Opinion ID: 1799426
Heading Depth: 1
Heading Rank: 1

Heading: parties to the action.

Text: Plaintiff Fenestra is a Michigan corporation engaged in the manufacture of automotive springs and also certain building products for which it is, perhaps, best known. Since 1957, the corporation has been listed on the New York Stock Exchange and, although publicly held, its 637,721 shares are distributed among only 1,200 stockholders. Fenestra has four divisions of which the automotive spring division is most successful. In fact, the other three divisions, referred to as the building products divisions, have lost substantial sums of money in the last several years. As a result, Fenestra has an income tax loss-carry-forward of $4,300,000 which can be used to offset profits in certain annual instalments up to and including the tax year of 1967, if Fenestra can generate profits in the operable years. Despite company losses, Fenestra had a strong financial position with current assets substantially greater than current liabilities. Current assets included approximately $7,700,000 in cash items and $9,500,000 of notes and accounts receivable, inventories, and prepaid items, as compared with current liabilities estimated at $2,800,000. The company also owed a balance on a long-term debt to Prudential Life Insurance Company of approximately $4,880,000. The majority or management directors include Orren Leslie, president, William P. Porch, vice-president and treasurer, D.S. Burnett, who is head of the automotive spring division, H.D. Palmer, a former president, V.W. Klein, a member of the law firm which represents the company, and M.E. Templeton. The combined stockholdings of the six management directors is 2,952 shares.
At the head of the Gulf group is the Gulf American Land Corporation, not to be confused with its wholly-owned subsidiary, the G.A.L.C. Company. The Gulf American Land Corporation was organized in 1957 as a Florida land development company by two brothers, Leonard and Julius Rosen. It is described as one of the two largest Florida land development companies and its principal projects are Cape Coral near Fort Meyers and Golden Gate Estates near Naples, Florida. Gulf is listed on the American Stock Exchange and is, of course, a publicly held corporation. Gulf has shown a substantial profit each year since its organization and according to its audit report of August 31, 1963, had gross assets of approximately $167,000,000 with a net value of approximately $31,400,000. It is conceded to be typical of such land development companies as Gulf that as they convert raw land into marketable building sites, the overall outlay of cash is substantially greater than the incoming cash from sales. This results in what is described as a negative cash flow which prevails for several years until a sufficient amount of building lots have been sold to the point where the aggregate of receipts equals or exceeds the aggregate of current development costs. Until this condition is reached, it is necessary for such companies to finance their land development operations by borrowing substantial amounts of money. There is nothing to show that Gulf had not been successful in obtaining, at higher interest rates, at least, substantial loans for its operations. It was this continuing need for cash which plaintiff says spurred Gulf to seek and obtain controlling interest in Fenestra, a company with a high proportion of liquid assets which could be, in some manner not fully explained, converted to the use of Gulf. Included also in the Gulf group is the G.A.L.C. Company, a wholly-owned subsidiary of Gulf, which was incorporated solely as a security device in connection with the financing of the purchase by Gulf of the controlling interest in Fenestra. The stock was bought in the name of the G.A.L.C. Company whose stock and voting rights in turn were pledged to the lender, defendant Pritzker. Also identified as part of the Gulf group were two of Gulf's nominees to the board of directors of Fenestra. One was Sidney Friedman, a New York lawyer and director of various banks and other commercial enterprises, who had previously assisted Gulf in connection with certain financial transactions. The second such board nominee was James A. Farley, Jr., a New York bank president, who like Friedman was nominated by Gulf and elected to the Fenestra board but removed by the judgment of the trial court.
Harry Brainin was the manager of a joint venture consisting of approximately 80 persons who had acquired, several years prior to the Gulf group coming into the picture, a large amount of Fenestra stock. In this group were Brainin, Irving Taub, Irving Projansky, Dr. F.B. Kaiserman, and the Argus Capital Corporation, which corporation included as stockholders the four defendants named immediately above. It was this group, enlarged in number as the stock acquisitions grew, which sold the approximate 293,000 shares of Fenestra stock to G.A.L.C. Company (the Gulf subsidiary), constituting 46% of the shares outstanding, at a price in excess of $7,000,000, as will be more fully set forth below.
The Pritzker defendants are a family group consisting of A.N. Pritzker, Jack Pritzker, Jay Pritzker, members of a Chicago, Illinois, law firm known as Pritzker & Pritzker, and Robert Pritzker, an engineer, who, like Jay, is the son of A.N. Pritzker. For a number of years the Pritzker firm has been engaged in finance and investments. In 1959, several years prior to the advent of either Gulf or Brainin into the Fenestra picture, the Pritzker family had purchased 20,000 shares of Fenestra stock. The Pritzker family still owns these shares. The Atkinson Corporation, which is principally engaged in financing, is a Wisconsin corporation in which the Pritzker family owns approximately 50% of the stock.