Geller v. Transamerica Corporation

• Decision Date: 05 September 1945
• Docket Number: No. 322.,322.
• Citation: 63 F. Supp. 248
• Parties: GELLER v. TRANSAMERICA CORPORATION.
• Court: U.S. District Court — District of Delaware

63 F. Supp. 248

GELLER v. TRANSAMERICA CORPORATION.

No. 322.

District Court, D. Delaware.

September 5, 1945.

Daniel O. Hastings (of Hastings, Stockly and Layton), and John VanBrunt, Jr., all of Wilmington, Del., for plaintiff.

Hugh M. Morris and Edwin D. Steel, Jr. (of Morris, Steel & Nichols), all of Wilmington, Del., for defendant.

LEAHY, District Judge.

Plaintiff, a minority stockholder of Axton-Fisher Tobacco Company, sued defendant, the majority stockholder, for damages resulting to plaintiff from the sale by him to defendant in November, 1942, of 240 shares of class A stock of Axton-Fisher, or, alternatively, by rescission of the sale. Defendant moved for summary judgment. Upon the pleadings and affidavits filed by the respective parties, the court rendered its opinion in favor of defendant. See Geller v. Transamerica Corporation, D.C., 53 F. Supp. 625. And on January 4, 1944 judgment was entered granting defendant's motion for summary judgment and dismissing the action. After several intermediate steps involving the taking of an appeal from the judgment, all of which it is unnecessary to detail, plaintiff on December 11, 1944, filed in this court his petition for leave to file a bill of review based on discovery of new matter.

Defendant has filed an amended motion to dismiss plaintiff's petition upon the grounds that it fails to state facts which probably would have changed the decision of the court had they been before the court when it granted the motion for summary judgment; that the record in the cause discloses that plaintiff, in the exercise of reasonable diligence, could have discovered substantially all the "newly discovered evidence" prior to the entry of the judgment; and that the petition is not supported by the affidavits of any witnesses by whom plaintiff expects to prove certain of the facts alleged in the petition.

The matter is now before the court upon the amended motion of defendant to dismiss the petition.

Facts upon which the original opinion was based are detailed in Geller v. Transamerica Corporation, supra. These facts will not be repeated here, but plaintiff, in its petition for review, relies upon certain "newly discovered evidence". This is a letter¹ dated June 21, 1944, from Axton-Fisher to its stockholders. This letter notifies the stockholders of Axton-Fisher that the company was dissolved on May 31, 1944; that certain of the company's properties were sold to Phillip Morris Company; and that the company is ready to distribute as a partial liquidating distribution to owners of its class B stock negotiable warehouse receipts covering certain of the tobacco which the company owned. This distribution and contemplated liquidation took place more than a year and a half after plaintiff sold his stock to defendant. There is no allegation that at or prior to the time defendant purchased plaintiff's stock defendant had any intention or plans of any character to dissolve and liquidate Axton-Fisher.

Plaintiff further relies on a letter of October 22, 1941, of Axton-Fisher to Transamerica. This letter reveals that in October, 1941, the defendant was apprised of the fact that the estimated 1941 tobacco crop replacement costs were substantially double the September 30, 1941, book value, for which the market price for equivalent 1941 crop tobacco was between 50% and 100% higher than Axton-Fisher's purchase price. There are other letters, i. e., the letter of July 2, 1942, Transamerica to Axton-Fisher, and letter of July 7, 1942, Axton-Fisher to Transamerica. These two letters represent an exchange of correspondence which took place approximately two months after the plan of recapitalization of Axton-Fisher for which a registration statement had been filed with the SEC had been abandoned. This exchange of correspondence preceded by approximately four months defendant's purchase of plaintiff's stock. These letters disclose that one Wilbur Fields suggested that Hillyer Brown, an attorney in San Francisco, proceed to work on a plan of recapitalization; that the suggestion had been mistakenly made by Fields; and that neither Axton-Fisher nor Transamerica had determined upon a "purchase program". Presumably, the "purchase program" which was referred to was the one consummated in November, 1942, about which plaintiff complains.

Reference is then made to certain minutes of meeting of Axton-Fisher's board, held June 15, 1943. Before quoting excerpts from these minutes, it may be well to state that on April 30, 1943—more than five months after plaintiff had sold his stock —directors of Axton-Fisher adopted a resolution to redeem all of the outstanding class A stock on July 1, 1943, at $80.80 per share, the call price fixed by the charter. Then, on July 16, 1943, the directors of Axton-Fisher attempted to modify their earlier resolution so as to eliminate the mandatory aspect of the redemption and make the redemption optional with the class A stockholders. Subsequently, in the case of Taylor v. Axton-Fisher Tobacco Co., 295 Ky. 226, 173 S.W.2d 377, 148 A.L.R. 834, the action of the directors in attempting to make the redemption optional rather than mandatory was held to be invalid by the Court of Appeals of Kentucky. The minutes reveal that developments since April 30, 1943, were responsible for the desire of the directors to give the class A stockholders the option of...