Lucas v. Pembroke Water Co.
| Decision Date | 09 March 1964 |
| Docket Number | No. 5692,5692 |
| Citation | 135 S.E.2d 147,205 Va. 84 |
| Parties | C. A. LUCAS, ET AL. v. PEMBROKE WATER COMPANY, INCORPORATED. Record |
| Court | Virginia Supreme Court |
Arthur F. Kingdon (Andrew L. Farrier, on brief), for the appellants.
Alton I. Crowell (Crowell, Deeds & Nuckols, on brief), for the appellee.
Pursuant to Code, § 13.1-78, Pembroke Water Company, Incorporated, a Virginia corporation, filed its bill in the court below to determine the fair value of the shares of stock of C. A. Lucas and others who had dissented from the sale of the corporation's entire plant and facilities to the Town of Pembroke. The bill alleged that on November 28, 1960, the board of directors of the corporation authorized and directed the sale of its entire plant, franchise and easements to the town for the sum of $90,000; that at a meeting of the stockholders held on March 31, 1961 the majority of the stockholders, holding 62 of the 110 shares of stock of the corporation, had ratified and approved the sale, but that C. A. Lucas and others, holding 46 shares, had objected to the sale; that these dissenting stockholders had made demand on the corporation for the payment to them of the 'fair value' of their shares of stock as of the date prior to that on which the sale had been approved, and that the parties had been unable to agree upon the value of such shares. The prayer of the bill was that the 'equitable value of the shares of the defendants be found and determined, after allowance for the expenses of this action, of the sale, and the expenses of winding up the affairs of the corporation.'
The defendants filed an answer admitting the material allegations of the bill. They also tendered a cross-bill in which they alleged that C. B. Andrews, J. L. Dillow and D. W. Mason, officers and directors of the corporation, had improperly paid to themselves excessive sums for salaries and fees for alleged services rendered the corporation in 1960 and 1961. The prayer of the tendered cross-bill was that these named officers and directors be required to restore to the corporate treasury the amount of these illegal withdrawals.
In a decree the lower court ruled that 'for the present the tendered cross-bill should not be filed as such, but that it might be filed and treated as an answer at this time,' and that should it subsequently appear that it was proper that these officers and directors be brought into the proceeding as parties, permission to do so would be granted. However, this was never done.
With the consent of the parties the court appointed the engineering firms of R. Stuart Royer & Associates of Richmond and Hayes, Seay, Mattern & Mattern of Roanoke to appraise the value of the corporation's plant and facilities as of March 30, 1961. Upon consideration of these valuations and the other evidence adduced by the parties, which was heard ore tenus, the court fixed the 'fair value' of the defendants' shares of stock as of March 30, 1961 at $440 per share. On this basis it entered judgments against the corporation in favor of the defendant dissenting stockholders for the respective amounts due them, with interest thereon at 2% per annum. It further decreed that the plaintiff corporation should pay the expenses of the two appraisals, plus the court costs.
While the lower court found that the named officers and directors had in fact withdrawn from the corporate treasury excessive salaries and fees for the years 1960 and 1961, it did not enter judgments against them for the amount of such excessive payments or require that they be restored to the corporate treasury.
From this decree the dissenting stockholders have appealed, claiming that the court erred (1) in fixing the value of their shares of stock at $440 each; that under the evidence adduced they should have been valued at a much larger amount; (2) in holding that Andrews, Dillow and Mason were entitled to any sums or salaries for services rendered to the corporation; (3) in not ordering these officers and directors to restore to the corporate treasury the amounts of their withdrawals for excessive salaries and fees; (4) in not entering judgments against them for the amount of their respective withdrawals; and (5) in allowing interest at the rate of only 2% on the amounts determined to be due the respective dissenting stockholders.
Pembroke Water Company, Incorporated, was organized in 1926 with C. A. Lucas as its president. He was the majority stockholder and had control and direction of the corporation until March, 1959, when control was obtained by Andrews, Dillow and Mason. By virtue of this latter control, Dillow was elected president, Mason vice-president, and Andrews secretary-treasurer. These officers were also elected directors of the corporation.
The record gives no information as to the capital structure of the corporation other than at the time of this proceeding there were outstanding 110 shares of capital stock at the par value of $100 each. The Andrews-Dillow-Mason group owned or controlled 62 of these shares, the Lucas group 46 shares, while the remaining two shares are unclassified.
