Jackson v. Continental Telephone Co.

CONLEY, P. J.

The plaintiffs, who, as stockholders in Central California Telephone Company, a California corporation (hereinafter called Central California), instituted this fraud suit against the former directors and majority stockholders of Central Western Corporation (hereinafter called Central Western) and joined Continental Telephone Company, a corporation, which is the surviving constituent corporation after merger with Central Western.

The Continental Telephone Company, incorporated under the laws of Delaware with its executive o~ces in St. Louis, was served with process through the delivery by hand in this state to its vice president, John P. Maguire, a resident of California, of a copy of the complaint and summons. (Code Civ. Proc., § 411, subd. 2; Gov. Code, § 6500.) The corporation appeared specially for the purpose of moving to quash service of summons upon itself on the ground that the court • . lacked jurisdiction over the Continental Telephone Company, which does no business in California." The motion was based upon the notice of motion, a declaration of J. P. Maguire, a memorandum of points and authorities and the pleadings, records and files in the case. The trial court granted the motion to quash, and plaintiffs appealed. (Code Civ. Proc., § 963, subd. 4.)

The plaintiffs, Dr. Edward A. Jackson, Helen C. Jackson, Charlotte Landram, Elizabeth Ball Uhl, John Bailey and Roland F. Hill, as guardian of the persons of Gayle Sharon Hill, Jerrie Lane Hill and Roland F. Hill, Jr., stockholders of

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Central California, brought this action on behalf of themselves and other shareholders similarly situated against the individual defendants and Continental Telephone Company, a corporation. The defendants, John P. Maguire, W. Gilman Snyder, Ben Sill, John M. Brock, J. Calvert Snyder, Harold O. Robertson, J. Thomas Maguire, William H. MacDonald and Don B. Keith, were directors of and owned the controlling interest in Central California and Central Western; they allegedly secured for themselves excessive benefits by reason of the alleged fraud which forms the basis of the action. The other two individual defendants, Philip J. Lucier and Charles Wohlstetter, were directors and executive officials of Continental Telephone Company.

The theory of the complaint is that the defendants were guilty of fraud toward the plaintiffs and other stockholders of Central California; it is alleged that the individual defendants and Central Western induced the plaintiffs as stockholders of Central California to sell their shares to Central Western on the representation that the latter corporation would soon thereafter issue additional stock which would be made available at reasonable rates to the plaintiffs for purchase ; but that thereafter the defendants retracted the promise to issue and sell such additional stock, then knowing, but keeping secret from the plaintiffs, a plan for Central Western to merge with Continental Telephone Company; that the individual defendants and Central Western did not advise the plaintiffs of these facts, which they knew and which they should have disclosed by reason of confidential relationship with the plaintiffs; that the plaintiffs did not accept an offer to repurchase the stock which they had sold to Central Western by reason of the fraud; that thereafter Central Western merged with Continental Telephone Company and that Continental Telephone Company, as the surviving corporation is liable for the same reasons and to the same extent that Central Western would have been if the merger had not taken place.