Yax v. Dit-Mco, Inc., DIT-MC
| Decision Date | 11 March 1963 |
| Docket Number | DIT-MC,No. 1,F,No. 49587,INCORPORATE,49587,1 |
| Citation | 366 S.W.2d 363 |
| Parties | Ambrose F. YAX, Plaintiff-Appellant, Fred H. Helling, Intervenor-Appellant, v.L. Thompson, Frank S. Morgan, Jack Lipsitz, Rose Morgan, Lucian Piane, Sherman W. Dreiseszun, Florence O. Heller, Baltimore Bank, and George W. Higginbotham and Traders National Bank, Executors of the Estate of George P. Heller, Deceased, Defendants-Respondents |
| Court | Missouri Supreme Court |
Albert Thomson, Mark J. Klein, Kansas City, Linde, Thomson, Vandyke, Fairchild & Langworthy, Kansas City, of counsel, for plaintiff-appellant.
John B. Ewing, Jr., Phillip C. Houx, of Brenner, Wimmell, Ewing & Lockwood, Kansas City, for intervening appellant.
E. E. Thompson, Ivan E. Moody, Kansas City, Popham, Thompson, Popham, Trusty & Conway, Kansas City, of counsel, for respondents Dit-Mco, Incorporated, F. L. Thompson, Frank S. Morgan, Jack Lipsitz, Rose Morgan, Lucian Piane and Sherman W. Dreiseszun.
Joseph J. Kelly, Jr., Howard F. Sachs, Kansas City, Spencer, Fane, Britt & Browne, Kansas City, of counsel, for respondents Heller and Higginbotham and Traders National Bank, Executors of Estate of George P. Heller, Deceased.
HOLMAN, Commissioner.
This equitable action was instituted by plaintiff, Ambrose F. Yax, as a stockholder of defendant Dit-Mco, Inc., for himself and all others similarly situated, seeking a decree compelling certain defendants to hold in trust for the benefit of said corporation and all of its shareholders the benefits from a contract with defendants George P. and Florence O. Heller, whereby said defendants purchased from the Hellers 52,643 shares of the stock of Dit-Mco. Another stockholder, Fred H. Helling, was permitted to file an intervening petition. Plaintiff and intervenor filed a motion for a temporary injunction in an effort to restrain defendants from voting that stock at the annual stockholders meeting in June 1961. After a hearing, that motion was overruled on June 1, 1961. Upon the final hearing the court found all of the issues in favor of defendants and accordingly entered a judgment for them. Plaintiff and intervenor have appealed.
The defendants in this case are Dit-Mco, Inc., hereinafter sometimes called the 'Company'; F. L. Thompson, Frank S. Morgan, Jack Lipsitz, Rose Morgan, Lucian Piane, Sherman W. Dreiseszun, hereinafter sometimes referred to as 'buyers' or as 'purchasing defendants'; George P. Heller (until his death) and Florence O. Heller, his wife, hereinafter sometimes referred to as the 'sellers'; Baltimore Bank, the escrow agent under agreements hereinafter described; and George W. Higginbotham and Traders National Bank who were substituted as defendants for George P. Heller who died prior to the final hearing and are now parties as executors of said decedent's estate.
