Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


November 27, 1964

Joseph J. KANE and John J. Kane, individually, and as stockholders of Central American Mining & Oil, Inc., suing on behalf of themselves and for the benefit of said corporation and all other stockholders of said corporation, Plaintiffs,
CENTRAL AMERICAN MINING & OIL, INC., Robert Guadano, Bernard Guadano, and Fred Menna, Defendants

The opinion of the court was delivered by: WEINFELD

This essentially is a stockholders' derivative action brought on behalf of Central American Mining & Oil, Inc., a Panamanian corporation, hereinafter called CAMO, charging the defendants, who are its principal officers, sole directors and majority stockholders, with fraud, waste, mismanagement and diversion of a corporate opportunity.

The second amended complaint, the subject of the defendants' motion to dismiss, contains three separate counts which are based substantially upon the following allegations:

That plaintiffs, John J. and Joseph J. Kane, are the owners of 58,000 of the more than 7,000,000 shares of common stock issued by CAMO, which was incorporated under the laws of the Republic of Panama; that in 1961, shortly after its incorporation, CAMO acquired, indirectly through a corporate shell controlled by the defendants, a large mineral concession in the Republic of Honduras for a consideration of $ 40,900 in cash and 1,005,000 shares of its common stock; that by this transaction the defendants improperly arrogated CAMO's corporate opportunity unto themselves; further, that at or about the time the concession was acquired, CAMO issued 2,000,000 shares of common stock to one O. R. Seagraves and 2,000,000 shares to the defendant, Robert Guadano, for which the latter paid no or an inadequate consideration; that thereafter Guadano, to gain control of the corporation and to oust O. R. Seagraves, caused another 2,000,000 shares to be issued to his brother, Bernard Guadano, also a defendant, for which no or an inadequate consideration was paid; that in July 1961 CAMO assigned part of its Honduran concession to Pure Oil Company in return for $ 450,000 cash ($ 50,000 of which was held in escrow) and for a share of Pure Oil's profits; that the defendants misappropriated a substantial portion of the $ 400,000 received on that transaction; and further, that the defendants, corporate and individual, filed with the Securities and Exchange Commission a registration statement covering the public distribution of 7,500,000 shares of CAMO stock, including the Guadanos' 4,000,000, at up to $ 5.00 per share, and if the registration statement is declared effective, the Guadanos, who acquired their shares for no or an inadequate consideration, will be the main beneficiaries of the distribution, whereas the proceeds should properly accrue to the benefit of CAMO. Additional allegations appropriate to the theory of each separate count are set forth.

 The three separate counts are as follows: The first, predicated upon diversity of citizenship, charges violations of the Articles of Incorporation and of Panamanian law. It alleges that the plaintiffs are citizens of the State of Texas, that the individual defendants are citizens of the State of New York, and that the corporation is doing business in that State and has conducted meetings there. The second count alleges liability under Section 10(b) of the Securities Exchange Act of 1934 *fn1" and Rule 10b-5, *fn2" promulgated thereunder by the Securities and Exchange Commission, jurisdiction resting on Section 27 of the Act. *fn3" The third count, based upon allegations of the first and second counts, rests upon the doctrine of pendant jurisdiction.

 Plaintiffs seek the return to the corporation of the 4,000,000 shares issued to the defendants, Robert and Bernard Guadano, the removal of the three individual defendants from their corporate posts, and an accounting with respect to the sums received in connection with the Pure Oil Company transaction.

 The defendants move under Rule 12(b) of the Federal Rules of Civil Procedure for dismissal of the complaint on the following grounds:

 (1) lack of jurisdiction over the person of the defendants;

 (2) lack of jurisdiction of the subject matter;

 (3) improper venue;

 (4) insufficiency of service of process;

 (5) failure to join an indispensable party; and

 (6) failure to state a claim upon which relief may be granted.

 In the event of denial of their motion, they further move that plaintiffs post security for expenses and damages pursuant to the New York Business Corporation Law *fn4" and for costs as nonresident plaintiffs. *fn5"

 The parties have submitted affidavits in support of and in opposition to the motion and that branch which seeks dismissal of the complaint for failure to state a claim is treated an one for summary judgment. *fn6"

 The extensive contentions of the parties, which in some respects overlap, make it desirable initially to consider the second count, the nondiversity and federally based claim, since if it withstands dismissal the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.