This is an appeal from a final decree entered by the Chancellor the thirteenth day of March, 1942. dismissing the bill of complaint of Ida G. Blish, a stockholder of Thompson Automatic Arms Corp. a corporation of the State of Delaware, called TAAC, against TAAC, Russell Maguire. Russell Maguire & Co., Inc. a corporation of the State of New York, Called Maguire & Co., Eugene D. Powers, Thomas A. Kane, Mortimer S. Gordon, and Matthew I. Hall.

The action below was a stockholder’s suit brought by the complainant to cancel certain shares of stock of TAAC theretofore issued to defendants Maguire & Co., Eugene D. Powers, Thomas A. Kane, Mortimer S. Gordon and Matthew J. Hall,

The bill of complaint filed below may be divided in two parts; First, allegations charging the illegal issuance of many shares of TAAC stock, which thc complainant contends should be ordered canceled. In this category fall the following shares issued to the following persons: 3500 shares issued to Maguire & Co. on March, 1939; 116,400 shares issued to Maguire & Co. on July 21, 1939; 20,000 subscription shares issued to Maguire & Co. at different periods beginning in March, 1939.

The complainant below is the widow of Commander John Blish, USN, who was the inventor of the basic principle of a sub-machine gun known in the field of armament as the Tommy Gun. In 1916 Commander Blish and the complainant, being joint owners of the basic patents, incorporated a New York company under the name of Auto-Ordnance Corp.

From corporate inception until 1939 the joint efforts of those in charge met with many disappointments. Auto, until 1939, had not commenced the manufacture of guns. On the other hand, in 1921, the Colt Firearms Co. manufactured, for Auto, 15,000 Tommy Guns, From 1922 until 1939 Auto’s entire corporate activity was spent in liquidating these guns upon the open market. Sales did not meet expectations, as in January, 1939 approximately 4500 guns remained unsold.

Auto, from time to time, had issued stock to Ryan and others for alleged debts due from the corporation, so that in January, 1939 there was outstanding, out of an authorized capital stock of 40,000 shares, a total of 25,630 shares, which were owned as follows: Guarantee Trust Co. of New York, as executor of the   last will and testament of Thomas Fortune Ryan - 18505 shares, Marcellus H. Thompson - 5000 shares, Ida G, Blish, complainant 1325 shares, Sarah Blish 50 shares, John Blish - 50 shares, John Lyman Blish - 50 shares, Meady Shield Blish - 50 shares, Evelyn S. Thompson - 100 shares, Dorothy M, Thompson 100 shares Estate of Dorothy H. Cobb 50 shares, Madam Jean de Gennes - 25 shares Estate of George Ed. Smith 325 shares,

E.D. POWERS NOTE: It was the failure of Thompson to procure the consents of the Cobb and de Gennes shares, a condition of the option, which permitted the Guarantee Trust to claim a default in the exercise of the option.

In January, 1939 the corporate picture of Auto was one of despair. It was in point of fact insolvent. If Auto was to continue, new capital had to be obtained or some type of reorganization was imperative.

In fact, as far back as 1935, Thompson engaged in a series of conferences with Matthew J. Hall, with the thought that he could interest Hall in participating with him in raising new capital to purchase the majority interest held by Guaranty.

Discussions were had with Savage Arms Co., Remington Arms Co., Hallgarten & Co., Fenner and Beane, Ungerleider Van Alstyne, Noile & Co., Cohu & Co., and many other corporations and financial institutions in New York, Detroit and Washington. Each Discussion ended in a refusal to invest.