Blaustein v. Pan American Petroleum & Transport Co.

New York Supreme Court

Blaustein v. Pan American Petroleum & Transport Co.

174 Misc. 601, 21 N.Y.S.2d 651, 1940 N.Y. Misc. LEXIS 1995

CourtNew York Supreme Court

DecidedJune 8, 1940

StatusPublished

Cited by17 cases

This text of 174 Misc. 601 (Blaustein v. Pan American Petroleum & Transport Co.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Blaustein v. Pan American Petroleum & Transport Co., 174 Misc. 601, 21 N.Y.S.2d 651, 1940 N.Y. Misc. LEXIS 1995 (N.Y. Super. Ct. 1940).

Pincite

Opinion

Rosenman, J.

Counsel on both sides have waived findings of fact and conclusions of law. By reason of such waiver, it becomes necessary to discuss in some detail the complicated and multitudi[604]*604nous facts and the conflicting evidence forming the basis of the legal conclusions reached. That explains the unusual length of this opinion. The complexities of the factual and legal disputes in this case are evident in the statement that the trial consumed seventy trial da3rs; it involved the taking of 10,631 pages of stenographer’s minutes, the introduction of 1,048 exhibits, many of which are voluminous and contain large collections of related documents, and some of which consist of hundreds of pages, the receipt in evidence of 2,686 additional printed pages of examinations before trial, and the submission during the trial and afterwards of about 2,900 pages of printed briefs.

Not all of the numerous questions of fact can be discussed in any detail, but the essential ones are set forth. As to many of these there was vigorous controversy; and the facts hereinafter stated are those which have been found by the court from the conflicting evidence and exhibits.

The Parties.

The case involves many millions of dollars. It is a derivative action brought by plaintiffs as stockholders and directors of Pan American Petroleum & Transport Company (a Delaware corporation hereinafter referred to as “ Pan Am ”). It is based upon the alleged breach of fiduciary obligations by the majority directors of Pan Am and by its majority and dominant stockholder, the Standard Oil Company of Indiana, (an Indiana corporation hereinafter referred to as “ Indiana ”).

The claim is that the directors and Indiana frustrated the intended “ integration ” of Pan Am, and prevented its natural development as a self-sufficient oil business; that Indiana and the directors of Pan Am under the domination of Indiana, exploited Pan Am for the benefit of Indiana; that the defendant Standard Oil Company (N. J.) (a New Jersey corporation hereinafter referred to as “ New Jersey ”), and the Standard Oil Company of New Jersey (incorporated in Delaware), a subsidiary of New Jersey (hereinafter referred to as “ New Jersey [Del.]”), were knowing participants in, and beneficiaries of, the alleged breaches of duty, and that they were conspirators with Indiana and with the Pan Am directors in a general scheme to secure benefits from certain transactions involving Pan Am which belonged in justice and equity to Pan Am itself.

The individual plaintiffs were, at the commencement of this action, president and first and executive vice-president respectively (f Pan Am. The corporate plaintiff is wholly owned by the Blausteins. The action is unlike the general run of minority stockholders’ actions, for the plaintiffs owned, between them, a substan[605]*605tial interest in the corporation — approximately twenty per cent of the stock of Pan Am. The defendant Indiana owned about seventy-eight per cent thereof. The balance was held by the public. Since the commencement of this action, two stockholders have intervened. Louis Blaustein died during the pendency of the action; and at the commencement of the trial, his representatives were substituted as parties plaintiff in his stead.

The relationship between the plaintiffs and the various corporations involved in this controversy is quite complicated. It may best be shown by means of the following chart (p. 606). The chart shows the intercorporate structure as it came into being after March 28, 1933, under a plan of reorganization which forms the basis of this suit.

In addition to these corporations, and not a part of either the Indiana or Pan Am system, are the defendant New Jersey, its wholly owned subsidiary, New Jersey (Del.), and its seventy-two per cent owned subsidiary, Humble Oil & Refining Co. (a Texas corporation hereafter called “ Humble ”). Indiana owns about seven per cent of the stock of New Jersey. The defendant Teagle is president of New Jersey.

The various other corporations taking part in the transactions involved in this litigation will be referred to as follows:

“ Pan Refining Pan American Refining Corporation; incorporated in Delaware in 1933; a wholly owned subsidiary of Pan Am.

“ PAPL Pan American Pipe Line Company; incorporated in Delaware in 1933; a wholly owned subsidiary of Pan Am.

“ Pan Production Pan American Production Company; incorporated in Delaware in 1935; a wholly owned subsidiary of Pan Am.

“ Amoco The American Oil Company; incorporated in Maryland in 1922; all stock originally owned by Blausteins. Pan Am acquired fifty per cent of the stock in 1923 and the balance in 1933.

“ Mexpet Mexican Petroleum Corporation; incorporated in Maine in 1915; since 1933 a wholly owned subsidiary (except for qualifying shares) of Amoco.

“ Lord Baltimore ”: Lord Baltimore Filling Stations, Inc.; incorporated in Maryland in 1921; since 1933 a wholly owned subsidiary of Amoco. “ Scop Stanolind Crude Oil Purchasing Company, wholly owned subsidiary of Indiana since 1930; now being

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