Adams v. U.S. Distributing Corp., Record No. 2934.
| Decision Date | 06 June 1945 |
| Docket Number | Record No. 2934. |
| Citation | 184 Va. 134 |
| Court | Virginia Supreme Court |
| Parties | MAURICE D. ADAMS, ET ALS. v. UNITED STATES DISTRIBUTING CORPORATION, ET ALS. |
1. CORPORATIONS — Consolidation or Merger — Statutory Remedy of Dissatisfied Stockholders Exclusive. — The language of section 3822 of the Code of 1942, relative to the remedy of stockholders dissatisfied with the consolidation or merger of a corporation, that the fair cash value of the stock "shall be determined in the manner hereinafter provided" indicates that that method and none other is to be followed.
2. CORPORATIONS — Consolidation or Merger — Statutory Remedy of Dissatisfied Stockholders. — The provisions of section 3822 of the Code of 1942, relative to the remedy of dissatisfied stockholders in case of consolidation or merger, that stockholders who failed to dissent as provided in the statute "shall be forever precluded from objecting to the consolidation or merger," and shall not be entitled to demand or receive the fair cash value of their stock but shall be confined to participation in the agreement or plan of consolidation and to the stock of the consolidated or merged corporation to which they may be entitled, evidences a clear legislative intention to give every stockholder of a merging corporation an election either to dissent and secure in the prescribed manner the fair cash value of his stock or, if he fails to dissent, to be bound by the terms of the merger.
3. CORPORATIONS — Consolidation or Merger — Right of Dissenting Stockholders — Recovery of Fair Cash Value of Shares. — "Actual value" of the shares of a stockholder dissenting to a consolidation or merger of a corporation is practically synonymous with "fair cash value" as those words are used in section 3822 of the Code of 1942, providing for the method of recovery of the value of the stock of the dissenting stockholders.
4. CORPORATIONS — Consolidation or Merger — Statutory Remedy of Dissatisfied Stockholders Exclusive — Case at Bar. — In the instant case, a suit by stockholders dissenting to a merger of a corporation, plaintiffs contended that the merger resulted in the dissolution of the merged corporation which gave to them the choice of three courses of action: (1) They could join in the merger and exchange their stock for shares in the continuing corporation. (2) They could proceed under section 3822 of the Code of 1942 to recover the "fair cash value of the stock". (3) They could insist that the continuing corporation pay to them out of the assets it received from the former corporation the par value of their stock, plus accrued dividends thereof, provided the continuing corporation received from the former corporation sufficient assets for such purpose. They based the last claim on a provision contained in the charter of the merged corporation and in their stock certificates that "in case of the liquidation or dissolution of this corporation, or a distribution of its assets, except by payment of dividends, the assets of this corporation shall first be applied toward paying to the holders of the preferred stock an amount equal to the par value of their respective holdings of such preferred stock, plus all accrued and unpaid dividends thereon".
Held: That there is no language contained in section 3822 of the Code of 1942, either express or implied, upon which the plaintiffs could base the third alternative remedy which they sought to invoke. The dissenters may not recover the "contractual value" of their shares as distinguished from the "fair cash value" or the "actual value".
5. CORPORATIONS — Consolidation or Merger — Right of Dissenting Stockholders — Full Compensation. — The design of section 3822 of the Code of 1942 is to assure to the dissenting stockholder that he will be fully compensated for the value of that of which he has been deprived by the merger, and no more.
6. CORPORATIONS — Consolidation or Merger — Right of Dissenting Stockholders — Meaning of "Fair Cash Value". — The term "fair cash value", as used in section 3822 of the Code of 1942, providing for the recovery of the value of stock by stockholders dissenting to a merger or consolidation, means the intrinsic worth of the dissenter's stock, which is to be arrived at after an appraisal of all the elements of value.
7. CORPORATIONS — Consolidation or Merger — Remedies of Dissenting Stockholders — Exclusiveness of Appraisal Statute. — Unless a corporate merger be tainted with fraud or illegality, the dissenting stockholder must pursue the remedy prescribed by section 3822 of the Code of 1942.
8. STOCK AND STOCKHOLDERS — Law of State as Part of Contract between Corporation and Stockholders. — The general law of the State, in force at the time of the incorporation, is just as much a part of the contract between a corporation and its stockholders as are its charter and certificates of stock.
