McGhee v. General Finance Corporation, Civ. A. No. 189.

• Decision Date: 05 May 1949
• Docket Number: Civ. A. No. 189.
• Parties: McGHEE v. GENERAL FINANCE CORPORATION.
• Court: U.S. District Court — Western District of Virginia

84 F. Supp. 24

McGHEE v. GENERAL FINANCE CORPORATION.

Civ. A. No. 189.

United States District Court W. D. Virginia, Abingdon.

May 5, 1949.

Ralph R. Repass and Francis M. Hoge, both of Marion, Va., for plaintiff.

Holman Willis, Jr., and Joseph Wysor Smith, both of Roanoke, Va., for defendant.

BARKSDALE, District Judge.

Effective January 6, 1949, two Virginia corporations, Farmers & Merchants Credit Corporation and General Finance & Small Loan Corporation, merged as one corporation known as General Finance Corporation, under the provisions of the Virginia law relative to corporate consolidations. At the stockholders' meeting held to consider the question of approving the merger, plaintiff, a citizen and resident of the State of Ohio, the holder of twenty shares of preferred stock in Farmers & Merchants Credit Corporation, voted against the merger. Thereafter, he gave notice of dissent pursuant to Section 3822(a), Code of Virginia, and brings this suit to have ascertained the fair cash value of his stock as of the day before the vote for the approval of the merger of his corporation, and to recover the same of the corporation resulting from the merger, as provided by Section 3822(a), Code of Virginia. This section of the Code provides the procedure for ascertainment and recovery of the fair cash value of the stock of dissident stockholders of merged corporations and specifies the courts of the state in which dissentients may establish their rights and obtain their remedies. Defendant has filed its motion to dismiss the complaint upon several grounds, at least one of which seems to me to be sufficient basis for the granting of the motion. Defendant contends that the remedy provided by Code Section 3822(a) is exclusive, and the rights of dissident stockholders thereunder must be asserted in the state courts specified in the statute. I agree with this contention.

In the case of Winfree v. Riverside Cotton Mills, 113 Va. 717, 75 S.E. 309, decided in 1912, it was held that the predecessor statute of Code Section 3822(a), adopted in 1903 and then in force, did not provide an exclusive method for the appraisal of the stock of a dissident stockholder. The court held that the dissident stockholder had his choice of the procedure provided by that appraisal statute, and a suit in equity. In 1922, after the decision in Winfree v. Riverside Cotton Mills, supra, the appraisal statute was amended and reenacted as Code Section 3822(a). In 1945, the Supreme Court of Appeals of Virginia construed Code Section 3822(a) In Adams v. United States Distributing Corp., 184 Va. 134, 34 S.E.2d 244, 162 A.L.R. 1227, and definitely held that a dissident stockholder no longer had available to him the remedy of a suit in equity, the remedy provided by Code Section 3822(a) being exclusive. The court in its opinion further pointed out the evils which might result if various dissenting stockholders adopted different procedures in different courts for the appraisal of their stock. The court said, 184 Va. at page 146, 34 S.E.2d at page 249:

"But that is not all. If the appellants are sound in their view, then they would be free to pursue their equitable remedy in any court, State or Federal, in which they might acquire jurisdiction of the parties. Under this theory the dissenting stockholders could institute actions for the value of their shares in State and Federal courts throughout the country, provided, only, that proper service of process could be effected.

"If such a multiplicity of suits could be instituted, and if all such courts had equal and concurrent jurisdiction, the inescapable result would be that instead of all dissenters from a particular merger receiving equal treatment, those who elected to pursue different remedies, or like remedies in different courts, would inevitably find themselves with widely varying judgments in their favor."

Shortly before the decision in Adams v. United States Distributing Corp., supra, a dissenting stockholder in a Virginia corporation which had merged with another corporation, brought a suit in the United States District Court for the Southern District of New York, seeking to have that court appraise the value of his stock under its general equity powers. The District Court declined to dismiss this action by reason of its conclusion that Virginia Code Section 3822(a) did not provide an exclusive remedy, and therefore a suit in equity was not precluded. Weiss v. Adkins, D.C., 52 F.Supp. 418. On appeal, Weiss v. Routh, 2 Cir., 149 F.2d 193, 196, 159 A.L.R. 658,...