Citations
- 22 F. Supp. 602
Full opinion text
WOOLSEY, District Judge.
I hold that the plaintiff is entitled to an injunction against the several defendants herein served on the grounds hereinafter indicated.
I. As a preliminary, before we get into a discussion of the questions of fact or of law involved herein, it is necessary to clear up the situation of the parties.
All the defendants above named, except “John” Leslie and Lewis Yedinsky, who were not served, have appeared in this action and are, therefore, defendants here.
The defendant Hurst and the defendant Gelderman have consented to injunctions, and I do not have to consider their case in any way.
In the case of the defendant Swords, before the trial was started, Mr. Wise made an application to relieve himself of continuing to represent Swords, with whom he was unable to communicate and from whom he could not get any instructions. After hearing this motion and in pursuance of my powers as District Judge, I relieved Mr. Wise of further representing the defendant Swords; so this trial has been an inquest 'in equity as against him.
II. The facts are to a large extent common ground.
It appears that Ellery W. Mann, one of the defendants, was the beneficial owner of 10,000 shares, of the common stock of Trans-Lux Daylight Picture Screen Corporation, hereinafter referred to throughout as “Trans-Lux,” and with a number of other owners of the stock he eventually got together for distribution" about 47,500 shares in all.
This stock so assembled was, as we have been told by Mann, the result of his having shaken out of Trans-Lux a large stockholder who was a very difficult person as a business mate. The 47,500 shares above mentioned represented only a part of the shares which this stockholder had owned.
In order to get this stock it had been necessary to borrow money.
The purchasers had paid $3 per share therefor, and the stock was being held by the Central Hanover Bank & Trust Company as security for a loan of $2 per share made to the purchasers. So far as the 47,-500 shares were concerned, Mann had obligated himself for this loan.
The stock originally had been put into the hands of the bank in this way, as I recollect it, in February, 1935, and Mann first took up the question of distributing these shares of Trans-Lux some time in October with a Mr. McDermott, who was a stock broker, and a member of the Curb Exchange on which Trans-Lux was listed.
As a result of conversations, Mr. Mc-Dermott suggested that Torr & Co., a partnership consisting of the defendants Torr and Mills, dealers in unlisted securities, might be an excellent firm to assist in distributing this stock, and eventually an arrangement was made between Torr & Co; and Mann under which Torr & Co. agreed to act in, the distribution thereof.
The arrangement, which took the form of an option or call to Torr & Co. for the stock, was substantially agreed on so far as prices were concerned some time at or about October 24, 1935, although the exact terms of the option were not reduced to writing until a-few days later when a letter from the defendant Mann to Torr &.Co., antedated October 24, 19-35, was written. The purpose of antedating the letter was to give Torr & Co. a 60-day option on the stock which would expire December 24, 1935.
This option read as follows:
“Ellery W. Mann “155 East 44th Street “New York, N. Y.
“October 24, 1935
“Torr & Co.,
“60 New Street,
“New York N. Y.
“Attention: Mr. J. M. Torr
“Gentlemen: I am granting you options on 47,500 shares of the Trans-Lux Daylight Picture Screen Corporation for a period of sixty days, as follows:
10,000 shares at $3.
21,500 “ at 3-1/2
11,200 “ at 3-3/4
5,000 “ at 4
“The above stock will be made available to you at the main office of the Central Hanover Bank and Trust Company upon payments of the amounts indicated.
“Yours very truly,
“EWM :B [Signed] Ellery W. Mann.”
It is here observable that the prices in the option went up — the first 10,000 shares were to be sold for $3 and the last 5,000 shares for $4. This indicated a hope at least, if not a purpose, that the market should also go up if it were possible to raise it. Otherwise there would be naught in it for Mann, Torr, and Mills. For this option was accompanied by an agreement between Torr & Co. and Mann, in which it was agreed that Mann should have two-t.hirds of the net profit from the sale of this stock on this distribution, and that the other one-third of the net profit should go to Torr & Co.
It