Meade v. Pacific Gamble Robinson Co.

• Decision Date: 14 February 1947
• Citation: 29 Del.Ch. 406,51 A.2d 313
• Court: Court of Chancery of Delaware
• Parties: JOHN A. MEADE, v. PACIFIC GAMBLE ROBINSON CO., a corporation of the State of Delaware

51 A.2d 313

29 Del.Ch. 406

JOHN A. MEADE, v. PACIFIC GAMBLE ROBINSON CO., a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

February 14, 1947

William S. Potter and Richard F. Corroon, of the firm of Southerland, Berl & Potter (W. G. McLaren, of Seattle, Wash of counsel), for complainant.

Hugh M Morris and Alexander L. Nichols, of the firm of Morris Steel, Nichols and Arsht, for defendant.

OPINION

SEITZ, Vice-Chancellor

This court must determine whether a dissenting stockholder, whose shares were appraised under Section 61 of our General Corporation Law (Rev. Code 1935 § 2093, as amended by 43 Del. Laws, c. 132, § 16), as it existed prior to the 1943 amendments (44 Del.Laws, c. 125, § 6), is entitled to interest on the appraised value from the effective date of the merger, or from some subsequent date. The question of assessing and apportioning costs is also involved.

Practically all the facts were made the subject of a stipulation, although a few additional facts were adduced at the final hearing.

Complainant, John A. Meade, was the record owner of 8,845 shares of the common stock of Pacific Fruit and Produce Company, Inc., a Delaware corporation. On November 24, 1942, despite the adverse vote of complainant's shares, the Pacific Fruit and Produce Company, Inc., approved a plan of merger with Gamble-Robinson Company, also a Delaware corporation. The defendant, Pacific Gamble Robinson Company, is the corporation which resulted from the adoption of the merger plan, which plan was filed in the office of the Secretary of State and recorded on December 5, 1942.

On December 11, 1942, the complainant made written demand on the defendant for payment of his stock. On March 3, 1943, the defendant sent a letter to all dissenting stockholders stating that it was preparing a computation of the value which it would offer to pay for the shares held by the dissenting stockholders.

On or about June 3, 1943, the complainant by his attorneys communicated to the attorney for the defendant his offer in writing to accept the sum of $ 24.15 a share, together with interest at six per cent from December 5, 1942 as the fair value of his shares. Until the appraisers' award was made herein the defendant made no definite offer for the shares held by the complainant.

On August 2, 1943, the parties having failed to come to an agreement as to the value of his stock, the complainant demanded an appraisal thereof and designated one of the appraisers pursuant to the provisions of the appraisal statute. On September 7, 1943, the defendant designated a second appraiser, but the two appraisers so designated failed to appoint a third appraiser with the result that on November 9, 1943, the complainant here filed an action in the Superior Court of the State of Washington for the purpose of having that court appoint a third appraiser under Section 61 of the then existing Delaware Corporation Law. On December 6, 1943, the Washington court entered an order appointing a third appraiser. The Pacific Gamble Robinson Company, defendant here, on appeal to the Supreme Court of Washington, had that court on November 28, 1944 reverse the order of the lower court, and direct the dismissal of the action on the ground that jurisdiction under the statute to make the requested appointment was limited to the Delaware Court of Chancery. See Meade v. Pacific Gamble Robinson Co., 21 Wash.2d 866, 153 P.2d 686.

On January 19, 1945, the complainant, Meade, filed a petition in this court requesting the Chancellor to designate a third appraiser pursuant to Section 61 of the Delaware Corporation Law as it existed on December 5, 1942. Defendant filed a consent answer and on March 12, 1945, a third appraiser was appointed.

On August 5, 1946, the appraisers gave their written determination of the value of the stock owned by complainant as $ 14.40 per share as of the date of the merger.

