Ingalls Iron Works Co. v. Ingalls Foundation

• Decision Date: 09 May 1957
• Docket Number: 6 Div. 985
• Citation: 98 So.2d 30,266 Ala. 656
• Parties: INGALLS IRON WORKS CO. et al. (Elesabeth Ridgely Ingalls, et al., Intervenors), v. INGALLS FOUNDATION et al. , 986, 987.
• Court: Alabama Supreme Court

Page 30

98 So.2d 30

266 Ala. 656

INGALLS IRON WORKS CO. et al. (Elesabeth Ridgely Ingalls, et al., Intervenors), v. INGALLS FOUNDATION et al.

6 Div. 985, 986, 987.

Supreme Court of Alabama.

May 9, 1957.

Rehearing Denied Nov. 21, 1957.

Chas. W. Greer, Birmingham, for respondent-appellants.

Bainbridge & Mims, Birmingham, for intervenors.

Lange, Simpson, Robinson & Somerville, Jas. A. Simpson, Reid B. Barnes and Daniel J. Meador, Birmingham, for appellees.

LIVINGSTON, Chief Justice.

The bill of complaint as amended was brought by Ellen Gregg Ingalls and James A. Simpson, as a majority of the co-executors of the estate of R. I. Ingalls, Sr., deceased, against the Ingalls Iron Works Company, and R. I. Ingalls, Jr., in the Circuit Court, in Equity, of Jefferson County. The First National Bank of Birmingham, the third co-executor of the estate of R. I. Ingalls, Sr., who refused to join as complainant in bringing this bill, was joined as a party respondent. The bill as amended avers that on April 15, 1943, R. I. Ingalls Sr., entered into a written contract with the Ingalls Iron Works Company whereby he gave the company the option to purchase the 2,287 shares of its capital stock owned by him, upon his retirement or death. That Ingalls died testate on July 12, 1951. That thereafter the board of directors of the company on four separate occasions adopted resolutions releasing all of the company's right under said contract. That on July 18, 1951, the day after the first said resolution was adopted, Ingalls' stock was delivered to Mrs. Ingalls, James A. Simpson, and the First National Bank of Birmingham, who were nominated executors in the last will and testament of Ingalls, accompanied by a letter of transmittal, which stated that the company released all its rights under said option contract to purchase the stock. That since this time, the stock has remained in the hands of these persons, who on August 2, 1951 were named executors of Ingalls' estate. That on December 30, 1952, a reconstituted board of directors rescinded the resolutions of the old board and elected to purchase said stock. The bill seeks to set aside the action taken by the reconstituted board on grounds that as a result of the actions taken by the old board the company relinquished all of its rights to purchase the stock involved and for that reason the acts of the reconstituted board in regard to this contract were inefficacious and void, and further that if the company did not effectively relinquish its right to purchase the stock as a result of the actions taken by the old board, the subsequent action taken by the reconstituted board in regard to this stock was without legal effect for the action was the direct result of the fraudulent conduct of R. I. Ingalls, Jr.

The respondents demurred to the bill as a whole and specifically to each aspect thereof. Said demurrer was sustained as to that aspect charging that the action of the reconstituted board was the result of the fraudulent misconduct of R. I. Ingalls, Jr., and overruled as to all other aspects. From this ruling respondents appeal.

The contract provides as follows:

'This Option, made this 15 day of April, 1943, by R. I. Ingalls and his wife, Ellen G. Ingalls (hereinafter called stockholder and wife, respectively), with and in favor of The Ingalls Iron Works Company, a corporation organized and existing under the laws of the State of Delaware, (hereinafter called the Coorporation).

'Witnesseth:

'Whereas, of the total of 15,000 shares of the issued and outstanding capital stock of the Corporation, Stockholder is the owner and holder of 2,287 shares representing a twenty-two hundred and eighty-seven fifteen thousandths (2,287/15,000) interests in the Corporation as now evidenced by certificates as follows:

'Certificate No. Shares

'31 2,283

'34 4;

'Whereas, the present successful status of the Corporation is entirely attributable to the painstaking efforts and splendid co-operation of the stockholders and it is the desire of the Stockholder that the splendid harmony and the continuity of management be not disturbed in the event of the retirement or death of the Stockholder, by the interest of the Stockholder in the Corporation passing to outside and disinterested persons; and

'Whereas, it is the desire of the Stockholder upon his retirement or death not only to protect the remaining or surviving stockholders of the Corporation by insuring the return of all his stock to the Corporation, at its election, but also to assure the remaining or surviving stockholders that upon his retirement or death his interest in the Corporation, as herein described, may be retired at the price and under the terms as hereinafter provided.

