Opdyke v. Kent Liquor Mart, Inc.

• Decision Date: 25 May 1962
• Citation: 181 A.2d 579,40 Del.Ch. 316
• Court: Supreme Court of Delaware
• Parties: Milton R. OPDYKE, Plaintiff below, Appellant, v. KENT LIQUOR MART, INC., Herman C. Brown, Glenn A. Richter and George M. Smith, Defendants Below, Appellees.

Page 579

181 A.2d 579

40 Del.Ch. 316

Milton R. OPDYKE, Plaintiff below, Appellant, v. KENT LIQUOR MART, INC., Herman C. Brown, Glenn A. Richter and George M. Smith, Defendants Below, Appellees.

Supreme Court of Delaware.

May 25, 1962.

E. N. Carpenter, II, of Richards, Layton & Finger, Wilmington, for appellant Milton R. Opdyke.

Vincent A. Theisen, of Theisen & Lank, Wilmington, for appellees.

SOUTHERLAND, Chief Justice, and WOLCOTT, Justice, and CAREY, Judge, sitting.

SOUTHERLAND, Chief Justice.

The principal issue in this case concerns the ownership of certain shares of stock of the defendant, Kent Liquor Mart, Inc.

In the summer of 1959 Milton R. Opdyke, the plaintiff, and George M. Smith, one of the defendants, discussed a possible venture into the liquor business. They learned of a vacant store in a shopping center near Dover. They interviewed Glenn A. Richter, one of the defendants. Richter was one of two members of Richter and Meyer, which owned the shopping center. He told them that the store would be available if he were made a co-owner of the business. They agreed.

Opdyke and Smith retained Herman C. Brown, Esq., an attorney practicing in Dover, to incorporate the business. The corporation was formed in September, 1959. The issued capital stock was 300 shares, of which each of the three men received 100. At the first incorporators and directors meetings all three men and Brown were present. There was some discussion of the desirability of restrictions on the sale of his stock by any stockholder. Brown explained to them the legal procedure required. Nothing ever came of this.

Application was made to the Alcoholic Beverage Control Commission for a liquor license. It was granted in June, 1960. The corporation borrowed $20,000 from the Bank of Delaware to provide funds for a stock of goods and working capital. All three stockholders and their wives joined in the note. The corporation also incurred a debt of $2600 to Richter & Meyer for the construction work.

The store was opened in August, 1960. It did not prosper as its owners had hoped. At a meeting on October 9 Richter said he would be willing to get out of the business. At another meeting on October 20 Richter renewed his offer to withdraw. The terms of his offer are in dispute, but it is admitted that after discussing the matter Opdyke gave Richter a check for $415, on the face of which Opdyke endorsed: 'For equity in the corporation.' ($415 was the amount of the contribution of each stockholder.) Richter negotiated the check and retained the proceeds until after the bringing of this lawsuit. After October 20 Richter was not active in the business.

On November 19 Opdyke and Smith met. Smith was dissatisfied and wished to withdraw. They discussed a possible purchase by Opdyke, but the result is in dispute. On the following day Smith sold his shares to Richter for $415 and Richter's agreement to relieve Smith and his wife from the obligation at the Bank of Delaware. A new note was executed, joined in by Richter and Opdyke and their wives, and also by Robert Richter, Richter's nephew, and his wife.

Sometime later Richter transferred the 100 shares he had bought from Smith. He gave 60 to Robert Richter and 40 to Smith. Richter and Smith called on Brown and gave him instructions about the transfer of the shares. They were transferred on February 2, 1961. They also discussed the holding of a stockholders meeting. By that time Brown realized that the three men were not getting along.

Some days later Opdyke telephoned Brown that he (Opdyke) had bought Richter's shares. Brown asked him whether he (Opdyke) was not obligated to relieve Richter of Richter's liability to the bank. Opdyke said that he was not so obligated. Apparently Opdyke also went to see Brown about the matter prior to March 7.

Brown testified that he did not intend to be drawn into 'any fight among stockholders as to who owned what'; but as counsel for the corporation he thought he had some duty 'to try to straighten it out'. As above indicated, he had already gathered that some difficulty between them was building up. Brown accordingly suggested to Opdyke that a meeting be held.

On March 7 the meeting was held in Brown's office. At Brown's suggestion Mr. and Mrs. Opdyke came in first. Opdyke asserted that he had bought Richter's stock and showed Brown his cancelled check for $415 with the endorsement on its face. Brown indicated some doubt.

A half hour later Smith and Richter came in. A matter of renewing the lease on satisfactory terms was discussed and settled.

