American General Corp. v. Camp

• Decision Date: 17 February 1937
• Docket Number: 73-76.
• Citation: 190 A. 225,171 Md. 629
• Parties: AMERICAN GENERAL CORPORATION v. CAMP ET AL., AND THREE OTHER CASES.
• Court: Maryland Court of Appeals

190 A. 225

171 Md. 629

AMERICAN GENERAL CORPORATION v. CAMP ET AL., AND THREE OTHER CASES.

Nos. 73-76.

Court of Appeals of Maryland

February 17, 1937

Appeals from Circuit Court of Baltimore City; Rowland K. Adams Judge.

Petitions by Martha W. Camp and others, and by John Gross and others for the appointment of three disinterested commissioners to appraise the fair value of their stock in subsidiary corporations, which had been consolidated into the American General Corporation. From decrees of the circuit court confirming the awards of the commissioners, cross-appeals were taken.

Decrees in accordance with opinion.

Argued together before BOND, C.J., and URNER, PARKE, SLOAN MITCHELL, SHEHAN, and JOHNSON, JJ.

R. Dorsey Watkins and James Piper, both of Baltimore (Reuben Oppenheimer, Fisher & Fisher, Piper, Carey & Hall, and Emory, Beeuwkes, Skeen & Oppenheimer, all of Baltimore, and Satterlee & Canfield, of New York City, on the brief), for appellant in No. 73 and the appellee in No. 74.

Hilary W. Gans and Frank B. Ober, both of Baltimore (Ritchie, Janney, Ober & Williams and Brown & Brune, all of Baltimore, on the brief), for appellees in No. 73 and appellants in No. 74.

Reuben Oppenheimer, of Baltimore (R. Dorsey Watkins, Fisher & Fisher, Piper, Carey & Hall, and Emory, Beeuwkes, Skeen & Oppenheimer, all of Baltimore, and Satterlee & Canfield, of New York City, on the brief), for appellant in No. 75 and the appellee in No. 76.

Frank B. Ober, of Baltimore (William M. Maloy and Ritchie, Janney, Ober & Williams, all of Baltimore, on the brief), for appellees in No. 75 and the appellants in No. 76.

PARKE Judge.

The appeals in these two cases were argued together and will be so decided on account of the similarity of the questions involved. The controversies grow out of the consolidation of eight separate but allied or subsidiary corporations into one corporation known as the American General Corporation, a body corporate of the State of Delaware. Seven of these corporations were created under the laws of the State of Maryland, and the eighth was incorporated in the State of Delaware. The consolidation became effective on November 23, 1935, and the questions are with reference to the value of the stock of those preferred stockholders of the International Securities Corporation of America and of the American Founders Corporation, two of the Maryland corporations, who dissented from the consolidation. There was a separate valuation and decree with respect to the dissenting stockholders of each of these two corporations, and cross-appeals were taken. The appeals of the stockholders of the International Securities Corporation of America, which will be called "International" and of the American General Corporation, which will be called "defendant," are Nos. 73 and 74 on the docket of the October term, 1936, of this court, and those of the stockholders of the American Founders Corporation, which will be called "Founders," and of the defendant are Nos. 75 and 76 on the same docket.

The eight corporations were interrelated before the consolidation. The relation of the group as a whole was so complicated that a consolidation of the members into one corporation presented advantages in the simplification of financial structure, management, and accounting. These considerations prompted the formation of a plan of corporate union, and, after a lengthy period of negotiation, an agreement of consolidation was prepared; presented to the various stockholders; and, at a meeting for that purpose, adopted on November 4, 1935. The vote was not unanimous, but the dissentients were the owners of much less than one-third of the stock entitled to vote, and, so, could not prevent the consolidation.

