Zeeb v. Atlas Powder Co.

• Decision Date: 06 March 1952
• Docket Number: No. 5,5
• Citation: 32 Del.Ch. 486,87 A.2d 123
• Parties: ZEEB v. ATLAS POWDER CO. September Session 1951.
• Court: Supreme Court of Delaware

Page 123

87 A.2d 123

32 Del.Ch. 486

ZEEB v. ATLAS POWDER CO.

No. 5 September Session 1951.

Supreme Court of Delaware.

March 6, 1952.

H. James Conaway, Jr. (of Hering, Morris, James & Hitchens), of Wilmington, for appellant.

Richard F. Corroon (of Berl, Potter & Anderson), of Wilmington, for appellee.

WOLCOTT and TUNNELL, Justices, and HERRMANN, Judge, sitting:

WOLCOTT, Justice.

The appellant was a common stockholder of Darco Corporation which, on July 31, 1950, merged into Atlas Powder Company. In compliance with the requirements of Section 61 of the General Corporation Law, Rev.Code 1935, § 2093, Atlas thereafter filed a petition seeking a determination of Darco's objecting stockholders entitled to payment for their shares. Pursuant to the order entered upon the petition the appellant filed his claim and demanded an appraisal of the value of his Darco shares and payment therefor in cash.

Section 61 permits a dissatisfied stockholder to withdraw from the corporate enterprise after merger and to obtain in cash the value of his shares if he complies with certain required steps. Briefly stated, the dissenting stockholder is required (1) to object to the proposed merger in writing prior to the meeting at which the stockholders' vote on the merger is to be taken; (2) not to vote his stock in favor of the merger, and (3) to make written demand for payment for his stock within 20 days after the recording of the merger agreement.

Atlas resists the claim of appellant for an appraisal of and payment for his shares on the ground that he has not complied with the first step of the statutory requirements.

Appellant contends that both of two letters addressed to Darco are objections in writing within the meaning of the statute. These letters were received by the corporation prior to the meeting of stockholders called to vote upon the proposed merger.

The first letter is dated June 24, 1950, is signed by the appellant himself and, in effect, states that, having read in the newspapers of the proposed merger of Darco with Atlas, he desires further information, and further indicates that he considers the proposed merger unfair to the common stockholders of Darco. Vice Chancellor (now Chancellor) Seitz citing Wiswall v. General Water Works Corporation, Del.Ch., 66 A.2d 424, held that this letter was not an objection in writing within the meaning of Section 61.

The second letter is under date of July 13, 1950 and in form is an absolute objection to the proposed merger. This letter, however, is signed by an attorney-at-law purporting to be acting in behalf of the appellant. The Vice Chancellor upon the authority of In re Universal Pictures Co., 28 Del.Ch. 72, 37 A.2d 615, and Friedman v. Booth Fisheries Corp., 28 Del.Ch. 211, 39 A.2d 761, held that this letter was not an objection in writing within the meaning of Section 61, because no evidence of the authority of the agent to act was furnished the corporation prior to the meeting of stockholders.

A third argument is urged upon us by the appellant for the allowance of his claim for an appraisal. This is based upon the fact that Darco acknowledged receipt of the letter of July 13, 1950 by letter addressed to the appellant stockholder, himself, even though the letter of objection had been signed by an attorney purporting to act for the appellant. Upon this circumstance appellant bases an argument that the corporation is estopped from contesting the appellant's claim on the ground that no proof of the agent's authority to act for the appellant had been furnished prior to the meeting of stockholders. The Vice Chancellor held that the facts raised no estoppel against the corporation.

We will first consider the correctness of the Vice Chancellor's holding, upon the authority of prior decisions in the Court of Chancery, that an objection in writing under Section 61 may be made by a stockholder by and through an agent, but that evidence of the agent's authority to act must be furnished the corporation prior to the meeting of stockholders called to act upon the proposed merger. The question is one of first instance in this court.

In a decision of this court, Stephenson v. Commonwealth & Southern Corp., 19 Del.Ch. 447, 168 A. 211, it was held that the basic purpose of requiring a stockholder, who objects to a proposed merger and who seeks to be paid the value of his stock and to withdraw from the resulting corporate enterprise, to object in writing to the proposed merger prior to the meeting of stockholders called to vote upon it is to inform the corporation and its other stockholders of the number of possible dissentients and, as such, potential demandants of cash for their shares. Knowledge of such information by the corporation and its stockholders prior to the meeting called to vote upon the merger is desirable since the possible amount of cash required to pay off dissenting stockholders might, under some circumstances at least, have an influencing effect upon the attitude of the other stockholders toward the merger itself.

With this purpose of the statutory requirement of an objection in writing prior to the stockholders' meeting in mind, Vice-Chancellor Pearson, in Re Universal Pictures Co., supra, held that the requirement was not satisfied by an objection in writing signed by an agent unless evidence of the authority of the agent to act for the stockholder accompanied the objection, for the reason that the corporation should not be required to assume the existence of the agency and to act upon that assumption. In Friedman v. Booth Fisheries Corp., supra, the same rule was applied to an objection in writing signed by an attorney-at-law purporting to act as agent for a stockholder, and subsequently in Lewis v. Corroon & Reynolds Corp., Del.Ch., 57 A.2d 632, was applied to a demand for payment signed by a purported agent after the recording of the merger agreement when it was held that evidence of the agent's authority must be submitted to the corporation within the statutory period prescribed for the making of a demand for payment.

The present rule followed in the Court of Chancery to the effect that a dissenting stockholder electing to act by an agent under Section 61 must furnish the corporation with evidence of the authority of the agent to act for him within the period of time allowed by Section 61 for the taking of the particular step, depends directly upon the authority of In re Universal Pictures Co., supra, since, upon this point, the subsequent decisions of the Court of Chancery were made upon its authority without re-examination of the question.

Appellant argued below and now argues in this court that the holding of In re Universal Pictures Co., supra, on this narrow question was incorrect. Vice Chancellor Seitz considered the line of decisions in the Court of Chancery as precedents binding upon him, and declined to depart from them. Appellant now asks us to overrule these cases as precedents upon the question. The decisions of the trial courts of this state are not binding precedents upon us under any principle of stare decisis, but, nevertheless, they are entitled to be given great weight and consideration and ought not to be disregarded unless, upon re-examination, they appear clearly to have been decided erroneously. 14 Am.Jur., Courts, § 84.

The reason for the decision in Re Universal Pictures Co., supra, that a stockholder objecting in writing under Section 61 to a proposed merger by and through an agent must, prior to the meeting of stockholders, submit to the corporation evidence of his delegation of authority to the agent to act in his behalf, is stated in that case to be that it is vitally important to the corporation to know, prior to the stockholders' meeting, whether or not the objection is a bona fide one. Referring to the principle that the existence of an agency is not presumed, and citing Jordan Piano Co. v. Lewis, 4 W.W.Harr. 423, 154 A. 467, ¹ as authority, the court concluded that it would be manifestly unreasonable to require the corporation or the consenting stockholders to assume the existence of an actual agency and to take action upon that assumption.

In Re Universal Pictures Co., supra, Jordan Piano Co. v. Lewis, supra, is cited for the proposition that an agency is not established merely from the representation of the purported agent, but must find its ultimate source in some act or omission of the principal. The precise issue before the court and jury in that case was the validity of an alleged collateral parol contract entered into between the defendant and the agent of the plaintiff respecting an abatement of price on an organ sold to the defendant. The plaintiff denied the authority of his agent to bind him to the parol agreement and the issue of the existence or...