Haft v. Haft

671 A.2d 413 (Ch. Del. 1995)

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Nature of the Case

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Facts

D transferred a block of the Class B common stock of Dart Group Corporation ('Dart') to P in exchange for cash, a note, and the grant of a 'lifetime' irrevocable proxy to vote the stock transferred. The Class B common stock was the sole class of voting stock of the corporation, and the 57% of the then outstanding Class B shares transferred carried with them the power to elect the board of directors of Dart. Prior to the transfer to P, the B stock was owned by D (172,730 shares or 57%); Gloria (18%); Robert (8.33%); Linda (8.33%) and P (8.33%). The July 1993 transaction arose from an acrimonious family dispute that included the dissolution of the long-term marriage between D and Gloria Haft. At the time of transfer P also signed an employment contract with Dart to become President and Chief Operating Officer of the company, a position that had formerly been held by D. P also alleged that he acquired from the Company, options to buy additional shares of Class B stock. That option covered up to 197,048 shares at a price equal to 110% of the then current market price of the non-voting Class A common stock. The terms of the transfer were as follows: D transferred to P all 172,730 shares of Class B stock that he owned in exchange for stated consideration of $13,818,400, consisting of $ 2.8 million in cash and a twenty-year promissory note (due on August 1, 2013) for the balance. P executed and delivered the promissory note and granted D 'lifetime' irrevocable proxy. A family settlement was reached, and P tried to exercise the purchase option, but the board refused. On September 12, 1994, P instituted suit against Dart seeking the specific performance of his alleged option to purchase additional Class B stock. P then revoked the proxy D held and D rescinded the transfer of the Class B stock. On July 18, 1995, P sued D for a breach of contract, a breach of fiduciary duty to P as the grantor of a proxy, and, derivatively, for breach of fiduciary duty to Dart. The suit seeks a declaration that the proxy was validly revoked on June 30, 1995, or, in the alternative, that the proxy will be revocable once the promissory note given in consideration of the transfer of the Class B common stock is satisfied. D counterclaimed for breach of contract and sought rescission of the transfer of the Class B stock for an alleged breach of contract, failure of consideration, attempted partial rescission by P, mutual mistake, and unilateral mistake. P moved for partial summary judgment that the proxy given to D was validly revoked or, in the alternative, that the proxy will be revocable once the promissory note is satisfied.