The International stock embraced 44,736 shares of 6 per cent. preferred stock of $100 par value a share; 14,714 shares of 6 1/2 per cent. preferred stock of $100 par value a share; 591,156 shares of Class A common stock of $1 par value a share; 600,000 shares of Class B common stock of 10 cents par value a share. The 6 per cent. preferred stock was subject to call and retirement at $105 a share and the 6 1/2 per cent. stock at $107.50. The dividends on these two classes of preferred stock were cumulative and none had been paid since December 1, 1931. The owners of 3,834 shares of the 6 per cent. preferred stock and of 482 shares of the 6 1/2 per cent. preferred stock opposed the agreement of consolidation.

The Founders stock outstanding consisted of 156,577 shares of preferred stock of the par value of $50 a share. 42,379 was of the 7 per cent. series of preferred stock, and 114,198 of the 6 per cent. series of preferred stock. The 7 per cent. series was redeemable at a premium of $5 a share, with accrued dividends, and the 6 per cent. series at a premium of $2.50 a share with accrued dividends. The owners of 360 shares of the 6 per cent. series of preferred stock and 649 shares of the 7 per cent. series of preferred stock rejected the agreement of consolidation. The accrued dividends on every share of the 6 per cent. series amounted to $12.19 and to $14.22 on the 7 per cent. series.

The dissenting stockholders of the International and of the Founders demanded payment for their stocks but were unable to agree upon the fair value of their stock and separately filed petitions in the circuit court of Baltimore City for the appointment of three disinterested commissioners to appraise the fair value of their stock, without regard to any depreciation or appreciation of the same in consequence of the consolidation. The chancellor selected three commissioners, who were disinterested and possessed expert qualifications for the valuation. Although separate orders were signed, the commissioners were the same in each as were their commissions.

The respective parties appeared before the commissioners and offered testimony and the parties were heard. After weighing the matters the commissioners made separate valuations and returned them in two distinct reports. In the report which was made with reference to the International, the fair value of both the 6 per cent. and the 6 1/2 per cent. preferred stock of International owned by the dissenting stockholders is, without regard to any depreciation or appreciation by reason of the consolidation, $91.47 per share as of November 22, 1935. In the valuation of the Founders stock, every share of the preferred stock was valued at $50 per share with the accrued dividends of $14.22 per share to be added on every share of the 7 per cent. series and of $12.19 per share to be added on every share of the 6 per cent. series. Each report made a further award of 6 per cent. interest on the amount to which every stockholder was entitled. The interest to be computed from November 22, 1935.

The defendant excepted to the award, as did the dissenting stockholders, in each case. The defendant, also, filed in each case exceptions to certain testimony offered in evidence before the commissioners, and moved the chancellor to strike out the testimony. The chancellor in both cases overruled all the exceptions and, after full and elaborate argument and careful consideration as is shown by his opinions, confirmed the awards of the commissioners. The dissenting stockholders believe the awards too low and the defendant corporation finds them too high, and their reasons are that in arriving at their respective findings the commissioners erred in the inclusion or exclusion of elements, testimony, and theories of value which should have been rejected or considered accordingly as they made for the contentions and material interests of the respective parties. It will not be necessary to treat the questions raised separately since they will be covered by the discussion to follow.

The power of a dissenting stockholder to prevent the sale of all the assets or the consolidation or merger of its corporate existence with another corporation frequently proved in the past a disadvantage to the other stockholders. To overcome this difficulty and to meet a general demand and, at the same time, to protect the dissentient in his property rights to their full extent, the General Assembly of Maryland passed appropriate legislation. So, by compliance with prescribed conditions and procedure, any one or more corporations of this state may be consolidated with another such corporation of this or another state to form a new corporation or be merged into another such corporation, provided, inter alia that the consolidation or merger shall be approved by the requisite vote of two-thirds of all the shares entitled to vote. Code (1935 Supplement) art. 23, §§ 33-36. If a dissenting stockholder voted or, in the case of a stockholder who was not entitled to vote, registered a protest against the agreement submitted, he may, within a specified time, make demand of the consolidated corporation or the corporation which survived the merger, as the case may be, for the payment of the fair value of his stock; and, in the event of a disagreement, the dissenting stockholder may apply by petition for such relief as the chancellor below accorded and is found on the records now at bar. The remaining portion of section 35 should be...