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SATTERFIELD v. MONSANTO CO.

March 27, 2000

CHARLES M. SATTERFIELD, III, PLAINTIFF,
V.
MONSANTO COMPANY AND SOLUTIA, INC., DEFENDANTS.



The opinion of the court was delivered by: Stanton, District Judge.

Opinion and Order

Defendants move for summary judgment dismissing all of plaintiff's claims. Defendant Monsanto Company ("Monsanto") is a Delaware corporation headquartered in Missouri, as is defendant Solutia, Inc. ("Solutia"), a corporation Monsanto spun off in 1997. Plaintiff is an individual resident of New York.

Mr. Satterfield claims that the defendants tortiously converted his property by refusing to turn over stock in the defendant companies to which he is entitled because of his ancestors' ownership of stock in a predecessor company which became, by mergers, part of defendant corporations. He claims that this refusal constitutes a breach of defendants' fiduciary duties and of the covenant of good faith and fair dealing, that defendants made fraudulent representations to him regarding his present right to their stock, and that they conspired to deprive him of his stock interest. Finally, he demands punitive damages, as well as attorney's fees and costs.

Background

In 1924 plaintiff's great-grandfather, Daniel Oldroyd ("Oldroyd"), purchased 50 shares of $1 par value stock in the E.L. Smith Oil Company ("Smith Oil"). Def.'s Ex. B-1. In 1928, the par value of Smith Oil stock was changed from $1 to $10 (Def.'s Ex. B-2), changing Oldroyd's holding in Smith Oil to five shares of $10 par value stock, although there is no evidence that he ever exchanged his 50 $1 par value shares for five $10 par value shares.

In 1938 Smith Oil merged with the Lion Oil Refining Company ("Lion Oil"). For every 10 shares of $10 par value Smith Oil stock surrendered, Lion Oil issued one share of its own stock:

Immediately upon this Merger Agreement becoming effective, each holder of capital stock of E.L. Smith Oil Company, Inc., other than Lion Oil Refining Company, upon surrender of certificates representing shares of stock of E.L. Smith Oil Company, Inc., in transferrable form, shall receive in exchange therefor one share of common capital stock of Lion Oil Refining Company, of no par value, for each ten shares of common capital stock of E.L. Smith Oil Company, Inc., of the par value $10.00 each, so surrendered for exchange for the common capital stock of Lion Oil Refining Company . . .

Pl.'s Ex. 1 at Bates No. 0110.

Accordingly, the five Smith Oil shares to which Oldroyd was entitled amounted to one-half a share of Lion Oil common stock after the merger.

For those Smith Oil stockholders who had not converted their $1 par stock to $10 par stock, the merger agreement provided:

It is understood that there are outstanding certain shares of the common capital stock of E.L. Smith Oil Company, Inc., which are of the par value of One Dollar per share, issued prior to April 9, 1928, and that the holders thereof have heretofore been entitled to exchange ten shares of such common capital stock of E.L. Smith Oil Company, Inc., of the par value of $1.00 per share, for one share of the common capital stock of E.L. Smith Oil Company, Inc., of the par value of $10.00 per share, and upon presentation of any such common capital stock of E.L. Smith Oil Company, Inc., of the par value of One Dollar per share, in exchange for common capital stock of Lion Oil Refining Company, the holder thereof shall be entitled to one share of common capital stock of Lion Oil Refining Company for each one hundred shares of such common capital stock of E.L. Smith Oil Company, Inc., of the par value of $1.00 . . .

Pl.'s Ex. 1 at Bates Nos. 0111-12.

Under the provision the same result obtained: since Oldroyd had kept his 50 $1 par shares of Smith Oil, they were worth one-half a share of Lion Oil common stock after the merger.*fn1 In either event, Lion Oil would not issue such a fractional share of its own stock, but only scrip which could be aggregated with enough other scrip to be exchanged for full Lion Oil shares. As the merger agreement stated:

The Corporation shall not issue fractional shares of its common capital stock in exchange for the common capital stock of E.L. Smith Oil Company, Inc., under any circumstance, but if the holder of any common capital stock of E.L. Smith Oil Company, Inc., shall be entitled to a fractional part of a share of common stock in the Lion Oil Refining Company, in lieu of issuing the same, the Corporation will issue to such holder a Bearer Scrip Certificate for such fraction, which shall entitle the holder thereof, upon the surrender of the same with other Scrip Certificates, together aggregating one or more full shares, to exchange the same for a certificate representing the same number of full shares of common stock of Lion Oil Refining Company. Such Scrip Certificates shall not entitle the holder thereof to vote on any question, or to receive dividends upon the fraction of a share to which the holder is entitled by virtue thereof, and the holder of any such Scrip Certificate shall not be entitled, by virtue thereof, to the preemptive right to purchase any of the common capital stock of Lion Oil Refining Company, or Securities of that Company convertible into common stock of that Company, issued by that Company subsequent to the issuance of such Script Certificates.

Pl.'s Ex. 1 at Bates No. 0111.

Thus the Smith Oil holders of Lion Oil scrip did not have rights as Lion Oil shareholders until (if ever) they assembled enough scrip to obtain one or more full Lion Oil shares. The face of the Lion scrip certificates bore the following notation:

This Scrip Certificate is not a Stock Certificate and the holder hereof is not a shareholder of Lion Oil Refining Company, is not entitled to vote at any meeting of the stockholders of that Company or to receive any dividends upon the fraction of a share to which the holder is entitled by virtue hereof; nor is the holder of this Scrip Certificate entitled to the preemptive right to purchase any of the Common Capital Stock of Lion Oil Refining Company, or securities of that Company convertible into Common Capital Stock of that Company, issued by the Company subsequent to the issuance of this Script Certificate.

Def.'s Ex. C at Bates No. 0006.

There is no evidence that Oldroyd's heirs ever attempted to assemble enough scrip to obtain one or more shares of Lion Oil stock, or made any tender to Lion Oil for such an exchange. Satterfield Depo. at 50-52. At the time of the Smith Oil/Lion Oil merger, Lion Oil thrice offered to buy "the old [Smith Oil] $1 par" at 85ยข per share, and the $10 par at $8.50 per share (the price at which the merger was consummated), without requiring conversion into the new Lion Oil shares. Thus, ...


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