Nelson v. Frank E. Best Inc.

Decision Date05 July 2000
Docket NumberCivil Action No. 16329.
Citation768 A.2d 473
PartiesMartin O. NELSON, Jr., Daniel F. Raider and Nancy E. Lee, and Mitchell Partners, L.P., Petitioners, v. FRANK E. BEST INC., Best Universal Lock Co., Best Lock Corporation, a Delaware corporation, and Best Lock Corporation, an Indiana corporation, Respondents.
CourtCourt of Chancery of Delaware

Norman M. Monhait, Carmella P. Keener, Rosenthal, Monhait, Gross & Goddess, Wilmington, Delaware, for Petitioners. A. Gilchrist Sparks, III, Alan J. Stone, and David J. Teklits, of Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware; of counsel: Robert T. Markowski, David M. Kroeger, and Arthur Gollwitzer III, of Jenner & Block, Chicago, Illinois, for Respondents.

OPINION

STRINE, Vice Chancellor.

Before me are the parties' cross-motions for summary judgment, the resolution of which boils down to a tolling issue in the context of Delaware's appraisal statute: when the last day of the limitations period for making an appraisal demand pursuant to 8 Del. C. § 262(d)(2) falls on a Sunday, is the effective deadline for making the demand that Sunday or the Monday immediately afterward?

One of the plaintiffs in this appraisal action, Mitchell Partners, L.P. submitted a demand to defendant Best Lock Corporation ("Best" or the "defendant") on Monday, March 23, 1998, which was twenty-one days after the start of § 262(d)(2)'s twenty-day limitations period. Whereas Mitchell Partners asserts that the final Sunday should not count toward the statutory limitations period and that its demand was therefore timely, Best argues that Mitchell Partners missed the § 262(d)(2) deadline under a plain reading of the statute.

Mitchell Partners' argument that the final Sunday should not count toward the § 262(d)(2) limitations period is premised on what some have called the "Sunday Rule," which holds that when the last day on which certain tasks may be performed falls on a Sunday, "performance on the following day is timely...."1 Although § 262(d)(2) does not explicitly state that the final Sunday must be excluded from the twenty-day limitations period, Mitchell Partners argues that Delaware common law has long recognized the Sunday Rule and that the General Assembly silently incorporated that common law rule when it enacted § 262(d)(2).

Mitchell Partners argues in the alternative that even if this court were to conclude that Delaware common law did not recognize the Sunday Rule when the General Assembly enacted § 262(d)(2), the statutory deadline must nevertheless be computed by reference to Court of Chancery Rule 6(a), which applies the Sunday Rule to the calculation of deadlines for actions taken in this court. Even if one may read § 262(d)(2) as being inconsistent with Rule 6(a), Mitchell Partners concludes, Rule 6(a) must take precedence because a court rule has "the force and effect of a legislative enactment"2 and because 10 Del. C. § 361(c) states that Court of Chancery rules "supersede all statutory provisions in conflict or inconsistent therewith."

For these reasons, Mitchell Partners asserts that its Monday demand was timely.

Somewhat surprisingly, Delaware case law has yet to address this issue. Nor do the commentators on Delaware law appear to have considered the question.3 Moreover, policy arguments can be made on either side of the issue, and non-controlling case law can arguably be read as supporting either position. As a consequence, reasonable people may differ as to the proper outcome. But after considering Mitchell Partners' arguments and the authorities cited, I conclude that the General Assembly that enacted § 262(d)(2) did not contemplate the exclusion of the final day of the twenty-day deadline when that day happens to fall on a Sunday.

I reach this conclusion for several reasons, the most important of which are the clear language of § 262(d)(2), which states that the period for sending a demand is to expire upon the passage of twenty "days," and the fact that § 262 does not contain any provision stating that Sundays are to be excluded from that limitations period. By contrast, in many other instances the General Assembly has explicitly excluded final Sundays from the calculation of statutory deadlines.

Furthermore, I reject Mitchell Partners' contention that Delaware common law recognized a Sunday Rule generally applicable to statutes at the time of § 262(d)(2)'s enactment. The parties have not cited, nor have I found, any decision in which a Delaware court has explicitly adopted the Sunday Rule in the context of a statute that requires an act to be performed outside the courthouse. More generally, there does not appear to have been any firmly recognized English or American common law applying the Sunday Rule to statutorily required acts that do not implicate the common law concept of "dies non juridicus," which simply means "not a court day."4 Indeed, the case relied on by Mitchell Partners in support of this proposition, the 1922 case of Simkin v. Cole,5 suggests that Delaware followed instead the common law rule that the Sunday Rule does not apply to a statute unless the legislature has explicitly adopted the Sunday exclusion. The General Assembly's own practice of codifying the Sunday Rule on a case-by-case basis confirms this conclusion and undercuts the notion that the General Assembly's silence in § 262(d)(2) should be construed as a codification of the Sunday Rule in the context of appraisal demands.

