Craddock-Terry Co. v. Powell, Record No. 2513.
| Decision Date | 26 April 1943 |
| Docket Number | Record No. 2513. |
| Court | Virginia Supreme Court |
| Parties | CRADDOCK-TERRY COMPANY, ET ALS. v. W. D. POWELL, AND OTHERS. |
1. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sales under Code Section 3820a — Time of Filing Dissent — Case at Bar. — The instant case was a suit by a dissenting stockholder to enforce his stock contract. The corporation proposed to sell all of its assets to a new corporation in consideration of the issuance to it of the stock of the new corporation. More than eighty per cent. of the holders of each class of stock outstanding in the old corporation agreed in writing to such sale, the new stock to be distributed to them by the old corporation. No official notice that the required number of stockholders had approved the sale was communicated to the stockholders until five days after the actual transfer of assets. Section 3820a of the Code of 1942, under which the sale was authorized, requires three months' notice in writing of the dissent of stockholders not agreeing. Defendants contended that the three months period of limitation for dissent contained in the statute began to run from the time the holders of the required stock had signified their written consent to the proposed sale and not from the time official notice was given thereof.
Held: That there was no merit in the contention of defendants.
2. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sales under Code Section 3820a — Estoppel to Dissent — Case at Bar. — The instant case was a suit by a dissenting stockholder to enforce his stock contract. The corporation proposed to sell all of its assets to a new corporation in consideration of the issuance to it of the stock of the new corporation. More than eighty per cent. of the holders of each class of stock outstanding in the old corporation agreed in writing to such sale, the new stock to be distributed to them by the old corporation. No official notice that the required number of stockholders had approved the sale was communicated to the stockholders until five days after the actual transfer of assets. Section 3820a of the Code of 1942, under which the sale was authorized, requires three months' notice in writing of the dissent of stockholders not agreeing. Within this period, plaintiff caused notice to be served on the president of the corporation, which stated that he was dissatisfied with the plan and intended to institute suit. Defendants raised the question of election and contended that plaintiff was estopped to dissent.
Held: That there was no merit in the contention, since the dominant purpose of the suit, apparent from the allegations, prayers, answers and evidence taken on the issues raised, was to invoke the plenary powers of equity to enforce the right of preferred stock expressed in the charter.
3. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sale of All Assets — Code Section 3820a Valid. — Section 3820a of the Code of 1942, which permits a corporation to consummate a sale of all of its assets, including good will, is not violative of any constitutional inhibition; that is, the legislature has power to authorize a corporation to sell all of its assets for cash or securities with the consent of two-thirds of the stockholders of each class of stock.
4. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sale of All Assets and Distribution of Proceeds. — The sale of the entire assets of a corporation and the distribution of the proceeds of such sale among stockholders are separate matters between separate parties and based upon separate considerations; stockholders of different classes cannot be compelled to give their consent to one as a condition to their concurrence in the other.
5. CORPORATIONS — Winding up and Dissolution — Sale of Assets — Liquidation Not Authorized by Code Section 3820a. — The powers granted under section 3820a of the Code of 1942, which permits a corporation to sell all of its assets, are exhausted by the consummation of the sale. If the selling corporation desires to liquidate by distributing all of its assets (the proceeds of sale) among its security holders, it has to look elsewhere for authority, that is, to other statutes or to the charter provisions.
6. CORPORATIONS — Winding up and Dissolution — Alienation of All Property. — A mere alienation of all property of a corporation does not terminate its existence.
7. CORPORATIONS — Winding up and Dissolution — Sale of All Assets — Does Not Effect Dissolution. — Section 3820a of the Code of 1942, which authorizes a corporation to sell all of its assets, provides that such a sale shall not effect a dissolution of the vendor corporation. The legislature did not use the words prohibiting a dissolution merely to retain the technical legal existence of the selling corporation. It is improbable that the legislature intended by this brief expression to overturn the whole basic law of priorities so as to substitute any new scheme which might be adopted by a two-thirds majority of stockholders in lieu of settled principles obtaining in liquidation.
