company, and FRANCO-WYOMING OIL COMPANY, a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

November 27, 1924

BILL FOR INJUNCTION. The defendant, Franco-Wyoming Oil Company, is a corporation of this State. In order to facilitate trading in its shares of stock on the French Stock Exchance, the defendant, Trust Francais des Actions de la Franco-Wyoming Oil Company, was organized under the laws of the Republic of France with a capital of one thousand shares of the par value of one hundred francs each. The Trust Francais receives registered shares of stock of the Franco-Wyoming Oil Company and in exchange therefor delivers to the persons entitled thereto its own so-called bearer certificates evidencing the fact that the designated number of shares of stock of the Franco-Wyoming Oil Company have been deposited with it. These bearer certificates are traded in on the French Stock Exchange.

The contract between the Trust Francais and the holders of its bearer certificates provides that the certificate holder may at any time surrender the same and receive in exchange therefor an equivalent number of registered shares of the Franco-Wyoming Oil Company. The bill discloses that the holders of bearer certificates are entitled to receive from the Trust Francais proxies enabling such holders to vote the shares of stock of Franco-Wyoming Oil Company at stockholders' meetings of said company in the amount represented by their bearer certificates.

The complainant, Henri Bouree, is the owner of one hundred and thirty shares of stock of the Franco-Wyoming Oil Company and twenty-seven hundred and fifty shares represented by bearer certificates issued to him by the Trust Francais. The complainant, Adolphe de Chazouliere, is the owner of five shares of stock of the Franco-Wyoming Oil Company and one hundred shares represented by bearer certificates issued to him by the Trust Francais.

The bill charges that the annual meeting of stockholders of Franco-Wyoming Oil Company is to be held on the twenty-fifth day of October of the present year at Cheyenne, Wyoming; that those controlling the Trust Francais have declared it to be their purpose to vote the shares of stock which had been deposited with it in exchange for bearer certificates and which were standing in the name of the Trust Francais on the books of the Franco-Wyoming Oil Company adversely to the re-election of the present board of directors of the Franco-Wyoming Oil Company. The bill further charges that it is the purpose of the persons controlling the Trust Francais to vote a sufficient number of the shares of stock of the Franco-Wyoming Oil Company, standing in its name, to authorize a sale and disposition of the assets of the Franco-Wyoming Oil Company.

The prayer of the bill is that the Trust Francais may be restrained from voting, and the Franco-Wyoming Oil Company from receiving, accepting or permitting the votes of, the shares of stock standing in the name of the Trust Francais at the stockholders' meeting to be held on October 25, 1924 or at any other meeting; that a decree may be entered declaring that the Trust Francais is without power to hold any of the shares of stock of the Franco-Wyoming Oil Company that the Trust Francais be required to transfer the shares of said Oil Company standing in its name to the holders of its bearer certificates, and in the event that the Trust Francais should fail so to do, that this court should require the Franco-Wyoming Oil Company to cancel the certificates of stock standing in the name of the Trust Francais and issue to the holders of said bearer certificates a number of shares of stock equal to the number of shares of stock represented by said bearer certificates.

Upon the filing of the bill on October 20, 1924, a rule was ordered requiring the defendants to show cause why a preliminary injunction should not issue in accordance with the prayers of the bill, the hearing on which has been postponed from time to time until November 21, 1924. Pending the hearing on the rule for preliminary injunction a restraining order was issued to restrain the Trust Francais from voting the shares of stock of Franco-Wyoming Oil Company and the acceptance of such votes by the Franco-Wyoming Oil Company.

The defendant, Franco-Wyoming Oil Company, has been duly served with process, but it has not entered an appearance. The Trust Francais is beyond the jurisdiction of the court and has not voluntarily appeared.