Since its organization the corporation has furnished water to the inhabitants and industries of the Town of Pembroke which according to the 1960 census had a population of 1,038. The source of the water supply is a number of springs located near the town. The distribution system consists principally of storage facilities, mains leading into and throughout the town, water meters, and the necessary rights of way.
Through the years the relations between the company and the town have not always been happy. At times the customers complained that the service was inadequate, while the corporation insisted that the rates were too low. In May, 1957, after a hearing, the State Corporation Commission authorized the corporation to increase its rates.
In the meantime the town officials and officers of the corporation had been negotiating for a sale of the plant and facilities to the town. After the Andrews-Dillow-Mason group had acquired control of the corporation these negotiations were brought to a successful conclusion. The officers of the corporation agreed to sell, and the town agreed to buy, the entire plant and facilities for the sum of $90,000. This sale was authorized by the board of directions on November 28, 1960, and approved by a majority of the stockholders on March 31, 1961. This latter action of the stockholders was over the protest of C. A. Lucas and the other defendants in the present proceeding. The sale was consummated on January 2, 1962, at which time the town, through a bond issue, had procured the necessary funds for the purchase.
Although Lucas and the other dissenting stockholders insist that the sale of the plant and facilities was not necessary and for the best interests of the corporation, the record shows that Lucas himself held a mortgage on the plant and facilities in the sum of $32,000 which was past due and for which he had demanded payment on March 26, 1960. The record also shows that the then officers of the corporation were unsuccessful in their efforts to obtain the necessary funds to pay this mortgage. Since there is no evidence that the corporation had any other offers to purchase the plant and facilities, the sale to the town was obviously the only way out of its difficulties.
In 1959, under the Lucas management, the officers and directors were paid total annual salaries of $2,475. Under the new management the annual salaries were increased to $6,075 for 1960, and $7,200 for 1961.
The corporate records show a profit of $1,196.07 and $2,128.39 for 1958 and 1959, respectively, and a loss of $1,846.92 and $718.10 for 1960 and 1961, respectively.
The pertinent parts of Code, § 13.1-78, Acts 1956, ch. 428, pp. 522 523, under which the present suit was brought, are printed in the margin. 1
Since Lucas and the other dissenting stockholders were unable to agree with the corporation upon the value of their respective shares of stock, pursuant to this statute each made written demand upon the corporation for payment of the fair value of his stock as of the day prior to the date on which the vote by the stockholders in favor of the sale was taken.
As has been said, in further compliance with the statute, the lower court appointed the two appraisers who filed their reports fixing the value of the corporation's plant and facilities.
In Adams v. United States Distributing Corp., 184 Va. 134, 146, 34 S.E.2d 244, 250, 162 A.L.R. 1227 (cert. denied 327 U.S. 788, 66 S.Ct. 807, 90 L.ed. 1014), we held that under Code of 1942, § 3822, as amended, 2 the term 'fair cash value' of the stock of a stockholder who dissented from a merger means the intrinsic worth of the dissenter's stock, which is to be arrived at after an appraisal of all the elements of value. The same is true here under Code, § 13.1-78, of the term 'fair value' of the stock of a stockholder who dissents from a sale.
Among the elements to be considered in arriving at the 'fair value' or 'fair cash value' of such stock...
To continue reading
Request your trial
-
Southdown, Inc. v. McGinnis
...factor bearing on value. Roessler v. Security Savings & Loan Co., 147 Ohio St. 480, 72 N.E.2d 259, 260 (1947); Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147, 150 (1964); Porter v. C. O. Porter Machinery Co., 336 Mich. 437, 58 N.W.2d 135, 136 (1953); Adams v. United States Distribu......
-
Boettcher v. IMC Mortg. Co., 2D03-3101.
...App.3d 911, 129 Ill.Dec. 162, 535 N.E.2d 927, 931 (1988); Sieg Co. v. Kelly, 568 N.W.2d 794, 798 (Iowa 1997); Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147, 150 (1964). Accordingly, courts should consider "proof of value by any techniques or methods which are generally considered ......
-
Richardson v. Palmer Broadcasting Co.
...in order to produce a correct finding of "fair value." Root v. York Corp., 29 Del.Ch. 351, 50 A.2d 52 (1946); Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147 (1964); see Annot., 48 A.L.R.3d 430, 439 (1973). This view has developed from the application of statutes which provide for a......
-
Sandberg v. Virginia Bankshares, Inc.
...upon by experts in the particular field, and this is all that Fed.R.Evid. 703 requires. The directors cite Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147, 150 (1964), for the proposition that Virginia law requires consideration of the market price in any determination of damages me......