Signal Oil & Gas Co. v. Ashland Oil & Refining Co.
| Court | United States State Supreme Court (California) |
| Writing for the Court | SCHAUER; SHENK, Acting C. J., TRAYNOR, SPENCE and McCOMB, JJ., and DRAPER; GIBSON; CARTER |
| Citation | 49 Cal.2d 764,322 P.2d 1 |
| Parties | SIGNAL OIL AND GAS COMPANY, a corporation, Hancock Oil Company, a corporation, Ralph K. Davies, Globe Oil and Refining Company, a corporation, and Lario Oil and Gas Company, a corporation, Plaintiffs and Respondents, v. ASHLAND OIL & REFINING COMPANY, a corporation, R. S. Blazer, S. M. Burnam, andAmerican Independent Oil Company, a corporation, Defendants, and Ashland Oil & Refining Company, a corporation, and American Independent OilCompany, a corporation, Appellants. S. F. 19329. |
| Decision Date | 25 February 1958 |
Page 1
v.
ASHLAND OIL & REFINING COMPANY, a corporation, R. S. Blazer, S. M. Burnam, andAmerican Independent Oil Company, a corporation, Defendants,
and
Rehearing Denied March 26, 1958.
Page 3
[49 Cal.2d 767] John L. Bradley, Robert E. Burns, Crimmins, Kent, Draper & Bradley, Park Chamberlain, Reginald L. Vaughan, Varnum Paul and Vaughan, Paul & Lyons, San Francisco. for appellants.
James D. Adams, Owen Jameson, Walker Lowry, McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, and Warner W. Gardner, Washington, D. C., for respondents.
[49 Cal.2d 768] SCHAUER, Justice.
Defendants-appellants Ashland Oil & Refining Company (hereinafter referred to as Ashland) and American Independent Oil Company (hereinafter termed American or American Independent) appeal 1 from an order granting a preliminary injunction restraining them from acting or recognizing action taken contrary to a certain so-called 'Agents' Agreement,' and from giving effect to certain actions taken at a meeting of American's board of directors held on December 16, 1954. We have concluded that, for reasons hereinafter stated, the order should be reversed in so far as it enjoins noncompliance with the Agents' Agreement, but affirmed in so far as it enjoins recognition by American of the actions taken at the December 16, 1954, board meeting.
American is a Delaware corporation formed in 1947 for the general purposes of exploration, extraction, processing, and sale of oil and gas and related products. The principal office of the corporation is in San Francisco, California, and the principal activities of the corporation are carried out in the geographic region generally referred to as the Middle East. The capital stock of American is held by ten shareholders. Each shareholder elects a certain number of the 15 members of American's board of directors in the approximate ratio which the number of shares owned by such shareholder bears to the total number of shares issued and outstanding. Thus Phillips Petroleum Company (hereinafter termed Phillips) elects four directors; Signal Oil and Gas Company (Signal), Hancock Oil Company (Hancock) and Ashland each elect two directors; Ralph K. Davies (Davies), J. S. Abercrombie (Abercrombie) Deep Rock Oil Company (Deep Rock) and Sunray Oil Corporation (Sunray) each elect one director; and Globe Oil and Refining Company (Globe) and its apparent subsidiary Lario Oil and Gas Company (Lario) together elect one director.
On March 30, 1950, Signal, Hancock, Ashland, Davies, Globe, and Lario, who together hold about 54.5 per cent of American's stock and who elect eight directors, entered [49 Cal.2d 769] into an agreement (sometimes hereinafter termed the Agents' Agreement)
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with eight persons designated as agents. These agents were in fact the respective directors of American elected by these stockholders. The stated purpose of the Agents' Agreement was 'to provide a means whereby the parties hereto may initiate or maintain in effect any general policy, plan, or program affecting American * * * which said parties should determine to be to their joint benefit, interest, and advantage, and to be to the best interests of all stockholders of American * * *.' The Agents' Agreement provided, in so far as here pertinent, that the shares of American's stock held by the signatory stockholders would be endorsed over to the agents, who would place the stock certificates in escrow, and who thereafter for the ten year term of the agreement would 'have the sole and exclusive voting power' of such stock; that the agents should consult and confer with each other relative to casting their votes, but that the 'vote of the Agents shall always be exercised as a unit, on any matter on which a vote of the stockholders is called for, as any seven of said Agents shall direct and determine'; that in the event seven agents could not agree the matter would be submitted to an arbitrator chosen pursuant to an outlined procedure.On December 9, 1954, at a meeting in Chicago of American's board of directors, one of the directors elected by Ashland moved that another board meeting be held in Chicago on December 16, 1954, for the purpose of considering certain amendments to American's by-laws. The substance of the principal changes to be made by these amendments was that (1) the directors be given power to remove any corporate officer (including the president, 2 who theretofore could be removed only for cause) 'summarily without cause;' (2) the office of chairman of the board be created; and (3) the stockholders' meetings be held in Dover, Delaware, rather than in San Francisco. The six directors representing Signal, Hancock, Davies, Globe, and Lario opposed the motion, but the directors elected by Ashland refused to join this opposition and took the position that their action was not contrary to the Agents' Agreement. The proposal to hold the December 16 meeting for the stated purposes was adopted by a nine to six vote. 3
[49 Cal.2d 770] On December 14, 1954, a meeting of the agents under the Agents' Agreement was held. At this meeting the representatives of Ashland did not agree to proposals of the other representatives to postpone the December 16 meeting and to submit the proposed by-law amendments to arbitration.