On August 29, 1946, the defendant offered in writing to pay complainant the amount of the appraisers' award for each share of stock held by him. On September 17, 1946, complainant, by his attorneys, informed the defendant in writing that he would surrender his stock upon receipt of $ 14.40 per share "'without prejudice to or waiver of his rights under the law, including but not limited to his rights to compensation for the use of his capital since the Merger, measured by interest or dividends, or such other method as may be applicable.'" On September 20, 1946, the defendant, by its attorneys, informed complainant that the offer to pay the appraisers' award "'must be accepted as made and not conditioned upon agreement to further litigation or assertion of rights for compensation.'"

On September 30, 1946, the defendant, Pacific Gamble Robinson Company, filed its petition in this court, as part of the original proceeding, to compel complainant to transfer shares held by him and to tax the costs of the appraisal. The complainant, Meade, filed an answer and cross petition thereto on November 4, 1946. In his cross petition Meade requested, inter alia, that the defendant corporation be ordered to pay interest on the principal amount of the award at the rate of six per cent for the period beginning December 5, 1942, and continuing until the date of payment, and that the costs and expenses of the appraisal be assessed against the defendant. Therefore, on October 3, 1946, complainant, Meade, had made demand in writing on the defendant for payment of the value of his shares as determined by the appraisers with interest at six per cent from March 15, 1943 (that date being three months after the date of Meade's original demand for payment).

The parties also set forth in their stipulation a list of the costs and expenses incurred by them in connection with the appraisal. A petition was also filed by the appraisers requesting the allowance of fees and expenses. I shall elaborate upon this phase of the case under the discussion concerning the assessment of costs.

The complainant, Meade, introduced documentary evidence tending to show the substantial profits made by the defendant in the four years since the merger. The defendant corporation took the position that such evidence was not relevant or material to a determination of the issues presented in this case.

After the matter came on for hearing on December 16, 1946, I entered an order directing the defendant to pay into the Registry of this court the principal amount of the appraisers' award. This was done. I directed that payment thereof (less $ 10,000 to cover any part of the costs and expenses which might be taxed against complainant) be made by the Register to the complainant on the same day he received the money. This was done on December 26, 1946.

Under this state of facts, I am called upon to determine:

(1) Whether complainant is entitled to interest on the amount of the award, and if so from what date, and

(2) What costs should be allowed and how they should be allocated, if at all.

Complainant contends that he is entitled to interest on the appraised value of his shares from the date the plan of merger was filed with the Secretary of State, to wit, December 5, 1942. He argues that the right given by the appraisal statute is analogous to the right of condemnation and that although the appraisal statute is silent on the subject of interest, nevertheless, interest should be allowed from the effective date of the merger because only by so doing can a dissenter receive just compensation for his shares. Moreover, he continues, interest is allowed on unliquidated claims in Delaware, which is actually the nature of a dissenter's claim prior to the determination of value by the appraisers.

The defendant corporation contends on the other hand that complainant's right to interest must be found in the appraisal statute alone, and since that statute does not provide for interest either expressly or by fair implication, the complainant is not entitled thereto prior to the time that the corporation is obligated under the statute to pay the award.

The pertinent portion of the appraisal statute (since amended) provides:

"Sec. 61. Consolidation or Merger; Payment for Stock of Dissatisfied Stockholder: -- If any stockholder in any corporation of this State consolidating or merging as aforesaid, who objected thereto in writing, shall within twenty days after the date on which the agreement of consolidation or merger has been filed and recorded, as aforesaid, demand in writing from the corporation resulting from or surviving such consolidation or merger, payment of his stock, such resulting or surviving corporation shall, within three months thereafter, pay to him the value of his stock at said date, exclusive of any element of value arising from the expectation or accomplishment of such consolidation or merger. If within thirty days after the date of such written demand the corporation and such stockholder fail to come to an agreement as to such value of such stock, such stockholder may demand an appraisal of his stock by three disinterested persons, one of whom shall be designated by the stockholder, one by the directors of the resulting or surviving corporation and the other by the two designated as aforesaid and may serve written notice on such corporation designating therein one appraiser and requiring the corporation to designate a second appraiser within thirty days from the date of service of such notice. If within thirty days from the date of service of such notice the corporation shall have failed to designate a second appraiser or if the two appraisers first designated shall fail to designate a third appraiser within thirty days from the designation of the second appraiser, such stockholder...