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CLARKSON CO. v. SHAHEEN

October 27, 1981

The CLARKSON COMPANY LIMITED, as Trustee in Bankruptcy, appointed by the Supreme Court of the Province of Newfoundland, of the Property of Newfoundland Refining Company Limited and Provincial Refining Company Limited, Plaintiff,
v.
John M. SHAHEEN, Roy M. Furmark, Albin W. Smith, Peter L. Caras, Paul W. Rishell, Shaheen Natural Resources Company, Inc., Newfoundland Refining Company Ltd., U.S.A., and Founders Corporation, Defendants; The CLARKSON COMPANY LIMITED, as Trustee in Bankruptcy, appointed by the Supreme Court of the Province of Newfoundland, of the Property of Newfoundland Refining Company Limited and Provincial Refining Company Limited, Petitioner, v. SHAHEEN NATURAL RESOURCES COMPANY, INC., John M. Shaheen, Macmillan Ring-Free Oil Co., Inc., and Ian W. Outerbridge, Respondents



The opinion of the court was delivered by: OWEN

OPINION AND ORDER

On July 22, 1980, following a jury verdict, a judgment in the total amount of $ 50 million was entered in favor of the plaintiff in Clarkson Company Limited v. John M. Shaheen, et al., No. 76 Civ. 1373 ("the main action" or "the principal action"). *fn1" Thereafter, the Clarkson Company Limited ("Clarkson"), the judgment creditor, brought various supplementary proceedings to enforce its judgment over which this Court had and took jurisdiction.

Clarkson, a Canadian corporation, was and is acting as a Trustee in Bankruptcy in the Province of Newfoundland.

 Newfoundland Refining Company, Limited and Provincial Refining Company, Limited, ("NRC" and "PRC") were engaged in the operation of an oil refinery at Come-By-Chance, Newfoundland. PRC was the wholly-owned subsidiary of NRC and owned the refinery which NRC managed. Both corporations were part of a complex of other corporations monarchically-owned or controlled by John Shaheen. They went bankrupt in 1976, and title to all the property of PRC and NRC vested in Clarkson upon its appointment as Trustee in Bankruptcy of PRC and NRC by the Supreme Court of the Province of Newfoundland.

 Shaheen Natural Resources Company, Inc. ("SNR"), a respondent in these supplementary proceedings, was a principal defendant in the main action. SNR, an Illinois corporation with its principal office at 90 Park Avenue, New York City, suffered a judgment in the amount of $ 46,049,040 with interest from March 13, 1976. The judgment is unsatisfied.

 John M. Shaheen ("Shaheen"), also a respondent in these supplementary proceedings, was also a principal defendant in that action. Clarkson's judgment against him included, inter alia, the sum of $ 23,151,910, together with interest from March 13, 1976. The judgment is unsatisfied.

 Shaheen controls SNR, owning all of its common stock.

 Respondent Outerbridge is a citizen and resident of the Province of Ontario, Canada. He is a Canadian lawyer, "Queen's Counsel," and has been Shaheen's primary counsel in Canada.

 Respondent Macmillan Ring-Free Oil Co., Inc. ("Macmillan") is a Delaware corporation with its principal place of business in New York. It is a "public company" of which SNR owns 13.5% of its stock, Founders Corporation, another Shaheen company, owns 28.3%, and a handful of stock is owned by Shaheen individually. Shaheen is also Macmillan's president, a director, and, through his stock ownership of SNR (100%-owned by Shaheen) and Founders (55%-owned by Shaheen), has held the controlling block of more than 40% of the common stock of Macmillan since at least 1974.

 In July, 1980, at the time of the jury's verdict and the subsequent entry of judgment, SNR was the owner and had possession of 235,175 shares of common stock of Macmillan. Two months thereafter, on September 16, 1980, SNR confirmed in an information subpoena that it still had not transferred possession of any of those shares.

 However, on December 5, 1980, in responding to Clarkson's motion for a turn-over order, Shaheen, by affidavit, for the first time advised counsel and this Court that on July 31, 1980, 185,723 shares of Macmillan stock owned by SNR had been transferred to Outerbridge as part of an agreement signed by Outerbridge, SNR, and Shaheen. The shares at that time had a value of some $ 750,000.

 Following a hearing on December 5, 1980, this Court enjoined Macmillan and its transfer agents from any transfer of any of the Macmillan shares of which SNR was the record owner.

 On December 8, 1980, the Court, at Clarkson's request and over the objection of counsel for Shaheen and SNR, ordered Outerbridge to retain and preserve the 185,273 shares of Macmillan, to refrain from transferring them, and to preserve the dividends and proceeds thereof. The Court's order was communicated to Outerbridge on December 8, 1980.

 Thereafter, by an Order to Show Cause on January 28, 1981, Clarkson commenced a supplementary proceeding against SNR, Shaheen, Macmillan, and Outerbridge seeking, inter alia, an order requiring SNR and Outerbridge to turn over to Clarkson the 185,723 shares of stock in Macmillan held by Outerbridge.

 By letter dated February 4, 1981, Messrs. Spengler, Carlson, Gubar and Brodsky ("the Spengler firm") informed this Court that they were appearing for Outerbridge. Thereafter, Outerbridge ...


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