8. CORPORATIONS — Winding up and Dissolution — Sale of All Assets — Does Not Effect Dissolution. — Section 3820a of the Code of 1942, which authorizes a corporation to sell all of its assets, provides that such a sale shall not effect a dissolution of the vendor corporation. The reasonably clear meaning of this proviso is that the sales statute should not be used as a means for accomplishing a distribution of the proceeds, with the consequent liquidation and dissolution of the corporation, contrary to the method prescribed in the charter.
9. CORPORATIONS — Winding up and Dissolution — Sale of Assets. — The power to sell the entire assets of the corporation does not include the power to dissolve, nor does such power entitle the vendor corporation forthwith to distribute the proceeds of the sale to its stockholders.
10. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sale of All Assets — Code Section 3820a Does Not Authorize Distribution of Proceeds — Case at Bar. — The instant case was a suit by a dissenting stockholder to enforce his stock contract. A sale was effected by the corporation in which plaintiff was a stockholder which transferred all of its assets to another corporation. The sale was authorized by section 3820a of the Code of 1942, and defendants contended that the distribution of the proceeds of the sale was a part of a single plan and was inseparable from the sale so that the authorization by statute of the sale included the authorization of the distribution of the proceeds to its stockholders.
Held: That there was no merit in the contention of defendants, since the sale of assets and a distribution to shareholders of the consideration received are separate and independent steps in the corporate procedure.
11. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sale of All Assets — Code Section 3820a Does Not Authorize Distribution of Proceeds — Case at Bar. — The instant case was a suit by a dissenting stockholder to enforce his stock contract. A sale was effected by the corporation in which plaintiff was a stockholder which transferred all of its assets to another corporation. The sale was authorized by section 3820a of the Code of 1942, and defendants contended that the distribution of the proceeds of the sale was authorized by section 3820a of the Code of 1942, when read in conjunction with section 3822 of the Code of 1942, which provides for rights of stockholders upon consolidation or merger of corporations. Section 3820a of the Code of 1942 provides that the rights of a dissatisfied stockholder shall be the same mutatis mutandis as that of a stockholder of a consolidated or merged corporation, but that nothing contained in the section should deprive any stockholder of existing remedies at law or in equity in the event of fraud or inadequacy of consideration. Section 3822 provides that a stockholder who fails to dissent within three months after the date of the meeting which authorized a merger or consolidation should be precluded from objecting.
Held: That there was no merit in the contention of defendants.
12. CONSTITUTIONAL LAW — Impairment of Obligation of Contracts — Power of Legislature to Enact Statutes. — The legislature, in the exercise of the power to enact statutes regulating the sale by a corporation of all its assets and the rights of dissenting stockholders in regard to the sale and to the distribution of the proceeds thereof, has no right to enact a law which impairs vested contractual rights.
13. STOCK AND STOCKHOLDERS — Rights of Minority Stockholders — Sale of All Assets — Code Section 3820a Does Not Authorize Distribution of Proceeds — Case at Bar. — The instant case was a suit by a dissenting stockholder to enforce his stock contract. A sale was effected by the corporation in which plaintiff was a stockholder which transferred all of its assets to another corporation. The sale was authorized by section 3820a of the Code of 1942, and defendants contended that the distribution of the proceeds of the sale was authorized by section 3820a of the Code of 1942, when read in conjunction with section 3822 of the Code of 1942, which provides for rights of stockholders upon consolidation or merger of corporation. Section 3820a of the Code of 1942 provides that the rights of a dissatisfied stockholder shall be the same mutatis mutandis as that of a stockholder of a consolidated or merged corporation, but that nothing contained in the section should deprive any stockholder of existing remedies at law or in equity in the event of fraud or inadequacy of consideration. Section 3822 provides that a stockholder who fails to dissent within three months after the date of the meeting which authorized a merger or consolidation should be precluded from objecting.
Held: That the use...
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Craddock-terry Co v. Powell
... ... It must be admitted that they have been followed to the letter. It so appears from the record. The dissenting stockholders' rights must be appraised not only by those rights which were expressed in the charter and in their ... ...