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RKO Theatres Inc. v. Trenton-New Brunswick Theatres Co.

Decided: April 24, 1950.

RKO THEATRES, INC., A CORPORATION OF THE STATE OF NEW YORK, ET AL., PLAINTIFFS,
v.
TRENTON-NEW BRUNSWICK THEATRES COMPANY, A CORPORATION OF NEW JERSEY, ET AL., DEFENDANTS



Jayne, J.s.c.

Jayne

While the motion of immediate attention is addressed to the counterclaim of the defendants Long Park, Inc., and Trenton Theatre Building Company, it will be illuminating to disclose in a precursory fashion the nature of this action as originated by the complaint.

The defendant Trenton-New Brunswick Theatres Company, organized in 1922, herein designated as "Theatres Co." is an exhibitor engaged in the operation of twelve moving picture theatres in the Trenton and New Brunswick area of this state. The outstanding capital stock of the company consists of 1,000 shares, divided into four equal classifications, that is, 250 shares of each class denominated as Class A1, A2, B and C stock. Of the 250 shares of Class A1 stock, 249 shares are held by the plaintiff RKO, and one share by the plaintiff Malcom Kingsberg. The plaintiff RKO also holds 249 shares of the Class A2 stock; the remaining share of that class is held by the plaintiff Sol A. Schwartz.

The stock of classes B and C has the following distribution of ownership: 249 shares of class B is held by the defendant Long Park, Inc., and one share by Walter Reade, Jr.; 249 shares of class C stock is held by the defendant Trenton Theatre Building Company and the remaining share by the defendant Richard M. Huber.

It is unnecessary for present purposes to disclose specifically the voting and other rights of the holders of each class of stock and the terms of the so-called Management Agreement, concerning the validity of which there has been previous litigation. Long Park, Inc., v. Trenton-New Brunswick Theatres Co. , 297 N.Y. 174, 77 N.E. 2d 633 (Ct. of A. 1948). It is apparent that the assets and business of the Theatres Co. are substantial.

Concisely stated, it is alleged in the present action that the voting shares of the Theatres Co. are equally divided into two independent ownerships and interests and unable to unite in the management of the company. The plaintiffs, the holders of one-half of the shares, seek the dissolution of the corporation pursuant to R.S. 14:13-15.

An answer has been filed on behalf of all the defendants and a counterclaim was filed by leave of court at the request of the defendants Long Park, Inc., and Trenton Theatre Building Company. Conceiving that the counterclaim lacks the legal or equitable substantiality upon which relief can be granted, counsel for the plaintiff moves to strike it. Rule 3:12-2(5).

In the consideration of a motion of this nature, the court must assume the ability of the counterclaimant to prove all of the facts alleged in the counterclaim or incorporated therein by reference. Gann Law Books v. Ferber , 3 N.J. Super. 236, 238 (App. Div. 1949).

It will be expedient and probably sufficient here to summarize the allegations of the counterclaim thus impugned. It is therein alleged that no stockholder of Theatres Co. may sell, assign, transfer, or otherwise dispose of any of the stock of the corporation except in conformity with the terms and

provisions of Section 3 of Article IV of the amended certificate of incorporation. The section of the certificate is consequently regarded as incorporated in the counterclaim. It is reproduced in the Appendix submitted for attention. It reads in part:

"Section 3. Restrictions on the transfer or pledge of stock. A. Without the prior written consent of all other stockholders, no stockholder of the Corporation shall sell, assign, transfer or otherwise dispose of any stock of the Corporation except as herein provided. If all other stockholders shall waive these restrictions with respect to any sale, assignment, transfer or other disposition of any stock by their written consent, such waiver shall not be a continuing waiver and these restrictions shall continue to apply to each and every purchaser, assignee, transferee or other person acquiring any stock of the Corporation.

"1. If any stockholder (herein sometimes called 'the Offeror') shall desire to sell all or any part of his stock in the Corporation, he shall first offer to sell the same to the other stockholders of the Corporation and to the Corporation itself (herein sometimes called 'the Offerees') at its Book Value (as hereinafter defined) for a period of thirty (30) days from the date of mailing of an offer to all other stockholders and to the Corporation. The Offeror shall have the right to specify that he is offering such stock on an 'all or none' basis. The Offerees shall have the right (upon the conditions in this Section hereinafter set forth) to purchase the stock offered in the following order of priority, it being understood that the Offeree or Offerees, as the case may be, having the first right to purchase the stock offered may purchase such stock to the exclusion of all other Offerees and that, in the event the Offeree or Offerees having a prior right to purchase the stock offered shall not accept such offer, the Offeree or Offerees having the next prior right to purchase shall be entitled to purchase the stock not purchased by the Offeree or Offerees having a prior right to purchase the same:

CLASS OF STOCK

Priorities in the Right to Purchase Stock Offered

A-1 1. Any other holder of Class A-1 stock

2. Any holders of Class A-2 stock

3. Any holders of Class B or ...


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