Ringling Bros.-Barnum & Bailey Combined Shows Inc. v. Edith Conway Ringling

• Decision Date: 03 May 1947
• Citation: 53 A.2d 441,29 Del.Ch. 610
• Parties: RINGLING BROS.-BARNUM & BAILEY COMBINED SHOWS INC., a Corporation of the State of Delaware, JAMES A. HALEY, AUBREY B. HALEY, JOHN RINGLING NORTH, JAMES R. GRIFFITH and GEORGE WOODS, Defendants Below, Appellants, v. EDITH CONWAY RINGLING, Complainant Below, Appellee
• Court: United States State Supreme Court of Delaware

53 A.2d 441

29 Del.Ch. 610

RINGLING BROS.-BARNUM & BAILEY COMBINED SHOWS INC., a Corporation of the State of Delaware, JAMES A. HALEY, AUBREY B. HALEY, JOHN RINGLING NORTH, JAMES R. GRIFFITH and GEORGE WOODS, Defendants Below, Appellants, v. EDITH CONWAY RINGLING, Complainant Below, Appellee

Supreme Court of Delaware

May 3, 1947

APPEAL from an order of the Court of Chancery for New Castle County. The appellee instituted a proceeding under Section 31 of the Delaware Corporation Law, Rev. Code of Del. 1935, § 2063, to determine the validity of an election of directors at the 1946 annual stockholders' meeting of the corporate appellant (a Delaware corporation) and to determine the right of the individual appellants to hold office as directors or officers of the corporation. The Vice-Chancellor decided that no valid meeting of stockholders had been held and that a meeting should be held before a master to be appointed by the Court of Chancery pursuant to Section 31. Ringling v Ringling Bros.-Barnum & Bailey Comb. Shows, ante p. 318, 49 A.2d 603. From the order entered in conformity with the Vice-Chancellor's opinion, the appellants brought this appeal. The parties will be referred to by their designations in the court below.

Aaron Finger, of the firm of Richards, Layton & Finger, and Leonard G. Bisco, George B. Balamut and William J. Granger, of the firm of Newman & Bisco, of New York City, for appellants.

Clair J. Killoran, John Van Brunt, Jr., and F. William Carr, of the firm of Killoran & Van Brunt, and Dan Gordon Judge and John F. Reddy, Jr., of the firm of Engel, Judge & Miller, of New York City, for appellee.

RICHARDS C. J., SPEAKMAN, TERRY, CAREY, and PEARSON, JJ., sitting.

OPINION

PEARSON, J.

The Court of Chancery was called upon to review an attempted election of directors at the 1946 annual stockholders meeting of the corporate defendant. The pivotal questions concern an agreement between two of the three present stockholders, and particularly the effect of this agreement with relation to the exercise of voting rights by these two stockholders. At the time of the meeting, the corporation had outstanding 1000 shares of capital stock held as follows: 315 by petitioner Edith Conway Ringling; 315 by defendant Aubrey B. Ringling Haley (individually or as executrix and legatee of a deceased husband); and 370 by defendant John Ringling North. The purpose of the meeting was to elect the entire board of seven directors. The shares could be voted cumulatively. Mrs. Ringling asserts that by virtue of the operation of an agreement between her and Mrs Haley, the latter was bound to vote her shares for an adjournment of the meeting, or in the alternative, for a certain slate of directors. Mrs. Haley contends that she was not so bound for reason that the agreement was invalid, or at least revocable.

The two ladies entered into the agreement in 1941. It makes like provisions concerning stock of the corporate defendant and of another corporation, but in this case, we are concerned solely with the agreement as it affects the voting of stock of the corporate defendant. The agreement recites that each party was the owner "subject only to possible claims of creditors of the estates of Charles Ringling and Richard Ringling, respectively" (deceased husbands of the parties), of 300 shares of the capital stock of the defendant corporation; that in 1938 these shares had been deposited under a voting trust agreement which would terminate in 1947, or earlier, upon the elimination of certain liability of the corporation; that each party also owned 15 shares individually; that the parties had "entered into an agreement in April 1934 providing for joint action by them in matters affecting their ownership of stock and interest in" the corporate defendant; that the parties desired "to continue to act jointly in all matters relating to their stock ownership or interest in" the corporate defendant (and the other corporation). The agreement then provides as follows:

"Now, Therefore, in consideration of the mutual covenants and agreements hereinafter contained the parties hereto agree as follows:

"1. Neither party will sell any shares of stock or any voting trust certificates in either of said corporations to any other person whosoever, without first making a written offer to the other party hereto of all of the shares or voting trust certificates proposed to be sold, for the same price and upon the same terms and conditions as in such proposed sale, and allowing such other party a time of not less than 180 days from the date of such written offer within which to accept same.