Brown then brought up the matter of Richter's stock. Because of the forthcoming stockholders' meeting he thought it desirable to attempt to adjust the difficulty. He said that Opdyke had a problem with respect to the ownership of some stock. He explained to them that he was not representing any of them individually, but was the attorney for the corporation. He suggested that they get their own attorneys. He also said that if they wished to discuss it, he would act as moderator.

He asked Opdyke to state his case. Opdyke did so. Richter replied that the stock had been sold with the understanding that Opdyke would relieve him (Richter) of his obligations; that Opdyke had not done so; and that Opdyke did not own the stock.

Apparently in an effort to settle the dispute, Opdyke asked Richter to let him have 60 of Richter's shares so that he would have control. Richter refused.

Brown then, also in an attempt to settle the dispute, asked Richter if he would still offer to transfer his original 100 shares to Opdyke if, in addition to the $415, Opdyke would arrange to relieve him of his obligations. Richter replied that he would do so. Brown asked Opdyke if he was satisfied to try this and Opdyke said: 'Yes.' Brown the asked Richter if Richter would agree to include the other 100 shares in the offer. Richter assented. Smith, the owner of 40 shares, also agreed. Opdyke seemed satisfied.

It was understood that Opdyke would have until March 13 to refinance the loan and the debt to Meyer and Richter. This time limit was extended. On March 24 Opdyke told Brown that he (Opdyke) was going to complete the deal.

On the following Tuesday (March 28), Richter and Smith called to see Brown. Richter said that on that morning Opdyke had told him that the deal was off. Richter and Smith had a problem--a proposed sale of the corporation to a Mr. Behan for $30,000. To this Opdyke would not agree. After discussion Brown advised them to offer Behan two-thirds of the stock for $20,000. As they were leaving Brown said that he was sorry to see this happen, and that he would have some interest, on behalf of a client or of himself, in purchasing all or part of the corporation. They told him they were obligated to pursue the matter with Behan, but if he did not accept their offer they would be interested in talking to Brown about it.

Brown was then not in a position to buy the stock for himself because he already had an interest in another liquor store, and he thought that a regulation or ruling prohibited multiple holding of liquor licenses. However, on the afternoon of the 28th he unexpectedly effected a sale of that interest. He then called Richter at Richter's home, explained that he was now much more interested in the purchase of the stock of the Kent Liquor Mart, and asked whether, if Richter had a higher offer, Richter would be bound to go back to Behan. Richter said he would talk to Smith, but he, himself, would feel under no obligation to Behan if he had a higher offer. Brown then offered $21,000 for the two-thirds of the stock under the same conditions. Richter said he would consult Smith and advise Brown. Later Richter confirmed the sale. Brown went to Richter's home that evening and gave Richter a deposit of $1,000. Smith was present, and the method of payment of the contract price was agreed upon.

Before leaving Brown requested Richter and Smith not to tell Opdyke of the sale because he (Brown) wanted to tell Opdyke himself.

About nine o'clock the next morning, Brown went to the store and said:

'Mickey, I have some news that is going to be a surprise for you, I am sure. I bought Mr. Richter and Mr. Smith and that group's stock last night, or agreed to buy it. I asked them not to tell you about it because I wanted to tell you about it myself.'

Brown explained to Opdyke what the transaction was. He then told Opdyke that there were three ways in which their association could continue: (1) Brown would buy Opdyke's stock; or (2) Opdyke would retain his stock; or (3) they would not agree and 'would have some kind of battle.'

After more discussion Opdyke agreed (according to Brown) to continue as a 'partner.' The possibility that Opdyke's stock, because of his minor position, would 'become worth $10' was discussed. According to Brown's recollection, Opdyke first suggested it.

Opdyke said he was not angry at Brown, but he was angry at Richter and Smith, because he thought he had bought Richter's stock. Brown testified: 'He was angry and disappointed because I had told him that I had purchased Richter's stock'. His anger was directed at Richter, and several times he spoke of suing Richter because of this.

The matter of the new loan at the bank was discussed, and Opdyke agreed that he and his wife would sign the note. Later that day Brown arranged for the loan at the Farmers Bank. At six o'clock Opdyke came to Brown's office. Brown and two friends were there. Opdyke said he had nothing against Brown, but he was going to sue Richter. Opdyke again agreed to continue as a 'partner'.

About a week later the bank was about ready to close the matter. Brown went to the store to see Richter and Smith. In a little while Mr. and Mrs. Opdyke came in. Opdyke had just consulted another attorney. Brown started to explain about the closing, but noticed a stiffness in Opdyke's attitude with respect to consumating the transaction. Opdyke...