9. CORPORATIONS — Consolidation or Merger — Right of Dissenting Stockholders — Law of State as Part of Contract — Case at Bar. — In the instant case, a suit by stockholders dissenting to a merger of a corporation, plaintiffs contended that the effect of the merger and the application of the terms of section 3822 of the Code of 1942, which provides the remedy of dissatisfied stockholders, was to violate the contract which they had with the corporation as embodied in its charter and in the provisions of the certificates of stock held by them. Section 3841 of the Code of 1942 provides that the general statutes of the State applicable to corporations shall be a part of the charter of every corporation formed under the laws of the State.
Held: That when the plaintiffs invested in the shares of the merged corporation they did so with the full knowledge of the fact that the corporation, chartered under the general corporation law of Virginia, might, under the laws of this State, merge with another corporation, in the manner and with the effect upon their investment specified in the statute.
10. CORPORATIONS — Consolidation or Merger — Not Dissolution of Merged Corporation — Case at Bar. — In the instant case, a suit by stockholders dissenting to a merger of a corporation, plaintiffs contended that a merger of the corporation with another corporation effected a dissolution of the merged corporation and thus made operative a charter provision that in case of the liquidation or dissolution of the corporation or a distribution of its assets, the preferred stockholders were to be paid the par value of their stock, plus accrued dividends.
Held: That there was no merit in the contention of the plaintiffs since the merger of two corporations did not end the existence of either, but continued the existence of both in the merged corporation.
Appeal from a decree of the Law and Equity Court of the city of Richmond. Hon. Willis D. Miller, judge presiding.
The opinion states the case.
John J. Wicker, Jr., Seymour M. Heilbron, George M. Jaffin and Charles Winkelman, for the appellants.
R. Grayson Dashiell, William W. Crump, James V. Hayes, J. Leo Coupe and Donovan, Leisure, Newton & Limbard, for the appellees.
This appeal involves the rights of certain holders of preferred stock in United States Distributing Corporation, a Virginia corporation, with its principal office in the city of Richmond, who dissented from the merger of that corporation with The Pittston Company, a Delaware corporation, under the name of the latter. The merger was approved by the respective agencies of the two States on December 31, 1942, with the result that the merged corporation is now duly incorporated in both States.
Prior to the merger the United States Distributing Corporation had outstanding 99,915 1/2 shares of 7% cumulative convertibel preferred stock, of the par value of $100 per share, and 401,876 1/2 shares of common stock of the par value of $5.00 per share. The Pittston Company owned 62,879 shares of this preferred stock, or approximately 63% thereof, and 360,713 shares of the common stock, or approximately 90% thereof. As of the date of the merger, the cumulative unpaid dividends on the preferred stock of United States Distributing Corporation amounted to a total of $84 per share.
It was provided both in the charter of United States Distributing Corporation and in each preferred stock certificate, that "in case of the liquidation or dissolution of this corporation, or a distribution of its assets, except by payment of dividends, the assets of this corporation shall first be applied toward paying to the holders of the preferred stock an amount equal to the par value of their respective holdings of such preferred stock, plus all accrued and unpaid dividends thereon, * * *."
Under the terms of the merger agreement the holders of the preferred stock of United States Distributing Corporation, other than The Pittston Company, were to receive in exchange for each preferred share of United States Distributing Corporation stock held by him, and unpaid dividends thereon, one share of "Class A Preference" stock and one share of common stock of the continuing corporation. The "Class A Preference" stock provided for a cumulative dividend of $5.00 per year per share, and other rights which need not be here detailed.
Between the date of the merger and March 13, 1943, the appellants, who together own a total of 1,337 shares of preferred stock in United States distributing Corporation, in various amounts, gave notice to The Pittston Company, the merged corporation, that they elected to dissent from the merger and to enforce their appraisal rights under section 3822 of the Code of Virginia. Various other like notices of dissent were received from other preferred stockholders.
On June 2, 1943, the appellants filed their bill in the Law and Equity Court of the city of Richmond against United States Distributing Corporation, The Pittston Company, and the...
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Adams Et At v. United States Distrib. Corp.
... 34 S.E.2d 244 184 Va. 134 ADAMS et at. v. UNITED STATES DISTRIBUTING CORPORATION et al. Supreme Court of Appeals of Virginia June 6, 1945 ... these cases, for after all, the rights of the parties before us must turn upon the interpretation of the Virginia statute. Suffice it to ... ...