On December 15, 1954, Signal, Hancock, Davies, Globe, and Lario commenced the instant action against Ashland, the two directors of American elected by Ashland, and American. The complaint alleges the facts as above stated; that the purpose of the Agents' Agreement was to prevent control of American from passing to any one stockholder (specifically Phillips, which is a so-called 'major' oil company and allegedly controls the votes of Abercrombie and Sunray); that the actions of Ashland and the directors elected by it at and after the December 9 board meeting 'are all pursuant to and in furtherance of the plan to transfer control of American Independent to a combination of its stockholders consisting of Phillips, Ashland, Abercrombie
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and Sunray, all in direct violation of the Agents' Agreement and the purposes pursuant to which American Independent was organized'; and that unless defendants are restrained from holding the proposed December 16 directors' meeting 'plaintiffs will suffer great and irreparable injury in that plaintiffs and the other signatories to the Agents' Agreement will lose control of American Independent and American Independent will itself lose its character as an independent oil company, all to the great loss and damage of American Independent and plaintiffs as its stockholders.'The complaint is supported by affidavits of Davies and the presidents of Signal and Hancock, which in substance aver that American was formed with the understanding that it would be free from the control of any one stockholder, that Phillips has been trying to seize control of American, that the Agents' Agreement waws executed in order to prevent such seizure, that the actions of Ashland and its representatives referred to in the complaint are in violation of the Agents' Agreement and present the danger that American [49 Cal.2d 771] will fall into the control of Phillips, and that unless Ashland and its representatives are restrained from acting contrary to the Agents' Agreement the respective investments of the stockholders represented by the affiants will be greatly impaired.
Based on the above described complaint and affidavits, the superior court, on December 15, 1954, issued a 'temporary restraining order and order to show cause,' directing that pending the hearing defendants 'and all persons acting for or on behalf of you or any of you * * * and all persons having knowledge of the contents of this order' refrain from conducting or participating in the proposed December 16 directors' meeting or any other directors' meeting called to accomplish the purposes proposed to be undertaken at the December 16 meeting, and from taking any action in violation of the Agents' Agreement. It was further ordered that American refrain from recognizing any action taken contrary to the preceding provisions of the order. The general counsel of American had notice and represented American as attorney of record when the application for the order was heard. Ashland, although not represented at the hearing, appeared in court by counsel later on the same day and moved to vacate the temporary restraining order. The motion was denied.
The restraining order was served in California on December 15, on Ashland's designated statutory agent for service of process in California and on the secretary of American. Copies of the order were sent by telegram to those directors of American who were assembled in Chicago to attend the December 16 meeting, and these directors received their copies prior to holding that meeting. The directors elected by plaintiffs did not attend the December 16 meeting, but the remaining directors, although informed of the terms of the restraining order, proceeded to hold that meeting as planned. It appears that they were advised by counsel that the restraining order did not apply to them because (1) they were no served with process in the pending action and (2) they were not acting as agents of American but were acting 'upon' the corporation and were in a position superior to it. At this meeting the proposed by-law changes were adopted by an eight to zero vote.
Plaintiff applied for an order to show cause re contempt againt Ashland, American, and the directors of American who attended the...
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In re Morrow, Bankruptcy No. LA 95-14358. Adv. No. 95-04174-ES.
...Beverage Control (1961) 55 Cal.2d 728, 733, 13 Cal.Rptr. 104, 361 P.2d 712; Signal Oil and Gas Co. v. Ashland Oil and Refining Co. (1958) 49 Cal.2d 764, 777, 322 P.2d 1; Pacific Mutual Life Ins. Co. v. McConnell (1955) 44 Cal.2d 715, 725, 285 P.2d 636 (1956), cert. denied sub nom. Gentles v......
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Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn., No. B187840.
...injunction against a corporation is sufficient by itself to bind the directors (Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 779-780 [322 P.2d 1]), it was unnecessary. As the majority itself notes when concluding that injunctive relief was proper despite the jury......
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People v. Sorden, D076458
...not assert as a defense that the order merely was erroneous " (italics added)]; Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 776, fn. 6, 322 P.2d 1 ( Signal Oil ) [" ‘An [order] duly issuing out of a court of general jurisdiction with equity powers upon pleadings......
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Wanke, Indus., Commercial, Residential, Inc. v. Superior Court of San Diego Cnty., Nos. D058825
...assert as a defense that the order merely was erroneous ” (italics added) ]; Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 776, fn. 6, 322 P.2d 1( Signal Oil ) [“ ‘An injunction duly issuing out of a court of general jurisdiction with equity powers upon pleadings ......
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In re Morrow, Bankruptcy No. LA 95-14358. Adv. No. 95-04174-ES.
...Beverage Control (1961) 55 Cal.2d 728, 733, 13 Cal.Rptr. 104, 361 P.2d 712; Signal Oil and Gas Co. v. Ashland Oil and Refining Co. (1958) 49 Cal.2d 764, 777, 322 P.2d 1; Pacific Mutual Life Ins. Co. v. McConnell (1955) 44 Cal.2d 715, 725, 285 P.2d 636 (1956), cert. denied sub nom. Gentles v......
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Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn., No. B187840.
...injunction against a corporation is sufficient by itself to bind the directors (Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 779-780 [322 P.2d 1]), it was unnecessary. As the majority itself notes when concluding that injunctive relief was proper despite the jury......
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People v. Sorden, D076458
...not assert as a defense that the order merely was erroneous " (italics added)]; Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 776, fn. 6, 322 P.2d 1 ( Signal Oil ) [" ‘An [order] duly issuing out of a court of general jurisdiction with equity powers upon pleadings......
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Wanke, Indus., Commercial, Residential, Inc. v. Superior Court of San Diego Cnty., Nos. D058825
...assert as a defense that the order merely was erroneous ” (italics added) ]; Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 776, fn. 6, 322 P.2d 1( Signal Oil ) [“ ‘An injunction duly issuing out of a court of general jurisdiction with equity powers upon pleadings ......