Shidler v. All American Life & Financial Corp., 64746

Citation298 N.W.2d 318
Decision Date12 November 1980
Docket NumberNo. 64746,64746
CourtUnited States State Supreme Court of Iowa
PartiesWilliam F. SHIDLER, et al., Plaintiffs, v. ALL AMERICAN LIFE & FINANCIAL CORPORATION, A Corporation, et al., Defendants.

Albert L. Harvey, Kenneth L. Butters, and Bruce H. Stoltze of Heartney, Harvey, Butters & Ottoson, Des Moines, Robert L. Ulstad, Fort Dodge, and J. Vernon Patrick, Jr. and Thomas Gallo of Berkowitz, Lefkovits & Patrick, Birmingham, Ala., for plaintiffs.

C. Carleton Frederici of Davis, Hockenberg, Wine, Brown & Koehn, Des Moines, and Aaron J. Kramer, Alfred Elliott, Walter C. Greenough, and Reinette Morin of Schiff, Hardin & Waite, Chicago, Ill., for defendants.

Considered by LeGRAND, P. J., and UHLENHOPP, HARRIS, McCORMICK, and McGIVERIN, JJ.

UHLENHOPP, Justice.

This proceeding involves construction of Iowa statutory law relating to corporate mergers. The United States District Court for the Southern District of Iowa, Central Division, certified to us a legal question on that subject under the Uniform Certification of Questions of Law Act, 1979 Sess., 68 G.A., ch. 144. Involved is an issue of separate voting by different classes of corporate stock. See also Berger v. General United Group, Inc., 268 N.W.2d 630 (Iowa 1978).

Reduced to the basics, the facts certified to us are as follows. In May 1973 an attempt was made to merge General United Group, Incorporated (GUG), a domestic corporation (and its subsidiary, United Security Life Company (USL), which need not be separately considered), into All American Delaware Corporation, a foreign corporation, which would be the surviving entity. At that time GUG had outstanding 105,000 shares of preferred stock, 2,959,650 shares of common stock, and 10,623,150 shares of class B common stock. The preferred and class B common stock had specified conversion rights into common stock. All of the preferred and class B common stock and 67,043 shares of the common stock were owned by another corporation, All American Life & Casualty Company (Casualty), and 2,892,607 shares of the common stock were owned by the public. Casualty also owned all of the stock of All American Delaware, into which GUG was to merge.

The agreement relating to the GUG-All American Delaware merger contained these clauses:

4.1 Cancellation of Certain Shares. Each share of the GUG Preferred Stock, GUG Common Stock and GUG Class B Common Stock which immediately prior to the Effective Date of the Merger is outstanding and owned by Casualty, shall be cancelled and retired upon the Effective Date of the Merger and by virtue thereof, without any action on the part of the holder or issuer thereof, and all certificates which theretofore evidenced such shares shall be cancelled and no cash or securities or other property shall be issued in the Merger in respect thereof ....

4.3 Conversion of Certain Shares. (a) Except for those shares which are owned by Casualty and therefore subject to Section 4.1, each share of GUG Common Stock, which is outstanding immediately prior to the Effective Date of the Merger, shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and exchanged for $3.25 cash ....

4.5 Surrender of Certificates. After the Effective Date of the Merger, each certificate which evidenced ownership of a share or shares of the capital stock of either GUG or USL converted by virtue of the Merger into cash (an " 'Old Certificate' "), shall be surrendered by the holder thereof to O'Hare International Bank, Chicago, Illinois (the " 'Disbursing Agent' "), or such other disbursing agent as shall be designated by the Board of Directors of the Surviving Corporation, as agent for such holders, to effect the surrender of certificates on their behalf, and each such holder shall upon such surrender receive in exchange therefor the amount to which he is entitled under Section 4.3 as a result of the conversion of the shares of the capital stock of either GUG or USL, as the case may be, into cash. Adoption of this Agreement by the respective stockholders of GUG and USL shall constitute ratification of the appointment of the Disbursing Agent. After the Effective Date of the Merger, the shares of Common Stock of GUG and USL outstanding immediately prior thereto shall cease to be shares of stock of such corporations regardless of whether or not surrendered and the stock transfer books of GUG and USL, shall be closed and there shall be no further transfer or issuance of certificates for the capital stock thereof; provided, however, that a new certificate will be issued in place of any certificate theretofore issued which has been lost or destroyed in accordance with the By-laws of GUG and USL, as the case may be.

Notice of a meeting was given to GUG stockholders. The notice stated that one of the purposes of the meeting was

(t)o consider and vote upon the approval and adoption of an Agreement of Merger dated as of April 20, 1973, pursuant to which GUG will be merged into All American Delaware Corporation ("The New Corporation"), a wholly-owned subsidiary of All American Life and Casualty Company ("All American"). As a result, GUG will become a wholly-owned subsidiary of All American and the holders of Common Stock of GUG other than All American will receive $3.25 in cash in payment for each outstanding share of Common Stock of GUG, all as more fully set forth is the accompanying Proxy Statement and in the copy of the Agreement of Merger attached as Exhibit A to the Proxy Statement.

