Smith v. Alabama Dry Dock & Shipbuilding Co.

• Decision Date: 06 March 1975
• Court: Alabama Supreme Court
• Parties: Harry H. SMITH et al., etc. v. ALABAMA DRY DOCK & SHIPBUILDING CO., a corporation. SC 926.

Page 424

309 So.2d 424

293 Ala. 644

Harry H. SMITH et al., etc. v. ALABAMA DRY DOCK & SHIPBUILDING CO., a corporation.

SC 926.

Supreme Court of Alabama.

March 6, 1975.

Cunningham, Bounds & Byrd and Harry H. Smith, Mobile, for appellants.

C. A. L. Johnstone, Jr., and William H. Hardie, Jr., Mobile, for Alabama Dry Dock & Shipbuilding Co.

M. A. Marsal, Mobile, for appellees, D. J. Maloney and others.

ALMON, Justice.

Alabama Dry Dock & Shipbuilding Company, a corporation, filed a bill of complaint in equity seeking a declaratory judgment upholding a proposed retirement plan for the non-bargaining employees of the corporation.

Harry H. Smith, Gregory L. Smith and Frank M. Ladd, Jr., were made parties respondent, individually and as representatives of a class consisting of all holders of common stock of Alabama Dry Dock & Shipbuilding Company. The action of the trial court in ordering Smith, Smith and Ladd, without notice, to be party respondents in a representative capacity under Alabama Equity Rule 31 is claimed as error. Due to our holding in this case (that a justiciable controversy was not presented), it will not be necessary to address ourselves to that question.

While suit was in progress in the trial court, the Alabama Rules of Civil Procedure became operative. Thus, hereinafter we shall refer to appellee, Alabama Dry Dock & Shipbuilding Company, as plaintiff and appellants, Smith Smith and Ladd, as defendants. Intervener D. J. Maloney, et al., individually and as representatives of a class consisting of employees of plaintiff eligible for participation in the proposed retirement plan, take the same position on appeal as the plaintiff.

The pertinent portions of the complaint are:

'1. The Company is a corporation duly organized and existing under the law of the State of Alabama with its principal place of business in Mobile County, Alabama.

'2. Each of Respondents Harry H. Smith, Gregory L. Smith and Frank M. Ladd, Jr., is over the age of twenty-one years, of sound mind and a resident of Mobile County, Alabama; and each of said Respondents is a holder of common stock of the Company, the said Harry H. Smith being the holder of 2,279 shares thereof, the said Gregory L. Smith being the holder of 328 shares thereof, and the said Frank M. Ladd, Jr., being the holder of 1,307 shares thereof, all according to the records of the Company.

'3. On November 21, 1972, the Board of Directors of the Company adopted a resolution by which a Retirement Plan for Non-Bargaining Employees of the Company, effective January 1, 1973, was adopted subject to approval of the stockholders of the Company at a special meeting of stockholders to be held on January 30, 1973 (Appendix I of Exhibit 'A'), and thereafter on the same date the Board of Directors of the Company adopted a second resolution providing in substance that subject to approval by the stockholders of the Company of the said proposed Retirement Plan and effective from and after close of business December 31, 1972, the Company shall discontinue the existing practice of paying premiums on life insurance for employees eligible for the proposed Retirement Plan for Non-Bargaining Employees after any such employee shall have retired an an employee of the Company and further that subject to approval of the proposed Retirement Plan the Company shall discontinue making any further contributions to an existing Profit Sharing Retirement Plan originally effective June 30, 1946, on behalf of any and all employees who shall have become eligible for membership in the said Retirement Plan for Non-Bargaining Employees (Appendix II, Exhibit 'A'). A notice of said special stockholders' meeting was duly given to the stockholders of the Company and there was sent with the said notice to each stockholder a proxy statement describing the proposed Retirement Plan for Non-Bargaining Employees of the Company, the reasons for the proposal to adopt the same, the estimated cost thereof to the Company and information about certain existing retirement and compensation plans, together with other information required for such proxy statements and together with Appendix I and Appendix II thereto setting forth the resolutions of the Board of Directors referred to hereinabove, all of which is hereto attached, marked Exhibit 'A' and incorporated herein as fully as if set forth herein and the Company avers that the facts set forth in said 'Exhibit 'A' are true and correct.

