149 F.2d 193 (2nd Cir. 1945), 228, Weiss v. Routh

Docket Nº:228.
Citation:149 F.2d 193
Party Name:WEISS et al. v. ROUTH et al.
Case Date:May 02, 1945
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 193

149 F.2d 193 (2nd Cir. 1945)

WEISS et al.

v.

ROUTH et al.

No. 228.

United States Court of Appeals, Second Circuit.

May 2, 1945

Page 194

Louis D. Frohlich and Schwartz & Frohlich, all of New York City (Herbert P. Jacoby, of New York City, of counsel), for appellants.

James V. Hayes and Donovan Leisure Newton & Lumbard, all of New York City (J. Leo Coupe, of Utica, of counsel), for appellees.

Before L. HAND, SWAN and CHASE, Circuit Judges.

L. HAND, Circuit Judge.

This is an appeal from a judgment dismissing a complaint on the merits after trial in a removed action, brought to recover the loss in value of 500 shares of common stock owned by the plaintiffs in the United States Distributing Corporation, incorporated under the laws of Virginia. On December 31, 1942, that corporation was merged with a Delaware corporation known as the Pittston Company, and Routh, the individual defendant, was a director of both companies, and took part in the merger. The common shareholders of the United States Distributing Corporation for each common share received one-twentieth of a share of new common stock in the Pittston Company; the preferred sharesholders for each preferred share received one share of 'Class A' preference stock and one share of common stock in the Pittston Company. The plaintiffs disapproved the merger and voted against it at the shareholders' meeting; but a majority approved it, and it went into effect. In computing the exchange a credit was allowed to the preferred shares for cumulated dividends which had not been paid for a period of twelve years; and of this the plaintiffs complained on the theory that preferred dividends, until declared, are not debts of the corporation, and that it was not permissible to credit the preferred shares with them, even though the charter made preferred dividends cumulative.

Section 3822 of the 'General Corporation Law' of Virginia, Code 1942, provides for the merger of corporations upon a majority vote at a meeting of shareholders called for that purpose. Subdivision (b) provides that if any shareholder is dissatisfied with the terms of a merger, and has voted against it, he shall be entitled to 'the fair cash value of this stock'; and by applying 'to the circuit court of the county * * * wherein the principal office of the corporation * * * is located * * * or the the chancery court of the city of Richmond * * * in the event the principal office of the corporation * * * is located in the city of Richmond, 1 to have the fair cash value of his stock * * * appraised by three disinterested persons, residents of this State, appointed by the court.' The appraisers are to conduct hearings and report to the court, and if the shareholder is not satisfied, he may apply to the court 'to set aside the finding...

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