The opinion of the court was delivered by: MCVICAR
This is a class action by the above-named plaintiffs against the American Bantam Car Company, a corporation, for specific performance of a plan of recapitalization adopted by the stockholders of the Car Company, injunctive relief necessary for specific performance and other and further relief as justice requires.
The American Bantam Car Company, defendant, filed a motion under Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A.following section 723c, for judgment in its favor on the ground that there is no genuine issue as to any material fact and that said Company is entitled to judgment as a matter of law. Some of the material facts (others are stated hereinafter) are as follows:
The plaintiffs, consisting (among others) of the partners named, doing business as Hoit, Rose and Troster, are stockholders of the American Bantam Car Company. On May 24, 1945, they were the record holders of 5,726 shares of Common Stock and 1,051 shares of Convertible Preference Stock of said Car Company. The defendant Car Company is a corporation of the Commonwealth of Pennsylvania. Francis R. Fenn has been president and a director of said company for more than five years.
On April 10, 1945, the Company, under its Articles of Incorporation, was authorized to issue:
'(b) 600,000 shares of Common Stock, no par value, each share of which was entitled to one vote at meetings of shareholders.'
On April 10, 1945, there was issued and outstanding:
'(a) 83,547 shares of Convertible Preference Stock and 304,284 shares of Common Stock.'
On the same date, 295,716 shares of Common Stock were reserved for conversion of Convertible Preference Stock.
In April, 1945, the Directors and Officers of the Company realized that it would be necessary for the Company to develop new peacetime products and that this would require a readjustment of the Company's capital structure and the procurement of new working capital. At this time the accumulated dividends on the preference stock amounted to $ 4.05 per share.
The Board of Directors, at their meeting of April 9 and 10, 1945, voted to recommend to its stockholders, amendments to the Articles of Incorporation, the adoption of a plan of recapitalization and called a special meeting of the Company's stockholders June 25, 1945, for the purpose of considering and voting upon said amendments and plan of recapitalization. The amendments to the Articles of Incorporation would authorize the issuance of 100,000 shares of prior preferred stock of par value of $ 10 per share. This stock would be preferred over the Convertible Preference Stock and the Common Stock, both as to dividends and assets, etc. The amendments would also change the Common Stock from no par value to a par value of $ 1 per share and would increase the number of shares from 600,000 to 1,500,000 shares. The proposed amendments also provided that the Preference Stock would be changed and modified so as to conform to the above provisions as to the prior preferred stock and Common Stock set forth above.
The Plan of Recapitalization contemplated that the Car Company would register the new stock with the Securities and Exchange Commission. The resolution adopted by the Board of Directors as to the Plan of Recapitalization, is as follows:
'III. That the following Plan of Recapitalization of this corporation be submitted to the shareholders of this corporation at a special meeting of shareholders to be held on Monday, June 25, 1945:
'(1) Upon approval by the stockholders of the proposed amendments to the Articles of Incorporation, the Corporation shall offer to issue to each holder of Convertible Preference Stock in exchange for each share of Convertible Preference Stock of such holder and for all rights in respect thereof, upon surrender for cancellation of each such share ...