Opinion ID: 2276854
Heading Depth: 1
Heading Rank: 5

Heading: Appraisal Masters Eliminated

Text: The next question presented in this interlocutory appeal is whether there is any role for a special appraisal master when this statutory appraisal proceeding is remanded to the Court of Chancery for a completely new trial. In DiGiacobbe, this Court has recently examined the historically broad use of masters in the Court of Chancery generally. [41] In the specific context of a statutory appraisal proceeding, we now conclude that the Court of Chancery's authority to appoint a special appraiser has been eliminated. In DiGiacobbe, this Court acknowledged that the broad inherent and statutory power of the Court of Chancery to appoint masters can be proscribed by statute or rule of court. [42] Cinerama argues that the 1976 amendment of the appraisal statute constitutes such an enactment. According to Cinerama, that 1976 legislation eliminated both the power of the Court of Chancery to appoint special masters to act as appraisers and the authority of the Court to delegate any portion of its appraisal adjudicatory function to them. We agree. Prior to, its amendment in 1976, the Delaware appraisal statute mandated a two-step process. [43] The petition was initially considered by an appraiser appointed by the Court of Chancery. [44] The appraiser's valuation report was thereafter subject to exceptions to be heard by the Court of Chancery. [45] That two-step process had been in effect for 33 years. The official Commentary explaining the proposed 1976 amendments to the members of the General Assembly stated: At present, the statute requires the court to appoint an appraiser who is charged with the obligation of determining the fair or intrinsic value of the stock which is being appraised. Then, if either party disagrees with the appraiser's findings, the party has the right to have his exceptions heard in the Court of Chancery. Experience has shown this two-step procedure to be wasteful of time and money. Thus, proposed modifications to § 262(e) through § 262(g) provide for the streamlining of the appraisal process by the elimination of the appraiser. The action will now be heard by the Court of Chancery in the first instance. Also, the process is further streamlined by permitting the determination of the value of the stock to go forward while the court is still determining which stockholders have complied with the statute and are entitled to an appraisal. In the past, the court has been required to determine, sometimes through a lengthy process, those stockholders entitled to an appraisal before the actual appraisal process can begin. Again, experience has shown this to be a time-consuming and wasteful process. [46] According to the Commentary, the stated legislative purpose for the 1976 amendments to the appraisal statute was to streamlin[e] . . . the appraisal process by the elimination of the appraiser. [47] The Commentary also explained that, as a consequence of the proposed amendments, future appraisal actions would be heard by the Court of Chancery in the first instance. [48] This legislative intent was to be accomplished by amending the statutory text to require that the Court shall appraise the shares. [49] Based on the foregoing legislative history and statutory text, Cinerama argues that the 1976 legislation eliminated the role of the special appraiser and mandated an adjudication by the Court of Chancery in a one-step process. First, Cinerama submits that the unambiguous text of Section 262(h) mandates an appraisal by the Court, i.e., the Chancellor and Vice-Chancellor only. Alternatively, Cinerama argues that, if the statutory text is ambiguous, the Commentary makes that legislative intent explicit. The guiding principle when construing any statute is the search for legislative intent. [50] When a statute is unambiguous, and there is no reasonable doubt as to its meaning, this Court is bound by the statutory text. Consequently, where the intent of the legislature is clearly reflected by unambiguous language in the statute, the language itself controls. [51] A statute is ambiguous only if it is reasonably susceptible of different conclusions or interpretations. [52] The word Court in the current appraisal statute appears to be an unambiguous synonym for judge, i.e., Chancellor or Vice-Chancellor. Technicolor suggests that the word Court becomes ambiguous when Section 262 is read in pari materia with 10 Del. C. § 372. The latter statute provides that the Court of Chancery may, in any cause pending . . . [therein], appoint a Master in Chancery, pro hac vice in such particular cause. [53] Cinerama argues that Section 262 is a specific self-contained statutory scheme that governs all aspects of appraisal proceedings. Accordingly, Cinerama contends that since Section 262 does not explicitly authorize the appointment of a master, the general provisions in Section 372 cannot confer such authority. As a general rule of statutory construction, when a specific statute is enacted that appears to conflict with an existing general statute, the subsequently enacted specific statute is controlling. Section 372 dates back to 1903. [54] The history of the appraisal statute supports Cinerama's position that the General Assembly did not intend for Section 372 to be applicable in appraisal cases. [55] The appraisal statute underwent a major revision in 1943. [56] The Court of Chancery was assigned the role of appointing a single appraiser to determine the value of the dissenting shares. Although Section 372 had been extant for forty years, the 1943 amendments to the appraisal statute did not invoke its provisions but instead specifically provided for the appraiser to be vested with the same powers and authority as may be conferred upon Masters by the Rules of the Court of Chancery or by the order of his appointment. [57] From 1943 to 1976, Section 372 continued to remain irrelevant to statutory appraisal proceedings. The 1943 amendments to the appraisal statute were the exclusive authority creating the special appraisal master position and alone defined its function. In interpreting a statute, this Court gives considerable deference to an official commentary written by the statute's drafters and available to the General Assembly before the statutory enactment. [58] We have already reviewed the reasons for the 1976 amendments that are set forth in the Commentary. There was a concern, based on experience with the 1943-1976 practice, that the two-step procedure [was] wasteful of time and money. Thus, [the] proposed [statutory] modifications. . . provide for the streamlining of the appraisal process by the elimination of the appraiser. [59] In fact, since the 1976 amendments, apparently no Chancellor or Vice-Chancellor has appointed a master in an appraisal case. Nevertheless, the successor judge held that the 1976 amendments to Section 262(e) did not strip from the Court of Chancery all power to appoint special appraisal experts or masters in appraisal proceedings. According to the successor judge, the 1976 amendments removed the requirement of special masters in appraisal proceedings. We have concluded that, if the General Assembly had meant only to modify the prior practice by converting a mandatory two-step process into an optional one or two-step procedure at the Court of Chancery's discretion, it would not have used the word eliminate to describe its intention. Our conclusion is supported by the legislative history set forth earlier in this opinion. [60] The legal history of a statute, including prior statutes on the same subject, is a valuable guide for determining what object an act is supposed to achieve because frequently legislative enactments are not accompanied by a contemporaneous Commentary. [61] In this case, we are fortunate to have definitive guidance from both of those authoritative sources. In Gonsalves I, after reviewing both the history of the appraisal statute and the Commentary, we held that in 1976, the General Assembly eliminated the role of the Appraiser by enacting a new version of DGCL § 262, which provided `the Court shall appraise the shares. . . .' [62] The General Assembly enacted amendments to the Delaware statutory appraisal process in 1976 that were intended to eliminate the prior practice of having an appraiser functioning as a master and to convert a two-step procedure into a unitary judicial process. Courts are bound to recognize and enforce the exclusionary intent of legislative enactments. [63] Courts may not engraft upon a statute language which has been clearly excluded therefrom by the Legislature. [64] In Gonsalves I, we concluded the role of the Court of Chancery has evolved over time to the present requirement that it independently determine the value of the shares that are the subject of the appraisal action. [65] It is beyond peradventure that the unambiguous mandate of the language in the appraisal statute now requires such proceedings to be conducted by the Court of Chancery's jurists ab initio, i.e., exclusively by the Chancellor and Vice-Chancellors. [66] Accordingly, we hold that the reference of an entire appraisal proceeding and the use of masters to determine the ultimate valuation are not permitted by the present statutory appraisal scheme. [67]