'Now, Therefore, in consideration of the premises and the sum of One Thousand ($1,000.00) Dollars cash in hand paid to Stockholder and his wife by the Corporation the receipt whereof is hereby acknowledged, and in further consideration of the mutual undertakings and covenants of the parties hereto as hereinafter set forth, it is agreed:

'1. That at any and all times during the life of the Stockholder and for thirteen (13) months after his death, the Corporation shall have a right, exercisable by written notice to the Stockholder prior to his death or by written notice to the executors, administrators or other legal representatives of the Stockholder subsequent to his death, to purchase all or any part of the twenty-two hundred eighty-seven fifteen thousandths (2,287/15,000) interest which the Stockholder now holds in the Corporation, as represented by the 2,283 shares of stock and the 4 shares of stock and evidenced by Certificate No. 31 and Certificate No. 34, respectively, as aforesaid, and any renewals or reissues thereof and said stock's pro rata proportion of any dividends declared on the issued and outstanding stock of the Corporation in the form of additional stock in the Corporation. In the event the Corporation shall elect to purchase all of the interest and stockholdings of the Stockholder in the Corporation, as evidenced by said Certificate No. 31 and No. 34 and any certificates evidencing any renewals or reissues thereof and dividends declared thereon in the form of additional stock in the Corporation, then the Corporation shall pay therefor (a) the aggregate sum of One million eighty thousand and no/100 ($1,080,000.00) Dollars, plus (b) the amount of cash dividends which shall have then been declared thereon but be unpaid. In the event, however, that the Corporation shall elect to purchase only part of the interest of the Stockholder in the Corporation, as hereinabove described, then the Corporation shall pay for the part so purchased (a) an amount which bears the same ratio to the said aggregate sum of $1,080,000.00 as the part so purchased bears to the entire interest of the Stockholder in the Corporation as described and referred to in this paragraph 1, plus (b) the amount of any cash dividends which shall then have been declared on the part so purchased but be unpaid. Any such purchase, if made, shall be upon the terms and conditions herein contained.

'2. That the stock certificates described in paragraph 1 hereof and all certificates evidencing any renewals or reissues thereof and all certificates evidencing any additional stock issued as dividends on the said interest of the stockholder in the Corporation, shall be endorsed as follows:

'This stock certificate is subject to an option to purchase dated April 15, 1943, in favor of the Ingalls Iron Works Company.'

That the stockholder agrees to assign and deliver, concurrently with the execution and delivery of this Option said stock certificates No. 31 and No. 34, properly endorsed, to the Corporation, as Trustee only, for the purpose of this Option. Stockholder will and shall likewise assign and deliver to the Corporation, As Trustee only, promptly as and when issued, all stock certificates evidencing any renewals or reissues of said stock certificates No. 31 and No. 34 and all certificates evidencing any additional stock issued by the Corporation as dividends on the said interest of the Stockholder in the Corporation, for the purpose of this Option and endorsed as above prescribed.

'3. That the stock owned by Stockholder and subject to this Option shall be voted by him and he shall receive all dividends declared and paid thereon and other rights accruing thereunder during his natural life, and, after his death, said stock shall be voted by his legal representatives, who shall receive all dividends declared and paid thereon and other rights accruing thereunder until such time as the option granted herein shall have been exercised, if the same be exercised, and the purchase pursuant thereto shall have been completed; provided, however, that all dividends paid in the form of additional stock in the Corporation shall, promptly as and when received be assigned, endorsed and delivered to the Corporation, as Trustee, for the purposes of this Option as provided in paragraphs 1 and 2 hereof and the full consideration therefor is included within the consideration as provided in said paragraph 1.

'4. That in addition to the Option granted to the corporation as provided in paragraph 1 hereof, the Corporation shall have the right, exercisable by written notice at any time within the time provided in paragraph 1 hereof, to repurchase from the stockholder or his executors, administrators or other legal representatives all or any part of any new stock (but such renewals or reissues of the present stock owned by the Stockholder or any additional stock issued as dividends thereon as are included within the option granted to the Corporation under paragraph 1 hereof, shall not be construed as new stock) which may be hereafter issued by the Corporation and purchased by the Stockholder, whether purchased by him pursuant to any rights accruing to him as a stockholder or record of the Corporation or...