Rank Organization Limited v. Pathe Laboratories, Inc.

• Decision Date: 09 March 1962
• Citation: 227 N.Y.S.2d 562,33 Misc.2d 748
• Parties: RANK ORGANIZATION LIMITED, Petitioner, v. PATHE LABORATORIES, INC., Respondent.
• Court: New York Supreme Court

Page 562

227 N.Y.S.2d 562

33 Misc.2d 748

RANK ORGANIZATION LIMITED, Petitioner, v. PATHE LABORATORIES, INC., Respondent.

Supreme Court, Special Term, New York County, Part I.

March 9, 1962.

Phillips, Nizer, Benjamin, Krim & Ballon, New York City (Gerald F. Phillips, John J. Daly, Joel H. Resnick, New York City, of counsel), for petitioner.

Eileen E. Evers, New York City, for respondent.

SAMUEL H. HOFSTADTER, Justice.

The petitioner, the holder of 500 shares of the common stock of the Pathe Laboratories, Inc., a New York corporation, applies for a judicial determination of the value of its stock, pursuant to section 21 of the Stock Corporation Law, upon the merger of the corporation into Pathecolor, Inc., a Delaware corporation. The respondent cross-moves to dismiss the petition as untimely. Since Pathecolor, Inc., as an incident of the merger changed its name to Pathe Laboratories, Inc., confusion will be avoided by referring throughout this opinion to the merged corporation, of which the petitioner is a stockholder, as Laboratories, and to the possessor corporation which absorbed Laboratories as Pathecolor. The petitioner will be referred to as Rank.

Laboratories at the time of the merger was authorized to and had issued and outstanding 10,000 shares of common stock of the par value of $1 per share. Rank owned 500 of these shares or 5%; the remaining 95% of the ourstanding shares was owned by Pathecolor. Pursuant to section 85 of the Stock Corporation Law of New York, the board of directors of Pathecolor at a meeting held on April 25, 1961, adopted a resolution by which Pathecolor merged Laboratories into itself; the resolution provided that the shares of Laboratories owned by Pathecolor should be canceled and no shares of Pathecolor be issued in their place and that the 'holders' of the shares not owned by Pathecolor should be paid in cash at the rate of $84.58 per share upon surrender of each share. On April 27, 1961, Pathecolor executed a certificate of ownership merging Laboratories into it, in which it set forth the resolution of April 25, 1961 and, as required by section 85 of the Stock Corporation Law, stated that on April 27, 1961, its officers had caused to be mailed to each stockholder of record of Laboratories a copy of the resolution and notice of its adoption. This certificate was filed in the Department of State of the State of New York on April 28, 1961. On May 1, 1961, Pathecolor filed in the office of the Secretary of State of the State of Delaware, the state of its incorporation, a certificate of ownership and merger, in which it also assumed the name of Pathe Laboratories, Inc., in place of Pathecolor, Inc.

Since the only issue to be determined is the timeliness of Rank's present application, the chronology of events becomes critical and must be recited in some detail. Rank is incorporated in England and has its principal place of business in London. The first notice of any kind of the merger addressed to Rank was that of April 27, 1961, mentioned in the certificate of ownership filed in the New York Department of State. This was a formal letter signed by both Laboratories and Pathecolor, forwarding a copy of the April 27, 1961 certificate of ownership and a 'proforma consolidated balance sheet giving effect as of December 31, 1960 of the merger and changes in capitalization.' The letter stated further:

'As a stockholder of record of Pathe Laboratories, Inc., you are entitled to a copy of the resolutions of the Board of Directors of Pathecolor, Inc. effecting the aforementioned merger. The enclosed Certificate of Ownership includes the merger resolutions, and this letter and said enclosure shall constitute notice to you that said resolutions have been duly adopted'.

This April 27, 1961 letter was sent to Rank at 38 South Street, London W. 1, England by 'Registered mail, Return Receipt Requested'; it was, however, sent by surface, not by air mail, and did not reach the Rank mail room until May 10, 1961, on which date it was receipted for by some employee of Rank. It is not disputed that through an unexplained slip this letter of April 27, 1961, and its enclosures, were lost and never reached any officer or executive of Rank.

The next communication to Rank was Laboratories' letter of May 18, 1961, sent in exactly the same way as the letter of April 27, 1961, and received by Rank in London on or about May 29, 1961. This May 18 letter, after referring to the transmission in the April 27, 1961 letter of the copy of the certificate of ownership and informing Rank that on May 1, 1961 Pathecolor, Inc., had changed its name to Pathe Laboratories, Inc., enclosed a bank check for $42,290 in full payment for Rank's 500 shares of Laboratories at $84.58 per share, and requested Rank to forward to Empire Trust Company the Laboratories' share certificate or certificates held by it. It is beyond dispute that the first actual notice of the merger received by Rank was that conveyed in the May 18, 1961 letter.

Immediately on the receipt of this letter, Rank through its secretary on May 29, 1961, sent Laboratories an air mail letter asking for a copy of the April 27 letter and enclosures 'as we are unable to trace their receipt'. Laboratories replied on June 1, 1961. It did not, however, forward the requested papers. Instead, it sent a photostat of the postal receipt evidencing receipt of the April 27 letter and enclosures on '10-5-61' (10th May) and concluded: 'With this information we believe you will be able to locate the April 27 letter and enclosures'. By letter of June 13, 1961, Rank wrote Laboratories that, while receipt of an envelope had been traced, the April 27 letter and its enclosures had not been located and 'I should, therefore, be grateful if you would let me have a copy'. This letter, as well as a follow-up letter of June 27, 1961, and cablegrams of July 5 and July 18, 1961, repeating the request for the documents, were never answered. Accordingly Rank, through its present attorneys, early in August, 1961, and thereafter, sought the needed papers but not until September 21 and 22, 1961 were they forthcoming. Promptly after their receipt Rank, pursuant to the statute, on September 28, 1961 served the formal notice of objection to the merger and demand of payment for its stock, upon which the present proceeding is founded. It is thus perfectly plain that not until September 21 and 22, 1961, when its attorneys received the copies of the papers, did Rank know the date of the filing of the certificate of ownership in the New York Department of State.

The statement of a few additional facts will be helpful to a better understanding of the setting in which the question here posed must be considered. A Delaware corporation, Rank Organization, Inc., whose principal place of business is in New York City, is known generally in the motion picture industry as Rank's United States liaison office. Its president is Robert S. Benjamin, a member of the law firm acting, for Rank in this proceeding. Benjamin in 1960 was in negotiation with Gordon Greenfield, president of Pathecolor and chairman of Laboratories, for the sale of Rank's stock in Laboratories. There were also meetings both in New York and London between Greenfield and John Davis, Rank's deputy chairman and managing director, looking to the possible sale of the Rank stock and the making of a laboratory agreement and correspondence on the subject was exchanged as late as March and April, 1961. In a letter of April 12, 1961 to Greenfield, Davis asks, 'May I hear from you at an early date please?' Throughout, the purchase price discussed was substantially...