Henri A. de Compiegne, a citizen of France, has filed a petition asking leave to intervene for the purpose of defending the suit. His petition represents that he is the owner of one thousand shares of stock of Franco-Wyoming Oil Company. If he holds any bearer certificates issued by the Trust Francais his petition does not so state. He further shows that out of a total of five hundred thousand shares of the Franco-Wyoming Oil Company, the Trust Francais is the registered holder of 488,408 shares. It is unnecessary to set out in detail the allegations of fact made in his petition. It charges that the Franco-Wyoming Oil Company does not propose to appear and defend the suit and that the Trust Francais being a French corporation is beyond the jurisdiction of the court. He therefore, prays that he may be permitted to intervene in the cause as a party defendant. The petition is opposed by the complainants.

Preliminary injunction denied, and rule discharged.

Caleb S. Layton, of Marvel, Marvel, Layton and Hughes, and Frederic R. Coudert, of New York City, for the complainants.

Andrew C. Gray, of Ward, Gray and Neary, and Alexander B. Seigel, of New York City, for the petitioner.

OPINION

THE CHANCELLOR

The complainants' opposition to the petition for leave to intervene as a party defendant in this cause is based on two grounds.

First. The contention under this head is that the proper practice requires the petitioner to present a sworn answer with his petition for leave to intervene. No authority is cited in support of this contention. In this case time for answering under the rule has not yet arrived, and it would appear to be unreasonable to require one who desired to be made a party defendant to present his answer at a time earlier than under the rules he would be required to do if he had been made a party defendant originally. It is clear that the petition for leave to intervene must show such facts as disclose that the petitioner has an interest in the litigation and that the defense which he desires to set up is a substantial one and not frivolous. Atlantic Refining Co. v. Port Lobos Petroleum Corp., (D. C.) 280 F 934. But that such defense must be disclosed to the court in the form of a sworn answer accompanying the petition does not seem to me to be tenable when the answer date has not yet arrived. Whether a different rule should prevail after that date it is unnecessary to determine.

Second. The other point raised against the petition is that it fails to disclose an interest on the part of the petitioner in the controversy. What is the controversy? Quoting from the complainants' memorandum, "the only matter in controversy in this cause is the right of the Trust Francais to vote the shares of stock standing in its name on the books of the Franco-Wyoming Oil Company." The pending petition (whose well pleaded averments are to be taken as true, Atlantic Refining Co. v. Port Lobos, etc., Corp., supra,) states that the Trust Francais is the record holder of 488,408 shares out of a total of 500,000 shares of Franco-Wyoming Oil Company stock. The complainants together hold in their names 135 shares of the Franco-Wyoming stock and bearer certificates issued by the Trust Francais in the total amount of 2,850 shares. They allege further that through their relatives, friends and associates they control upwards of 40,000 shares of the Franco-Wyoming Oil Company's stock, either through registered shares or through bearer certificates issued by the Trust Francais. The petitioner shows by his petition that he is the record owner of 1,000 shares of stock of the Franco-Wyoming Oil Company, and states that he and his associates who are dissatisfied with the management of the company number 130,000 shares.

It is to be observed that the complainants do not seek to restrain the Trust Francais from voting only the 2,850 shares for which they hold its bearer certificates. They seek to restrain it from voting not only those shares, but all the rest of the 488,408 shares standing in its name and against which bearer certificates are outstanding in the hands of other persons.

I understand it to be the contention of the complainants that the controversy between the complainants and the Trust Francais as to whether the latter has a right to hold and vote the stock standing in its name at stockholders' meetings can be of no possible interest to the petitioner because (illustrating the contention) if stockholder A. is in a controversy with stockholder B., it is of no concern to stockholder C. Generally speaking, this is doubtless true and in such supposed case stockholder C. would ordinarily have no right to inject himself into the controversy. If, for instance, A. claims stock standing in the name of B. and seeks by suit to secure it and to restrain B. pending the litigation from voting or transferring it, another stockholder who makes no claim to the stock has no such litigable interest in the controversy as would entitle him to intervene. But such is not this case.

Here it seems is a controversy over...