"2. In exercising any voting rights to which either party may be entitled by virtue of ownership of stock or voting trust certificates held by them in either of said corporation, each party will consult and confer with the other and the parties will act jointly in exercising such voting rights in accordance with such agreement as they may reach with respect to any matter calling for the exercise of such voting rights.

"3. In the event the parties fail to agree with respect to any matter covered by paragraph 2 above, the question in disagreement shall be submitted for arbitration to Karl D. Loos, of Washington, D. C. as arbitrator and his decision thereon shall be binding upon the parties hereto. Such arbitration shall be exercised to the end of assuring for the respective corporations good management and such participating therein by the members of the Ringling family as the experience, capacity and ability of each may warrant. The parties may at any time by written agreement designate any other individual to act as arbitrator in lieu of said Loos.

"4. Each of the parties hereto will enter into and execute such voting trust agreement or agreements and such other instruments as, from time to time they may deem advisable and as they may be advised by counsel are appropriate to effectuate the purposes and objects of this agreement.

"5. This agreement shall be in effect from the date hereof and shall continue in effect for a period of ten years unless sooner terminated by mutual agreement in writing by the parties hereto.

"6 The agreement of April 1934 is hereby terminated.

"7. This agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators and assigns of the parties hereto respectively."

The Mr. Loos mentioned in the agreement is an attorney and has represented both parties since 1937, and, before and after the voting trust was terminated in late 1942, advised them with respect to the exercise of their voting rights. At the annual meetings in 1943 and the two following years, the parties voted their shares in accordance with mutual understandings arrived at as a result of discussions. In each of these years, they elected five of the seven directors. Mrs. Ringling and Mrs. Haley each had sufficient votes, independently of the other, to elect two of the seven directors. By both voting for an additional candidate, they could be sure of his election regardless of how Mr. North, the remaining stockholder, might vote. ^[1]

Some weeks before the 1946 meeting, they discussed with Mr. Loos the matter of voting for directors. They were in accord that Mrs. Ringling should cast sufficient votes to elect herself and her son; and that Mrs. Haley should elect herself and her husband; but they did not agree upon a fifth director. The day before the meeting, the discussions were continued, Mrs. Haley being represented by her husband since she could not be present because of illness. In a conversation with Mr. Loos, Mr. Haley indicated that he would make a motion for an adjournment of the meeting for sixty days, in order to give the ladies additional time to come to an agreement about their voting. On the morning of the meeting, however, he stated that because of something Mrs. Ringling had done, he would not consent to a postponement. Mrs. Ringling then made a demand upon Mr. Loos to act under the third paragraph of the agreement "to arbitrate the disagreement" between her and Mrs. Haley in connection with the manner in which the stock of the two ladies should be voted. At the opening of the meeting, Mr. Loos read the written demand and stated that he determined and directed that the stock of both ladies be voted for an adjournment of sixty days. Mrs. Ringling then made a motion for adjournment and voted for it. Mr. Haley, as proxy for his wife, and Mr. North voted against the motion. Mrs. Ringling (herself or through her attorney, it is immaterial which,) objected to the voting of Mrs. Haley's stock in any manner other than in accordance with Mr. Loos' direction. The chairman ruled that the stock could not be voted contrary to such direction, and declared the motion for adjournment had carried. Nevertheless, the meeting proceeded to the election of directors. Mrs. Ringling stated that she would continue in the meeting "but without prejudice to her position with respect to the voting of the stock and the fact that adjournment had not been taken." Mr. Loos directed Mrs. Ringling to cast her votes

882 for Mrs. Ringling,

882 for her son, Robert, and

441 for a Mr. Dunn,

who had been a member of the board for several years. She complied. Mr. Loos directed that Mrs. Haley's votes be cast

882 for Mrs. Haley,

882 for Mr. Haley, and

441 for Mr. Dunn.

Instead of complying, Mr. Haley attempted to vote his wife's shares

1103 for Mrs. Haley, and

1102 for Mr. Haley.

Mr. North voted his shares

864 for a Mr. Woods,

863 for a Mr. Griffin, and

863 for Mr. North.

The chairman ruled that the five candidates proposed by Mr. Loos, together with Messrs. Woods and North were elected. The Haley-North group disputed this ruling insofar as it...