A proxy statement sent to the stockholders included the following:

The affirmative vote of shares representing at least two-thirds of the Common and Class B Common Stock entitled to vote at the meeting, voting as one class, in person or by proxy, is required to approve the Merger Agreement.

At the time, Iowa had a statute in effect which applied to the merger, section 496A.74, The Code 1973 (references are to that Code). The relevant portion is this:

One or more foreign corporations and one or more domestic corporations may be merged or consolidated in the following manner, if such merger or consolidation is permitted by the laws of the state under which each such foreign corporation is organized:

1. Each domestic corporation shall comply with the provisions of this chapter with respect to the merger or consolidation, as the case may be, of domestic corporations and each foreign corporation shall comply with the applicable provisions of the laws of the state under which it is organized.

Under the statute just quoted, section 496A.70 on mergers thus came into play. The pertinent parts of that section provide:

The board of directors of each corporation, upon approving such plan of merger or plan of consolidation, shall, by resolution, direct that the plan be submitted to a vote at a meeting of shareholders, which may be either an annual or a special meeting ....

At each such meeting, a vote of the shareholders shall be taken on the proposed plan of merger or consolidation. Each outstanding share of each such corporation shall be entitled to vote on the proposed plan of merger or consolidation, whether or not such share has voting rights under the provisions of the articles of incorporation of such corporation. The plan of merger or consolidation shall be approved upon receiving the affirmative vote of the holders of at least two-thirds of the outstanding shares of each such corporation, unless any class of shares of any such corporation is entitled to vote as a class thereon, in which event, as to such corporation, the plan of merger or consolidation shall be approved upon receiving the affirmative vote of the holders of at least two-thirds of the outstanding shares of each class of shares entitled to vote as a class thereon and of the total outstanding shares. Any class of shares of any such corporation shall be entitled to vote as a class if the plan of merger or consolidation, as the case may be, contains any provision which, if contained in a proposed amendment to articles of incorporation, would entitle such class of shares to vote as a class.

The reference in this section to a merger containing a provision which, as an amendment to articles, would require class voting also necessitates consideration of portions of section 496A.57 on amendments:

The holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the provisions of the articles of incorporation, if the amendment would:

1. Increase or decrease the aggregate number of authorized shares of such class.

3. Effect an exchange, reclassification, or cancellation of all or part of the shares of such class.

At the GUG stockholders' meeting called to consider the merger, the stockholders in control required all classes of stock to vote together on the question. As a result, the merger proposal carried by more than the requisite two-thirds vote of all outstanding stock. Actually, however, the proposal did not carry by two-thirds vote of the outstanding common stock, if that stock is tallied separately.

William F. Shidler and other owners of common stock commenced an action in federal court for themselves and others challenging the merger on several grounds. One of the grounds alleged was noncompliance with sections 496A.70 and 496A.57 for failure to have the GUG common stock vote separately as a class. The United States District Court for the Southern District of Iowa, Central Division, stating that "it appears there is no controlling precedent (of) the Supreme Court of the State of Iowa," certified the following question of law to us:

Did Iowa law require that the General United Group, Incorporated (GUG) merger into All American Delaware Corporation in May of 1973 be approved by

(a) an affirmative vote of the holders of at least two-thirds (2/3) of the outstanding GUG Common Stock shares voting separately as a class and by at least...

To continue reading

Request your trial
15 cases
  • Shidler v. All American Life & Financial Corp., s. 84-2398
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • 9 Octubre 1985
    ...Thereafter, the Iowa Supreme Court ruled that section 496A.70 did in fact require separate class voting. Shidler v. All American Life & Financial Corp., 298 N.W.2d 318 (Iowa 1980). The district court then held a bench trial to determine whether in light of the state court decision defendant......
  • State v. Hauan, 84-276
    • United States
    • Iowa Court of Appeals
    • 20 Noviembre 1984
    ...we look at the object to be accomplished, the evils to be remedied, and the intent of the legislature. Shidler v. All American Life & Financial Corp., 298 N.W.2d 318, 321 (Iowa 1980). We also will assume that the legislature is familiar with the existing state of law. Hines v. Illinois Cent......
  • Pearson v. Robinson
    • United States
    • Iowa Supreme Court
    • 21 Abril 1982
    ...if possible, place a construction on the statute which will effect its purpose rather than defeat it. Shidler v. All American Life & Financial Corp., 298 N.W.2d 318, 321 (Iowa 1980). We avoid strained, impractical, and absurd results. Hamilton v. City of Urbandale, 291 N.W.2d 15, 19 (Iowa 1......
  • Root v. Toney
    • United States
    • Iowa Supreme Court
    • 17 Diciembre 2013
    ...effect its purpose rather than one which will defeat it.’ ” Christenson, 472 N.W.2d at 280 (quoting Shidler v. All Am. Life & Fin. Corp., 298 N.W.2d 318, 321 (Iowa 1980)). With these principles in mind, we consider the meaning of “resides” in section 236.3(1). In Kollman, we distinguished b......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT