Enstar Corp., Matter of
| Decision Date | 29 April 1986 |
| Citation | 513 A.2d 206 |
| Parties | In the Matter of the Appraisal of ENSTAR CORPORATION. |
| Court | Court of Chancery of Delaware |
On defendant's motion for leave to file amended stockholder information form as to claim of the Belzbergs: Granted.
On defendant's motion for leave to file amended stockholder information form as to claim of United Virginia Bank: Denied.
Edmund N. Carpenter, II, and Samuel A. Nolen, Richards, Layton & Finger, Wilmington, for Enstar Corp.
James F. Burnett, Potter, Anderson & Corroon, Wilmington, for United Virginia Bank.
Grover C. Brown and Lewis H. Lazarus, Morris, James, Hitchens & Williams, Wilmington, for the Belzbergs.
HARTNETT, Vice Chancellor.
This action was commenced by dissenting stockholders of Enstar Corporation ("ENSTAR") in order to obtain a statutory appraisal of the value of their shares in response to a cash out merger. ENSTAR now seeks by motions to file Amended Stockholder Information Forms to assert additional objections to the demands for an appraisal submitted on behalf of First City Financial Corp. Ltd., First City Trust Company, Marc Belzberg and A. Forbstein (collectively "Belzbergs"), and the United Virginia Bank. The motion to amend must be granted as to the Belzbergs' claim because ENSTAR asserts it did not know the Belzbergs had submitted their shares in acceptance of the merger price at the time the Stockholder Information Forms were prepared. The motion to amend must be denied as to the United Virginia Bank claim because ENSTAR has not shown sufficient cause to justify the amendment.
Some of the background facts are set forth in my opinions in Thompson v. Enstar Corporation, Del.Ch., 509 A.2d 578 (1984), and in Huffington v. Enstar, Del. Ch., C.A. Nos. 7802-N.C., 7857-N.C. and 7864-N.C., Hartnett, V.C. (March 8, 1985) which related to the procedures to be followed in this action.
After a merger of Unimar Subsidiary, Inc. into ENSTAR on September 25, 1984, a number of stockholders of ENSTAR who were dissatisfied with the merger price sought a statutory appraisal of their shares pursuant to 8 Del.C. § 262.
Prior to 1943 the value of the shares of a dissenting stockholder who was entitled to an appraisal was determined by arbitration. In 1943 much of the present statutory procedural mechanisms for an appraisal were adopted. 44 Del.L. Ch. 125. Although 8 Del.C. § 262 has been amended many times since 1943 (especially by 60 Del.L., Ch. 371, in 1976 and by 63 Del.L., Ch. 25, in 1981), the procedural prerequisites for an appraisal remain technical and burdensome. The procedures for a civil action brought in this Court are as set forth in the Chancery Rules, originally adopted in 1947, which closely follow the Federal Rules of Civil Procedure. Chancery Rule 81(a) states:
In an effort to make this appraisal proceeding conform to the intent of the Chancery Rules and to reduce the demands on the litigants and the Court, I directed that after the petition for an appraisal (complaint) and the answer had been filed, an Order Establishing Procedures would be entered and a Stockholder Information Form would be sent by ENSTAR to all the stockholders who had indicated they desired an appraisal of their shares. Huffington v. Enstar, supra. The purpose of the Stockholder Information Form was to attempt to eliminate the necessity for further court hearings as to a stockholder's entitlement to an appraisal if ENSTAR conceded that the stockholder held his claimed shares, had complied with the procedural prerequisites, and was entitled to an appraisal of his shares.
The Stockholder Information Form as approved by the Court, and sent by ENSTAR to each dissenting stockholder who had sought an appraisal, stated:
ONE RODNEY SQUARE, WILMINGTON, DELAWARE 19899, COUNSEL FOR RESPONDENT NOT
LATER THAN JULY 24, 1985. PLEASE USE THE ENCLOSED ENVELOPES FOR FILING OR
MAILING IN YOUR INFORMATION FORMS. ABSENT A SHOWING OF CAUSE BY THE
STOCKHOLDER, FAILURE TO COMPLETE AND FILE OR MAIL YOUR INFORMATION FORM IN A
TIMELY MANNER WILL CAUSE THE COURT TO FORECLOSE YOU FROM ASSERTING A CLAIM IN
THIS PROCEEDING OR BIND YOU TO THE INFORMATION SET FORTH HEREIN BY RESPONDENT
WITH RESPECT TO YOUR SHARE OWNERSHIP.