'4. At the said special meeting of stockholders of the Company held on January 30, 1973, there were present in person or by proxy the holders of 122,988 shares of the common stock of the Company out of a total of 143,745 shares of stock outstanding and entitled to vote at said meeting thereby constituting a quorum for the transaction of business in accordance with the by-laws of the Company. At said meeting upon motion duly made and seconded for the approval of the said resolution of the Board of Directors adopting the Retirement Plan for Non-Bargaining Employees of the Company there were 110,105 shares of common stock of the Company voted in favor of the motion, and 12,883 shares of said stock voted against the motion so that the said motion was carried by more than a majority in accordance with the by-laws of the Company.

'5. The Directors of the Company received a letter from Respondent Harry H. Smith dated January 25, 1973, copy of which is hereto attached, marked Exhibit 'B' and hereby made a part hereof. At the said special meeting of stockholders of the Company on January 30, 1973, Respondent Gregory L. Smith, son of the said Harry H. Smith, spoke against the said motion citing substantially the same objections as those set forth in Exhibit 'B'. Respondent Frank M. Ladd, Jr., has otherwise indicated to a representative of the Company his opposition to the proposed Retirement Plan for Non-Bargaining Employees on substantially the same grounds as set forth in Exhibit 'B' hereto. At said special stockholders' meeting the said Harry H. Smith, Gregory L. Smith and Frank M. Ladd, Jr., voted or caused to be voted the said number of shares held by each of them against the said motion for approval of the adoption of the said Retirement Plan. The Company has not received information of any question or objection as to the legality of said Retirement Plan for Non-Bargaining Employees of the Company by any of the other stockholders of the Company who voted against the approval of said Retirement Plan, or by any other stockholders of the Company.

'6. On January 30, 1973, after the conclusion of the said special meeting of stockholders, the Company transmitted to newspapers of general circulation in Mobile, Alabama, a 'Press Release,' copy of which is hereto attached, marked Exhibit 'C' and made a part hereof and a copy of the same was on said date mailed by United States mail, postage prepaid, to each stockholder or record of the Company. The text of a resolution set forth in said Exhibit 'C' is a true and correct copy of a resolution duly adopted by the Board of Directors of the Company at a special meeting thereof on January 30, 1973, after the close of the said special meeting of stockholders of the Company on said date and the said resolution of the Board of Directors now remains in full force and effect without modification; and the text of said last mentioned resolution is incorporated herein as if set forth at length herein.

'7. The Company avers and contends that the adoption of said Retirement Plan for Non-Bargaining Employees of the Company as aforesaid is a legal corporate act regardless of the opposition thereto by the holders of a minority of the shares of stock of the Company but Respondents deny this and have indicated that the legality of any payments made by the Company in accordance with the provisions of said Retirement Plan will or may be contested by Respondents or some of them. The Company does not wish to submit the Company to risk of liability in lawsuits on such subject and is withholding making payments on account of said Retirement Plan for Non-Bargaining Employees pending final adjudication by a court of competent jurisdiction that the participation of the Company in said Retirement Plan is legal and valid. Complainant avers that the said controversy is one upon which Complainant is entitled to have a declaratory judgment under the laws of the State of Alabama.

'8. There are approximately 680 persons or parties who are the holders of record of the outstanding shares of common stock of the Company who may have some interest in the outcome of this proceeding and of these there are approximately 37 persons who voted or caused their shares of stock to be voted against approval of the adoption of the said Retirement Plan at the said special meeting of stockholders of the Company, and each said class of stockholders is so numerous as to make it impracticable to bring them all before the Court as parties in the proceeding. Complainant avers that the Respondents named hereinabove will fairly insure the adequate representation of all of the stockholders of the Company who may make or support the contentions made by the Respondents as aforesaid; and that there are common questions of law and fact affecting the rights of all stockholders of the Company who may make such contentions and a common relief is hereby sought as to all of such persons.'

The defendants' motion to dismiss challenged the complaint for failure to state a justiciable controversy. This motion was denied. The defendants then filed a motion for summary judgment with supporting affidavits. This motion...