Mr. Heller is described in the record as the parent of the Company. On the dates hereinafter mentioned there were approximately 223,000 shares of stock outstanding, of which Mr. Heller and his wife owned 67,500. For some time prior to March 1961, Mr. Heller had been chairman of the board and F. L. Thompson had been president of the Company. Both were also members of the board of directors, as was Frank Morgan. In June 1960, Mr. Heller told Thompson that he wanted to sell all of the stock he and his wife owned in the Company. He desired to do so primarily because of the state of his health. For a time efforts were made to sell the entire Company but such a sale did not materialize. Mr. Heller also made an effort to sell the stock through a securities company but no sale in that manner was consummated. Finally, an effort was made by a group of stockholders to purchase the stock, and in February 1961 Mr. Heller suggested that he might sell his stock for $11 a share. Mr. Heller also expressed a desire that the Company acquire a portion of his stock because he knew that in March of that year there would be a dilution of the stock by the exercise of certain options whereby the Company had agreed to sell a large number of shares to certain officers and employees at a price considerably below the market price of the stock. After extended negotiations the sellers, on March 2, 1961, made a written offer to the board of directors to sell 14,857 shares of the stock to the Company at a price of $10.50 per share or a total of $156,000. On the same date, the sellers entered into a written agreement with the purchasing defendants whereby they agreed to sell to said purchasers 52,643 shares of their stock at a price of $11 per share or a total of $579,073. The purchasers agreed to buy said stock in accordance with the following percentages thereof: Frank Morgan, Rose Morgan and Sherman Drieseszun 16 2/3% each, F. L. Thompson 25%, Lucian Piane and Jack Lipsitz 12 1/2% each. It was agreed that stock certificates would be delivered to said purchasers for said stock, and that they would pay for same by executing a promissory note for the amount of the purchase price, dated April 1, 1961, which should bear interest at 5%, payable annually, and that the principal would become due and payable in five annual installments of $115,814.60, beginning on April 1, 1965, and ending on April 1, 1969. The stock was to be placed in escrow to secure the payment of the purchase price. The purchase agreement provided that the sale of the shares to the purchasing defendants, as above outlined, was conditioned upon the acceptance by the Company of the offer of the sellers to sell 14,857 shares to it, as above mentioned, to be paid for in cash upon delivery of the stock certificate.
A meeting of the board of directors was held on March 4, 1961, with all five of the directors present, and a resolution was adopted authorizing the purchase of said shares of stock and the payment of the purchase price therefor. All of the directors voted in favor of that resolution except Mr. Heller who abstained from voting. Thereafter, the purchase of the shares by the individual defendants was consummated and the certificates for said shares were issued to said purchasers and delivered to the Baltimore Bank as escrow agent to secure the payment of the note given by said defendants for the purchase price of said stock. In addition to the 52,643 shares, said purchasers, in accordance with the sales agreement, also delivered to the escrow agent certificates of stock in the Company for a total of almost 15,000 shares as additional collateral security for the payment of said promissory note.
F. L. Thompson testified that as far as the purchasing defendants were concerned the two transactions whereby they and the Company each purchased stock were entirely separate; that he and Mr. Morgan had handled the negotiations for the sale and that the shares purchased were prorated among the purchasers in proportion to the number of shares they already owned; that he had objected to the two deals being combined into one contract but that such was done at the insistence of Mr. Heller's tax attorney because it was considered a necessary and advantageous procedure for Mr. Heller's tax purposes; that as far as the individual purchasers were concerned the purchase of their stock was not contingent upon the purchase of stock by the Company; that if the Company had not bought that stock 'we would have bought it, and wanted to'; that at that time the Company had $542,000 in cash, or its equivalent; that the Company had undertaken an extensive research program which required heavy expenditures, but the directors determined that an expenditure of $156,000 for the purchase of stock could prudently be made; that Mr. Heller had indicated that he wanted to sell the stock to them on a deferred payment basis so that he could have the interest income and also a tax advantage, but that he would not sell stock to the Company on a time payment basis.
The evidence indicated that the market price of the Company's stock on March 2, 1961, was approximately $11 per share, on May 18, 1961, was $17 a share, and on the date of the final hearing, February 28, 1962, was $16.50 per share. It was admitted by the parties, however, at the time of oral argument here (January 1963) that the market price of the stock at that time was approximately $6 per share.
In a deposition taken on April 14, 1961, plaintiff testified that he was employed as a salesman for Midland Securities Company of Kansas City. He stated that he owned 800 shares of stock in the Company and a corporation in which he was a stockholder owned another 800 shares; that he thought it was sound judgment for the Company to buy the 14,857 shares and he had no complaint concerning that transaction; that he filed the suit because he wanted the court to make an order that the Company 'be the purchaser of all the stock' sold by the Hellers, or that all the stockholders be given the opportunity to buy the stock on a prorata basis.
We will first consider the question of our appellate jurisdiction. The shares of stock in question were purchased for $11 per share. At the date of the final hearing the market price was $16.50. That represented an increase in value of $289,536.50. Appellants contend that the Company, or all of the stockholders, should have the benefit of that appreciation in value. It would therefore appear that on the record as it existed at the time the appeal was taken (June 1962) the amount in dispute exceeded $15,000. We are mindful of the...
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