In its second amended petition Reading asserted that the car hire rates, to the extent they were less than the ICC per diem rates, constituted a "constructive dividend" to the operating railroads using cars from the pool. Even if we assume that the difference between Trailer Train's car hire rates and the ICC per diem rates constitutes a constructive dividend, Reading cannot characterize that pattern of dividend distribution as self-dealing if Reading and the other shareholders of Trailer Train have previously agreed to it. Under Delaware law the rights of stockholders are contractual, Ellingwood v. Wolf's Head Oil Refining Co., 27 Del. Ch. 356, 362-63, 38 A.2d 743, 747 (Del. 1944), and may be altered by binding agreements between the stockholders and the corporation, Coleman v. Taub, 638 F.2d 628, 629, 636 (3d Cir. 1981) (applying Delaware law); see Weinberg v. Baltimore Brick Co., 35 Del. Ch. 225, 241, 114 A.2d 812, 821 (Del. 1955); see also Del.Code Ann. tit. 8, § 350 (1975). A purchaser of stock who thus bargains away part of his rights as a stockholder alters the fiduciary duty of a majority shareholder to him.
No irregularity or fraud in its adoption is asserted. It cannot be held to have no force or effect, merely because of some mental reservation or unexpressed intention which the stockholders may have had when they adopted it. Schroeter v. Bartlett Syndicate Bldg. Corp., 8 Cal.2d 12, 63 P.2d 824, 825; De Mello v. Dairyman's Co-op. Creamery Co., 73 Cal.App.2d 746, 167 P.2d 226; Vulcan Corporation v. Westheimer Co., Ohio App., 34 N.E.2d 278; Ellingwood v. Wolf's Head Refining Co., Del., 38 A.2d 743, 154 A.L.R. 406; Constructors Ass'n of Western Penn. v. Furman, 165 Pa. Super. 248, 67 A.2d 590. See Baldwin v. Miller Lux, 152 Cal. 454, 92 P. 1030; Wilson v. Cherokee Drift Mining Co., 14 Cal.2d 56, 92 P.2d 802; Reynolds v. Supreme Council Royal Ancanum, 192 Mass. 150, 78 N.E. 129, 131; Murphy v. Nowak, 223 Ill. 301, 79 N.E. 112, 117; Hartford Accident Indemnity Co. v. W.S. Dickey Mfg. Co., 26 Del. Ch. 411, 24 A.2d 315; Sovereign Camp W.O.W. v. Smith, 176 Okla. 545, 56 P.2d 408, 410-411; Hottenstein v. York Ice Machinery Corp., 3 Cir., 136 F.2d 944, 950.
In interpreting Exide's Bylaws, the court's "analysis starts with the principle that the rules which are used to interpret statutes, contracts, and other written instruments are applicable when construing corporate charters and bylaws." See Hibbert v. Hollywood Park, Inc., 457 A.2d 339, 342-43 (Del. 1983) (citing Ellingwood v. Wolf's Head Oil Refining Co, Inc., 38 A.2d 743, 747 (Del.Supr. 1944)); Lawson v. Household Finance Corp., 152 A. 723, 726 (Del.Supr. 1930); In re Osteopathic Hospital Assoc., 191 A.2d 333, 335 (Del.Ch. 1963)).
The relationship between the shareholder and the body corporate is plainly one of contract. Stevenot v. Norberg, 210 F.2d 615 (9th Cir. 1954); see also Schroeter v. Bartlett Syndicate Bldg. Corp., 8 Cal.2d 12, 63 P.2d 824, 825; Ellingwood v. Wolf's Head Oil Refining Co., 27 Del. Ch. 356, 38 A.2d 743, 154 A.L.R. 406 (1944); Corporations, 18 Am.Jur.2d § 463 (1965).
A corporation in the sale and issuance of its stock assumes a contractual relation to the shareholder. Peters v. United States Mortgage Co., 13 Del.Ch. 11, 114 Atl. 598 (1921); Gaskill v. Gladys Belle Oil Co.,16 Del.Ch. 289, 146 Atl, 337 (1929); Ellingwood v. Wolf's Head Oil Refining Co., 27 Del.Ch. 356, 38 A.2d 743 (1944). Section 8 of the plan and section 11 of the purchase agreement both provide that ‘The Participant shall have no interest in shares covered by this option until certificates for said shares are issued.’
Airgas, 8 A.3d at 1188 ; see also Centaur Partners, 582 A.2d at 928 (“Corporate charters and by-laws are contracts among the shareholders for corporations and the general rules of contract interpretation are held to apply.” (citing Berlin v. Emerald Partners, 552 A.2d 482, 488 (Del.1989) ); Hibbert v. Hollywood Park, Inc., 457 A.2d 339, 342–43 (Del.1983) ; Ellingwood v. Wolf's Head Oil Refining Co., Inc., 38 A.2d 743, 747 (Del.1944) ). “Words and phrases used in a bylaw are to be given their commonly accepted meaning unless the context clearly requires a different one or unless legal phrases having a special meaning are used.” “Under the applicable interpretation rules, if the bylaw's language is unambiguous, the court need not interpret it or search for the parties' intent.”
Investment Assoc. v. Standard Power Light Corp., 48 A.2d 501 (Del.Ch. 1946); aff'd, 51 A.2d 572 (Del. 1947).Ellingwood v. Wolf's Head Oil Ref. Co., 38 A.2d 743 (Del. 1944).Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997); Pellaton v. The Bank of New York, 592 A.2d 473, 478 (Del. 1991); Harrah's Entertainment, Inc. v. JCC Holding Company, 802 A.2d 294, 309 (Del.Ch. 2002) (applying rule of construction to ambiguous corporate instruments).
Rothschild Int'l Corp. v. Liggett Corp., Del.Supr., 474 A.2d 133, 136 (1984); Wood v. Coastal States Gas Corp., Del.Supr., 401 A.2d 932, 937 (1979). Courts must give effect to the intent of the parties as revealed by the language of the certificate and the circumstances surrounding its creation and adoption. Judah v. Delaware Trust Co., Del.Supr., 378 A.2d 624, 628 (1977); Ellingwood v. Wolf's Head Oil Ref. Co., Del.Supr., 38 A.2d 743, 747 (1944). Since stock preferences are in derogation of the common law, they must be strictly construed.
Corporate charters and by-laws are contracts among the shareholders of a corporation and the general rules of contract interpretation are held to apply. See Berlin v. Emerald Partners, 552 A.2d at 488; Hibbert v. Hollywood Park, Inc., 457 A.2d at 342-43; Ellingwood v. Wolf's Head Oil Refining Co., Inc., Del.Supr., 38 A.2d 743, 747 (1944). In the interpretation of charter and by-law provisions, "[c]ourts must give effect to the intent of the parties as revealed by the language of the certificate and the circumstances surrounding its creation and adoption."
Stock preferences must also be clearly expressed and will not be presumed. See Wood v. Coastal States Gas Corp., Del.Supr., 401 A.2d 932 (1979); Ellingwood v. Wolf's Head Oil Refining Co., Del.Supr., 38 A.2d 743 (1944). See also Hibbert v. Hollywood Park, Inc., Del.Supr., 457 A.2d 339 (1983); Shanghai Power Co. v. Delaware Trust Co., Del. Ch. , 316 A.2d 589, 594 (1974).