Taylor v. Standard Gas & Electric Co.
United States Supreme Court
306 U.S. 307 (1939)
- Written by Heather Whittemore, JD
Facts
Standard Gas & Electric Company (Standard) (defendant) purchased the common stock of Deep Rock Oil Corporation (Deep Rock) (defendant). By owning the common stock of Deep Rock, Standard completely controlled Deep Rock. Standard installed its officers and directors on Deep Rock’s board of directors, hired its officers as Deep Rock’s officers, and controlled Deep Rock’s financial affairs. Deep Rock’s preferred shareholders had no voting power and no say in Deep Rock’s actions. Deep Rock experienced financial troubles and borrowed large amounts of money from Standard. Deep Rock filed for bankruptcy, and Standard filed a claim as a creditor. The account between Deep Rock and Standard consisted of thousands of transactions, and Deep Rock owed Standard over $9 million. A committee that advocated for the interests of the preferred shareholders of Deep Rock (plaintiff) objected to Standard’s claim, arguing that Standard was the owner of Deep Rock rather than a creditor. The bankruptcy trustee recommended a compromise under which Standard would reduce its claim against Deep Rock to $5 million, with $3.5 million prioritized the same as the other creditors’ claims and the remaining $1.5 million subordinated to the other creditors’ claims. The district court approved the compromise. The court of appeals affirmed the district court. The committee appealed.
Rule of Law
Issue
Holding and Reasoning (Roberts, J.)
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