Given these factors, together with the strict construction of the appraisal statute required by the Delaware Supreme Court, I conclude that the General Assembly intended that Sundays would be included in the calculation of deadlines for appraisal demands.

I am similarly unconvinced by Mitchell Partners' suggestion that § 262(d)(2) must be read through the lens of Court of Chancery Rule 6(a), which encompasses the Sunday Rule. Given that § 262(d)(2) sets forth the rights and responsibilities of parties in a process that occurs outside this court, Rule 6(a) has no bearing on the § 262(d)(2) deadline. Indeed, Court of Chancery Rule 1 explicitly states that "[t]hese Rules shall govern the procedure in the Court of Chancery of the State of Delaware...."6 The enabling legislation of 10 Del. C. § 361(a) contains a similar restriction, providing that this court's authority to make rules is limited to matters relating to "practice and procedure with respect to ... causes and proceedings in [the Chancery] Court."7 And because the rules of this court do not apply to the demand submission process, the provisions in subsections (c) and (d) of § 361 governing conflicts between the Court of Chancery Rules and statutory provisions are similarly inapplicable. Even more important, embracing the interpretation advanced by Mitchell Partners would violate the basic tenets of the separation of powers doctrine.

Thus I conclude that the § 262(d)(2) limitations period in this case expired on Sunday, March 22, 1998 and that Mitchell Partners failed to submit its appraisal demand on time. I therefore deny its motion for summary judgment and grant Best's cross-motion for the same relief. The following discussion sets forth my reasoning in greater detail.

I. Factual Background

The undisputed facts are relatively few and as follows.

The underlying appraisal action arose out of three cash-out mergers (the "Mergers"), after which the surviving entities were Frank E. Best Inc. ("FEB"), Best Universal Lock Co. ("BUL"), and Best Lock Corporation ("BLC") (collectively, the "Best Companies"). The Mergers were completed pursuant to 8 Del. C. §§ 228 and 251 and effective as of March 23, 1998. The three Best Companies later merged into Walter E. Best Company, Inc., which is now known as Best Lock Corporation. Best Lock Corporation and the Best Companies are the defendants (collectively, "Best") in this appraisal action subsequently filed by Mitchell Partners and the other plaintiffs. Mitchell Partners is an investment firm, and Joseph Mitchell, who has a law degree and practiced law for several years before becoming a full-time investor, is the firm's sole general partner.

The motions before me, however, concern only certain shares owned by Mitchell Partners in the Best Companies (the "Disputed Shares"). The Disputed Shares were held in Mitchell Partners' brokerage account at Bear Stearns Securities Corp. and were held of record by the Depository Trust Company ("Cede") until shortly before the Mergers.

Upon learning through the Best Companies' public filings that the Mergers were going to take place, Mitchell Partners asked Bear Stearns to transfer the Disputed Shares to Mitchell Partners' name to facilitate an appraisal demand at the time of the Mergers. Mr. Mitchell requested this transfer both in October 1997 and February 1998, but it did not take place, and he does not appear to have followed up on his requests very diligently.

On March 2, the Best Companies mailed a "Joint Information Statement, Notice of Action Taken Without a Meeting, and Notice of Appraisal Rights" (collectively, the "Notice").8 The Notice stated that "[w]ritten demand for appraisal pursuant to Section 262 must be received by the applicable Company no later than March 22, 1998, which is the 20th day after the mailing of this notice."9 Mitchell Partners acknowledges having received the Notice on or before March 5, 1998.

But as of March 5, 1998, the transfer of the Disputed Shares from Cede to Mitchell Partners still had not taken place. Thus that same day Mr. Mitchell instructed Bear Stearns to demand appraisal on Mitchell Partners' behalf. To facilitate that process, Mitchell sent Bear Stearns draft demand letters10 to be forwarded to Cede for submission to the Best Companies.11 Cede made the demand on March 9, 1998. On Friday, March 20, 1998, Mitchell Partners received its daily report from Bear Stearns regarding Mitchell...

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