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
In the Matter of the ) CONSOLIDATED
Appraisal of ENSTAR ) Civil Action Nos. 7802
7857, 7864
Corporation. ) 7796, 7846, 7918 & 7925
----------------------------
1. Name and Ownership of Shares:
Please confirm or correct the following information obtained from the records
of ENSTAR Corporation ("ENSTAR") concerning record ownership of shares of
common and/or preferred stock of ENSTAR on September 25, 1984, the effective
date of the merger of Unimar Subsidiary Inc. ("Unimar Sub") into ENSTAR.
Name __________________________
Address __________________________
Number of Shares Held of Record on Common:___________________
September 25, 1984 Convertible Preferred
Stock
Series A: ________________
Number of Shares as to Which Common:___________________
Demand for Appraisal Made Convertible Preferred
Stock___________________
Series A:_________________
_____ The above information is correct.
_____ I wish to correct the above information as follows:
2. Objections to Demand for Appraisal:
/__/ ENSTAR does not object to your demand for appraisal.
/__/ ENSTAR contends that your demand for appraisal is defective for the
following reason(s):
/__/ (a) Your demand for appraisal was not filed with ENSTAR prior to the
taking of the vote on the Merger of ENSTAR and Unimar Subsidiary on September
25, 1984.
/__/ (b) You voted the shares for which you have demanded appraisal in
favor of the merger.
/__/ (c) You have accepted the merger consideration in exchange for your
shares and thereby waived your right to appraisal.
/__/ (d) You have withdrawn your demand for appraisal and received payment
for your shares at the amount of consideration paid in the merger. A copy of
your withdrawal, if any was received by ENSTAR, is attached.
/__/ (e) You are not a stockholder of record of ENSTAR and your demand for
appraisal was not made by or on behalf of a stockholder of record.
/__/ (f) Other: ___________________________________________________________
You should respond to the above objection(s) prior to July 24, 1985, by
attaching to this Information Form a written statement and/or documents
refuting the objection(s). In addition, if you so complete and file this
form, you may appear in person or by counsel at a hearing, of which you will
receive notice, concerning your entitlement to appraisal. You may wish to
consult with your attorney in determining what response, if any, you should
make to any objection made by ENSTAR.
ABSENT A SHOWING OF CAUSE BY YOU, FAILURE TO PROPERLY RESPOND BY JULY 24, 1985,
INFORMATION SET FORTH HEREIN BY ENSTAR WITH RESPECT TO YOUR SHARE OWNERSHIP.
I certify that the above information is correct.
--------------------------
If you are signing in some representative capacity (e.g., executor or
administrator of an estate, guardian, trustee, attorney, officer of a
corporation), please indicate the capacity in which you are signing.
STATE OF )
) SS.
COUNTY OF )
SWORN TO AND SUBSCRIBED TO before me, ______________________________, a
Notary Public, in and for the State of __________, this _____ day of
_________________, 1985.
__________________________
Notary Public
My commission expires:
THE BELZBERG CLAIMS
ENSTAR has moved to amend the Stockholder Information Form filed by it to assert an objection to the Belzbergs' right to an appraisal not set forth when the Form was prepared. This amendment seeks to raise the defense that the shares owned by the Belzbergs were submitted in acceptance of the merger and a waiver of a right to an appraisal thereby occurred. The motion to amend arises because the Belzbergs' shares were held for them by First City Financial Corp. Ltd. and First City Trust Company which in turn had the shares held for them by CEDE & Co. The name "CEDE & Co." is used by Depository Trust Company to hold securities for its owners who are brokers, banks and fiduciaries. CEDE & Co. does not hold any shares for itself but only holds them as nominee of its owners.
CEDE & Co. was listed on the books of ENSTAR as holding a large number of shares, many more than those beneficially owned by the Belzbergs, and there was no breakdown of the actual beneficial ownership of the CEDE holdings on the books of ENSTAR. Some of the beneficial owners of the stock listed in CEDE's name desired to accept the merger price and some desired to seek an appraisal. CEDE therefore demanded an appraisal for some shares and tendered other shares in acceptance of the tender consideration.
When the Stockholder Information Form was sent to CEDE by ENSTAR on June 7, 1985, it apparently listed those shares held by CEDE for which a demand for appraisal had been submitted and ENSTAR did not indicate any objection to those shares being entitled to an appraisal. It now appears,...
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