Randolph v. Deibel (76 Ohio App. 194, 1945)

By the Court.

This is an appeal on questions of law -and fact from a judgment of the Common Pleas Court for the defendants on their motion for judgment on the pleadings.

The plaintiff is the owner of 18 shares of the capital stock of the defendant, The Modern Tool Die- & Machine Company, the total capital stock of which is some 600 shares, common, without par value. The .plaintiff ■instituted her action as a class suit on behalf of other shareholders, whose names and the amount of whose holdings do not appear in the pleadings.

We shall not attempt to set out in detail the averments of the petition, the answer and reply, upon which the issues were drawn and upon which the trial judge entered judgment for the defendants.

' Briefly, it is the claim of the plaintiff on her own behalf and on behalf of others similarly situated that she and they are entitled to have issued to them, upon payment of the purchase price therefor, 54 shares of stock now in the name of Joseph F. Deibel, Sr., on the books of defendant company, which stock was acquired by Joseph F. Deibel, Sr., by purchase from Ella Fallcenbach and William Falkenbach, who owned 25 and 29 shares, respectively, of the no par common stock of defendant company.

It appears that those owners proposed to the board of directors of defendant company to sell their shares of stock for the sum of $150 per share. The petition sets out that one of the regulations of the company provides as follows:

“In ease any member of the company desires to sell all, or part of stock owned by him, he shall notify the secretary of the company in writing, stating the amount of stock he desires to sell and the ma'rket value of same, when this company shall have an option on said stock for thirty days following such notice.”

The board of directors of the company declined to purchase the stock at the price quoted, but made an offer therefor of $100 per share, and lafer the owners notified the board that they would not sell at $100 a share. It is averred that Joseph F. Deibel, Sr., after the expiration of the option date, purchased the stock at approximately $110 per share and later without consideration turned portions of it over to certain named defendants and retained some of it. Later all this stock, after some objection and discussion among the members of the board, was transferred to the certificate holders on the books of the defendant company.

The plaintiff avers that she had no knowledge that the stock of the Falkenbachs had been offered for sale, until within a few days prior to the filing of her petition.

The amended answer asserts three defenses, the first of which, after admitting certain averments of the petition, is a general denial; the second is a claim that the suit was not properly instituted as a class suit; and the third is a claim that the plaintiff and those whom she claims to represent are estopped from objecting to the sale, purchase, transfer or ownership of the 54 shares of stock.

The cause is submitted to this court on the transcript of the docket and journal entries, including what is designated as a bill of exceptions and so signed by the trial court, and which is made up of statements of counsel, the letters of the Falkenbachs to the board of directors of the defendant company offering their stock for sale, the notification of the company to the 'agent of the Falkenbachs that the board of directors would not buy the stock at $150 per share but that the board would pay $100, and the reply of the agent of the Falkenbachs that they would not sell at $100 a share.

We have been favored with the written opinion of the trial judge whose viewpoint we are pleased to have although the matter comes to our attention originally. He was of opinion that plaintiff was chargeable with waiver of her rights, or laches. She pleads, however, that she had no knowledge of the transaction until a few days before her petition was filed.

In oral presentation and in the statements of plaintiff’s counsel in the trial court and in this court, there appear factual developments which are not found in the pleadings. Those statements raise a very serious implication that Deibel, Sr., was chargeable with a delict in conducting the transactions, after the board declined to purchase at $150 and offered $100, and in eventually purchasing the stock at $110 for himself. The nature and extent of the scope of the agency of Deibel to represent the board are not in the record. Just what transpired after the $100 bid was transmitted to the Falkenbachs does not appear. The occurrences arising in the interim between the notification of rejection of the bid and the purchase by Deibel, Sr., would be of some advantage in determining whether Deibel properly carried out his agency for the defendant company. Likewise, there might arise a nice legal question, if made, whether any proposal to sell stock at a lower price .than the $150, quoted by the Falkenbachs to the board, should not have been treated as was the original proposition and first tendered to the board of directors for its acceptance or rejection. Upon the meager record, that question is not definitely projected.

The determining factor, as we view it, assuming that the plaintiff has a right to prosecute a class suit, is that the right of purchase under the rule pleaded is in the company and not in the shareholders. The board of directors act for and on behalf of the company, or at least did at the time when this transaction was conducted. Sections 8623-20, 8623-36 and 8623-41, General Code; 13 American Jurisprudence, 504, Section 461'. It is not pleaded, nor could it be upon any fact appearing in the record, that the board of directors at any time indicated a purpose to insist upon the right to purchase this stock at the figure at which Deibel, Sr., bought it.

It impresses us that the rights of the shareholders rise no higher than the rights of the company as assertecl by its board of directors. Tbe mere fact tbat tbe board permitted tbe transfer of tbe shares of stock to the transferees would not have barred it from taking-legal steps to protect its interests if done promptly.

It is not alleged tbat plaintiff or any one wbom she represents called upon tbe board of directors to bring tbis suit. 13 American Jurisprudence, 500, 508, Sections 454, 464.

It is not- contemplated tbat tbe purchase right accorded to tbe company under tbe rule pleaded should be exercised by individual shareholders. Tbis appears to be tbe only practical construction of tbe rule. If it were meant tbat tbe tendered option of purcbasé of stock be exercised by tbe shareholders, there would develop a burdensome and difficult procedure. Then, if a majority determined to buy at tbe option price, it would be necessary for every shareholder to indicate a willingness to take bis proportionate share of tbe stock and to pay for it. If any one or more of tbe shareholders did not elect to purchase, then tbe seller would be left with some of bis stock unsold. Obviously, tbis would result in dissatisfaction and a seller could not be compelled to transfer anything less than all tbe shares which be bad to sell.’

The petition does not aver tbat tbe shareholders wbom tbe plaintiff claims to represent as a class have indicated a purpose to put up tbe purchase money and to take tbe respective shares to which they are entitled.

We have not discussed all of tbe questions presented in oral argument and in tbe briefs, but are satisfied tbat upon tbe averments of the petition tbe plaintiff may not maintain her action individually or as representative of a class.

Judgment accordingly.

Hornbeck, P. J., Geiger and Montgomery, JJ., concur.

Montgomery, J., of tbe Fifth Appellate District, sitting by designation in tbe Second Appellate District.