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Keywords

plaintiffdefendanthearingaffidavitpleamotionsummary judgmentwillcorporationbad faithmotion for summary judgment
plaintiffdefendanthearingaffidavitpleamotionsummary judgmentwillmotion to dismiss

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Bennett v. Breuil Petroleum Corp., 34 Del.Ch. 6, 99 A.2d 236

Facts

William H. Bennett, a stockholder of Breuil Petroleum Corporation, filed a complaint to cancel stock issued under a plan adopted by the corporation. Bennett alleged that the plan was illegal as it represented an oppressive exercise of rights by majority stockholder James F. Breuil, Sr., and that the stock was sold for grossly inadequate consideration. The plan involved significant changes to the corporation's capital structure, including reducing the par value of shares and increasing the number of authorized shares, which Bennett claimed was intended to dilute his interest and force him out of the corporation.

By his complaint, plaintiff, William H. Bennett, seeks to cancel stock issued under a plan adopted by the requisite statutory vote. Plaintiff claims the plan is illegal because it constitutes an oppressive exercise by the majority stockholder of an admitted legal right.

Issue

The main legal issues are whether the stock issuance constituted an oppressive exercise of majority rights and whether the stock was sold for grossly inadequate consideration.

The main legal issue is whether the stock issuance constituted an oppressive exercise of majority rights and whether the stock was sold for grossly inadequate consideration.

Rule

The court applied the principle that actions by majority stockholders aimed at 'freezing out' minority interests are actionable regardless of the fairness of the price, and that the burden of proving bad faith or improper motive lies with the plaintiff.

The court applied the principle that actions by majority stockholders having as its primary purpose the ‘freezing out’ of a minority interest is actionable without regard to the fairness of the price.

Analysis

The court analyzed the facts presented in the pleadings and affidavits, noting that they raised substantial disputes regarding the motives of the corporate defendant and its controlling stockholder. The court emphasized that the plaintiff's allegations of inadequate consideration and improper purpose warranted a hearing, as they could not be resolved through a motion for summary judgment. The court also highlighted that the plaintiff's right not to purchase shares was impaired if the stock was worth significantly more than its issuing price.

The court analyzed the facts presented in the pleadings and affidavits, noting that they raised substantial disputes regarding the motives of the corporate defendant and its controlling stockholder.

Conclusion

The court denied the defendants' motions to dismiss and for summary judgment, allowing the case to proceed to a hearing to resolve the factual disputes regarding the legality of the stock issuance.

The court denied the defendants' motions to dismiss and for summary judgment, allowing the case to proceed to a hearing.

Who won?

The court ruled in favor of the plaintiff, William H. Bennett, allowing his claims to proceed due to the substantial factual disputes raised regarding the motives behind the stock issuance.

Defendants' motion to dismiss and for summary judgment denied.

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