Signal Oil & Gas Co. v. Ashland Oil & Refining Co.

322 P.2d 1, 49 Cal. 2d 764, 1958 Cal. LEXIS 268
CourtCalifornia Supreme Court
DecidedFebruary 25, 1958
DocketS. F. 19329
StatusPublished
Cited by40 cases

This text of 322 P.2d 1 (Signal Oil & Gas Co. v. Ashland Oil & Refining Co.) is published on Counsel Stack Legal Research, covering California Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Signal Oil & Gas Co. v. Ashland Oil & Refining Co., 322 P.2d 1, 49 Cal. 2d 764, 1958 Cal. LEXIS 268 (Cal. 1958).

Opinions

[768]*768SCHAUER, J.

Defendants-appellants Ashland Oil and Refining Company (hereinafter referred to as Ashland) and American Independent Oil Company (hereinafter termed American or American Independent) appeal1 from an order granting a preliminary injunction restraining them from acting or recognizing action taken contrary to a certain so-called “Agents’ Agreement,” and from giving effect to certain actions taken at a meeting of American’s board of directors held on December 16, 1954. We have concluded that, for reasons hereinafter stated, the order should be reversed insofar as it enjoins noncompliance with the Agents’ Agreement, but affirmed insofar as it enjoins recognition by American of the actions taken at the December 16, 1954, board meeting.

American is a Delaware corporation formed in 1947 for the general purposes of exploration, extraction, processing, and sale of oil and gas and related products. The principal office of the corporation is in San Francisco, California, and the principal activities of the corporation are carried out in the geographic region generally referred to as the Middle East. The capital stock of American is held by 10 shareholders. Each shareholder elects a certain number of the 15 members of American’s board of directors in the approximate ratio which the number of shares owned by such shareholder bears to the total number of shares issued and outstanding. Thus Phillips Petroleum Company (hereinafter termed Phillips) elects four directors; Signal Oil and Gas Company (Signal), Hancock Oil Company (Hancock) and Ashland each elect two directors; Ralph K. Davies (Davies), J. S. Aber-crombie (Abercrombie), Deep Rock Oil Company (Deep Rock) and Sunray Oil Corporation (Sunray) each elect one director; and Globe Oil and Refining Company (Globe) and its apparent subsidiary Lario Oil and Gas Company (Lario) together elect one director.

On March 30, 1950, Signal, Hancock, Ashland, Davies, Globe, and Lario, who together hold about 54.5 per cent of American’s stock and who elect eight directors, entered [769]*769into an agreement (sometimes hereinafter termed the Agents' Agreement) with eight persons designated as agents. These agents were in fact the respective directors of American elected by these stockholders. The stated purpose of the Agents' Agreement was "to provide a means whereby the parties hereto may initiate or maintain in effect any general policy, plan, or program affecting American . . . which said parties should determine to be to their joint benefit, interest, and advantage, and to be to the best interests of all stockholders of American . . ." The Agent's Agreement provided, insofar as here pertinent, that the shares of American's stock held by the signatory stockholders would be endorsed over to the agents, who would place the stock certificates in escrow, and who thereafter for the 10-year term of the agreement would "have the sole and exclusive voting power" of such stock; that the agents should consult and confer with each other relative to casting their votes, but that the "vote of the Agents shall always be exercised as a unit, on any matter on which a vote of the stockholders is called for, as any seven of said Agents shall direct and determine"; that in the event seven agents could not agree the matter would be submitted to an arbitrator chosen pursuant to an outlined procedure.

On December 9, 1954, at a meeting in Chicago of American's board of directors, one of the directors elected by Ash-land moved that another board meeting be held in Chicago on December 16, 1954, for the purpose of considering certain amendments to American's by-laws. The substance of the principal changes to be made by these amendments was that (1) the directors be given power to remove any corporate officer (including the president,2 who theretofore could be removed only for cause) "summarily without cause"; (2) the office of chairman of the board be created; and (3) the stockholders' meetings be held in Dover, Delaware, rather than in San Francisco. The six directors representing Signal, Hancock, Davies, Globe, and Lario opposed the motion, but the directors elected by Ashland refused to join this opposition and took the position that their action was not contrary to the Agents' Agreement. The proposal to hold the December 16 meeting for the stated purposes was adopted by a nine to six vote.3

[770]*770On December 14, 1954, a meeting of the agents under the Agents’ Agreement was held. At this meeting the representatives of Ashland did not agree to proposals of the other representatives to postpone the December 16 meeting and to submit the proposed by-law amendments to arbitration.

On December 15, 1954, Signal, Hancock, Davies, Globe, and Lario commenced the instant action against Ashland, the two directors of American elected by Ashland, and American. The complaint alleges the facts as above stated; that the purpose of the Agents’ Agreement was to prevent control of American from passing to any one stockholder (specifically Phillips, which is a so-called “major” oil company and allegedly controls the votes of Abercrombie and Sunray); that the actions of Ashland and the directors elected by it at and after the December 9 board meeting “are all pursuant to and in furtherance of the plan to transfer control of American Independent to a combination of its stockholders consisting of Phillips, Ashland, Abercrombie and Sunray, all in direct violation of the Agents’ Agreement and the purposes pursuant to which American Independent was organized”; and that unless defendants are restrained from holding the proposed December 16 directors’ meeting “plaintiffs will suffer great and irreparable injury in that plaintiffs and the other signatories to the Agents’ Agreement will lose control of American Independent and American Independent will itself lose its character as an independent oil company, all to the great loss and damage of American Independent and plaintiffs as its stockholders.”

The complaint is supported by affidavits of Davies and the presidents of Signal and Hancock, which in substance aver that American was formed with the understanding that it would be free from the control of any one stockholder, that Phillips has been trying to seize control of American, that the Agents’ Agreement was executed in order to prevent such seizure, that the actions of Ashland and its representatives referred to in the complaint are in violation of the Agents’ Agreement and present the danger that American [771]*771will fall into the control of Phillips, and that unless Ashland and its representatives are restrained from acting contrary to the Agents’ Agreement the respective investments of the stockholders represented by the affiants will be greatly impaired.

Based on the above described complaint and affidavits, the superior court, on December 15, 1954, issued a “temporary restraining order and order to show cause,” directing that pending the hearing defendants “and all persons acting for or on behalf of you or any of you . . . and all persons having knowledge of the contents of this order” refrain from conducting or participating in the proposed December 16 directors’ meeting or any other directors’ meeting called to accomplish the purposes proposed to be undertaken at the December 16 meeting, and from taking any action in violation of the Agents’ Agreement. It was further ordered that American refrain from recognizing any action taken contrary to the preceding provisions of the order.

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Cite This Page — Counsel Stack

Bluebook (online)
322 P.2d 1, 49 Cal. 2d 764, 1958 Cal. LEXIS 268, Counsel Stack Legal Research, https://law.counselstack.com/opinion/signal-oil-gas-co-v-ashland-oil-refining-co-cal-1958.