Weiss v. Atkins

• Citation: 52 F. Supp. 418
• Parties: WEISS et al. v. ATKINS et al.
• Decision Date: 09 November 1943
• Court: U.S. District Court — Southern District of New York

52 F. Supp. 418

WEISS et al. v. ATKINS et al.

District Court, S. D. New York.

November 9, 1943.

Schwartz & Frohlich, of New York City (Herbert P. Jacoby, of New York City of counsel), for plaintiffs.

Donovan, Leisure, Newton & Lumbard, of New York City (Jerome H. Doran, of New York City, of counsel), for defendants Joseph P. Routh and others.

GODDARD, District Judge.

Motion by defendants, Joseph P. Routh, the Pittston Company and United States Distributing Corporation, for an order dismissing the complaint and directing summary judgment for the defendants.

The complaint alleges that the plaintiffs, as trustees under the last will and testament of Nathan Burkan, deceased, were at all the times referred to and are the holders of 500 shares of common stock of the United States Distributing Corporation; that the value of such shares was destroyed as a result of a merger of the United States Distributing Corporation and the Pittston Company, which merger was brought about by the individual defendants who were directors of these corporations; that by reason of the acts of the defendants, plaintiffs have been damaged in the value of their stock to the extent of $5,000, for which they demand judgment against the defendants.

The answer, in addition to denying material allegations of the complaint, sets up four affirmative defenses. This motion is founded upon the first and third affirmative defenses, namely—that the plaintiffs, as dissenting stockholders of the United States Distributing Corporation, a Virginia corporation, had available a remedy of appraisal under the statutes of Virginia, and that their failure to avail themselves of that remedy, which is exclusive, is a bar to this suit; also that the plaintiffs' failure to allege compliance with certain provisions of that statute, is a further bar to this action.

The Pittston Company, a Delaware corporation, and the United States Distributing Corporation, were merged on December 31, 1942.

The question presented is—whether or not the provisions made for dissenting stockholders by Section 3822 of the Virginia General Corporation Law provide an exclusive remedy. It is apparent that if the Virginia statute was not exclusive, the failure to give notice under that statute is not a good defense in this action.

Many of our states provide for statutory remedies by which dissenting stockholders may institute proceedings whereby the fair market value of their stock may be appraised, and compensation made therefor, but the states differ as to whether such remedy is exclusive. Fletcher on Corporations, Permanent Edition, Volume 15, pp. 242-3, referring to the statutory remedy says — "In some of the cases it has been held to be exclusive Citing Ohio, North Carolina and Maryland cases; but in most of the decisions the contrary view is held by the courts", and cites, among other cases holding to the contrary, Winfree v. Riverside Cotton Mills, 1912, 113 Va. 717, 75 S.E. 309.

Whether this Virginia statute is exclusive is a matter for determination by the Virginia courts. Wallace v. Motor Products Corporation, D.C., 15 F.2d 211; Koster v. Shenandoah Corporation, 258 App.Div. 1079, 18 N.Y.S.2d 38.

In Winfree v. Riverside Cotton Mills, 113 Va. 717, 75 S.E. 309, it was held that the merger statute was non-exclusive and did not prevent the maintenance of an action by a dissenting stockholder to recover the fair value of his stock, and said (75 S.E. 309, at page 312):

"While under the provisions of section 1105e of the Code the Riverside Cotton Mills Company had the right to consolidate with the Dan River Power & Manufacturing Company by a majority vote, any stockholder of either corporation who did not give his assent to such consolidation and was dissatisfied therewith had the right to refuse to become a stockholder in the consolidated corporation, and was entitled to receive from such consolidated corporation the fair cash value of his stock as of the day before the vote for consolidation was cast, and a summary remedy was provided for ascertaining the value of such stock and to secure its payment to the dissenting stockholder. Subsection 41.

"While this summary remedy is given by the statute, and the appellant might have pursued it, he was not bound to do...