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Wool v. Solar Aircraft Co.

FEBRUARY 13, 1964.




Appeal from the Circuit Court of Cook County; the Hon. JACOB BERKOWITZ, Judge, presiding. Affirmed.


Rehearing denied March 16, 1964.

In this appeal, plaintiff seeks reversal of the trial court's decision adverse to him on a motion for summary judgment filed by defendant Fairbanks, Morse & Company. *fn1

Plaintiff, as an owner of shares of Solar Aircraft Company, brought a stockholder's derivative action, and in response to this complaint defendant filed a motion for summary judgment accompanied by affidavits to which plaintiff filed a counteraffidavit. An amended complaint was filed, and, by leave of court, the motion was permitted to stand thereto.

In his amended complaint plaintiff alleges that the purchased 500 shares of Solar stock on November 27, 1959. He states that he is suing on behalf of himself and 4300 others who were stockholders at the date of his purchase, at which time the stock was listed on the New York and Pacific Stock Exchanges and actively traded. Plaintiff also asserts that International Harvester Company now claims to own 98% of the stock of Solar and regards the latter as its subsidiary.

The transaction of which plaintiff complains is the sale to Solar by defendant of 124,000 shares of Solar for $2,652,360, which transaction he avers was not completed until on or about December 31, 1959. Plaintiff says this purchase was not authorized by the bylaws of Solar, was not submitted for the approval of stockholders as it should have been, constituted preferential treatment of defendant, and had the effect of an unauthorized reduction of capital by Solar. Plaintiff also states that defendant knew that its conduct was illegal, fraudulent and tortious.

Plaintiff further alleges, on information and belief, that the transaction in question was part of a plan by which International Harvester acquired 98% of the 576,752 shares of Solar outstanding in early 1961. The recovery sought was the amount paid by Solar to defendant ($2,652,360) plus interest.

Plaintiff's amended complaint also stated that the facts and documents to support his complaint were in the possession of Solar, International Harvester, the Continental Illinois National Bank & Trust Co. and defendant, and that he would seek discovery of those matters through the court before trial, as they were otherwise not available to him.

The most significant point raised by defendant's motion for summary judgment asserts that the transaction between Solar and defendant for the purchase and sale of the 124,000 shares of Solar stock was completed on November 25, 1959, that this date was prior to the date on which plaintiff purchased his shares; *fn2 and that, in consequence, plaintiff is barred from bringing the action by Section 45a of the Business Corporation Act. (Ill Rev Stats 1957, c 32, § 157.45a.) This statute provides:

No action shall be brought in this State by a shareholder in the right of a domestic or foreign corporation unless the plaintiff was a holder of shares or of voting trust certificates therefor at the time of the transaction of which he complains, or his shares or voting trust certificates thereafter devolved upon him by operation of law from a person who was a holder at such time. (Emphasis supplied.)

The principal affidavit filed in support of defendant's motion for summary judgment was that of George W. Gardes, corporate secretary of Solar. He stated that part of the stock in the questioned transaction was the subject matter of a lawsuit brought by Solar against Fairbanks Morse and another corporation in the United States District Court in Philadelphia; that in early November, 1959 a New York securities firm offered to sell to Solar the 124,000 shares of its stock then owned by Fairbanks Morse, including the 94,000 shares involved in the Philadelphia lawsuit, at a price of $21.39 per share. His affidavit stated further that on November 23, 1959 Solar accepted the offer and caused the purchase price of the shares to be deposited with Chase Manhattan Bank in New York; that on November 25, 1959 the stock certificates for the 124,000 shares were delivered to Solar's agent at the Continental Illinois National Bank and Trust Company in Chicago; and that Solar on that date caused the purchase price to be transmitted from the New York bank to the Continental bank in Chicago for disposition by Continental as directed by the seller. This affidavit was verified on the oath of the affiant without qualification of any kind.

Plaintiff filed an amended counteraffidavit in which he reasserted his purchase of 500 shares on November 27, 1959 and explained the details thereof. His affidavit then continued with a statement on information and belief that the transaction complained of between Solar and defendant was not completed until after December 17, 1959 and that it was part of a plan whereby International Harvester acquired 98% of Solar's stock. The counteraffidavit also restated plaintiff's need for discovery proceedings to acquire the information and documents to substantiate his amended complaint.

The record does not disclose that plaintiff made any motion to the court to compel discovery from defendant or anyone else during the four months the suit was pending.

On February 2, 1962 the court sustained defendant's motion for summary judgment. From this order plaintiff appeals on two grounds: First, he asserts that the documents on file raised a question of fact as to whether plaintiff was a "holder of shares" at the time of the transaction of which he complained, within the meaning of the section of the Business Corporation Act quoted above; alternatively on this point, plaintiff argues that the hearing on the motion for summary judgment should have been continued to permit plaintiff to take depositions and arrange for other discovery in order to substantiate his claim. Second, plaintiff contends that, despite the ...

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