Opinion ID: 2194387
Heading Depth: 1
Heading Rank: 2

Heading: analysis of the claims of error

Text: On appeal, Rich claims that the Vice Chancellor committed reversible error by determining that: (i) Rich lacked standing to collaterally attack the Stipulation; (ii) the Connecticut Superior Court did not exceed its jurisdiction when entering the order approving the Stipulation; (iii) that order was entitled to full faith and credit; (iv) the Stipulation did not confer upon Gray, Sr. any voting rights that he, as the minor children's parent, did not already have; and (v) Gray, Sr.'s voting of his minor children's shares was not a use of his children's property that required the prior appointment of a guardian of the children's estate under Connecticut law. Because the facts material to these claims are uncontroverted, the issues presented are all essentially questions of law that this Court reviews de novo. [13] Having considered the issues raised on this appeal, we conclude that only the fifth presents an issue of substance. The substantive issue is whether the Connecticut guardianship statute, as applied to these facts, required the appointment of a guardian of the estates of the minor children before their Realty stock could be voted in the manner set forth in the 2005 Shareholder Consent. Rich's other four claims are procedural, in that they involve a collateral attack upon the Connecticut Superior Court order approving the Stipulation. Those procedural claims are readily disposed of, because they rest on an incorrect premise. For that reason we first address the collateral attack issues and then turn separately to the remaining issue of substance. Preliminarily, we note that the basis of this action is 8 Del. C. § 225, a statute that empowers the Court of Chancery to determine the validity of any election, appointment, removal or resignation of any director or officer of a Delaware corporation, and the right of any person to hold or continue to hold such office. [14] Section 225 also authorizes inquiry into the validity of actions taken by written consent. [15] The scope of a Section 225 action, however, is not unlimited, and embraces only issues that are pertinent to determining the validity of the election [16] in this case, the validity of the written consents themselves. The Collateral Attack Issues Rich first contests the Court of Chancery's determination that Rich lacked standing to attack collaterally the Stipulation and the Connecticut Superior Court order approving it. The Vice Chancellor held that Rich had no standing to attack that order under Connecticut law, because Rich was not a party to, and had no cognizable interest in, that proceeding. Consequently, Rich also lacked standing to mount that collateral attack in a Section 225 Chancery proceeding. That ruling is correct as a matter of both Connecticut and Delaware law. As the Vice Chancellor correctly held, [i]n Connecticut a person not a party to prior divorce proceedings has no standing to attack collaterally the divorce decree where the person has no legally protected interest adversely affected by the decree itself at the time it was rendered. [17] Noting that the Delaware law on standing is similar, [18] the Vice Chancellor concluded that in this case: . . . Rich failed to identify any legally protected interest it had in the Stipulation between Foster and Gray [Sr.] when the Connecticut Superior Court granted it. . . . Rich was a stranger to the divorce proceedings and had no interest in the divorce or standing to participate in those proceedings. Furthermore . . . Rich's challenge to the Stipulation is not based on a wrong committed against it. [19] In the alternative, the Court of Chancery ruled that even if Rich had standing to attack collaterally the Superior Court order approving the Stipulation, the attack had no merit. That alternative ruling is also correct. Rich claims that, in approving the Stipulation, the Connecticut Superior Court exceeded its jurisdiction. The Stipulation, therefore, was not entitled to full faith and credit, and the Court of Chancery erred in holding otherwise. Rich's argument runs as follows: the Stipulation was ultra vires, because it conferred upon Gray, Sr. the power to vote their minor children's Realty stocka power that neither Gray, Sr. nor Ms. Foster could exercise without first being appointed guardian(s) of their children's estate. By approving the Stipulation, the Connecticut Superior Court implicitly validated Gray, Sr.'s and Ms. Foster's status as guardians. The Superior Court had no power to do that, because only the Connecticut Probate Court is empowered to appoint a guardian of a minor's estate. The Connecticut Superior Court having had no jurisdiction to approve the Stipulation, the Vice Chancellor erred by according the Stipulation legal force and effect in this Section 225 action. This argument fails for two separate, though interrelated, reasons. First, it rests on the erroneous premise that the Stipulation transferred or assigned to Gray, Sr. Ms. Foster's power to vote the minor children's Realty shares. In fact, the Stipulation did no such thing. It merely documented and rendered enforceable Ms. Foster's promise not to interfere with, or oppose, any efforts by Gray, Sr. to pursue their minor children's rights (including voting rights) in the Realty shares. As the Vice Chancellor pointed out, both parents already possessed the right to vote the Realty shares on their minor children's behalf, subject only to the Connecticut guardianship statute, if applicable. Thus, the premise that the Stipulation transferred or assigned to Gray, Sr. the children's voting rights in the stock is unfounded. Second, Rich's collateral attack argument rests upon the premise that the Connecticut Superior Court order approving the Stipulation operated as a sub silentio appointment of Gray, Sr. as guardian of his minor children's estate. That premise is also unfounded, because it mischaracterizes the order. The only effect of that order was to approve a negotiated settlement of the Connecticut divorce proceeding. That any court having jurisdiction over a dispute is empowered to approve a binding settlement of that dispute, is a proposition so basic as to require no citation. No party disputes that the Connecticut Superior Court possessed jurisdiction to adjudicate issues relating to the divorce of Gray, Sr. and Ms. Foster, and the Vice Chancellor correctly so recognized. [20]