Opinion ID: 2351146
Heading Depth: 1
Heading Rank: 1

Heading: Is the case moot?

Text: Plaintiffs invoke the well-settled principle, conceded by Southern to be the law, that where by an act of the parties a controversy has come to an end the case becomes moot and the court is without power to proceed further. State ex rel. Traub v. Brown, 9 W.W.Harr. 187, 39 Del. 187, 197 A. 478. Plaintiffs in substance argue that the instant controversy concerns the desire of plaintiffs to abandon the appraisal proceedings and accept the terms of the merger and the unwillingness of Southern to consent thereto; and that, even if Southern's consent to the dismissal be required by the provisions of Section 61 of the General Corporation Law, such consent has in substance been given through the act of the transfer agent in canceling plaintiffs' certificates and issuing to them new certificates evidencing their status as stockholders of Southern  an act, say the plaintiffs, clearly within the scope of its authority, since the transfer of stock is the very function of a transfer agent. Even if the transfer agent's act was in error, or was an inadvertence, the transaction, plaintiffs argue, cannot be reversed nor can it be rescinded or set aside for a unilateral mistake. If the instant case involved nothing more than a transfer of stock, plaintiffs' argument could be readily accepted. But if we assume (as we must for the purpose of plaintiffs' motions) that the consent of the corporation is required to make effective plaintiffs' withdrawal of objections to and acceptance of the merger, a different question is presented  the question of the power of the transfer agent to grant that consent. For the reasons following, we think plaintiffs have failed to show that it had such power. At the time when plaintiffs tendered their stock to the transfer agent they did not have the status of stockholders who, by reason of acceptance of the merger, had automatically become entitled to receive certificates of stock in the surviving corporation. On the contrary, they were still claimants to an award of money in an appraisal proceeding, since the effect of the Chancellor's order of November 28 reinstating them as stockholders was stayed and never became operative. Thus the tender of plaintiffs' shares was, at bottom, not an ordinary request to transfer stock but a request that the corporation grant its written approval of their withdrawal of objections to and acceptance of the merger. Until that approval should be granted they had no right to have their shares transferred  more accurately, no right to certificates evidencing the conversion of Danciger shares into Southern shares wrought by the merger. There is no suggestion in the record that any specific written approval of the corporation to such request was given; and if we assume (without deciding) that specific written approval might be waived, it yet remains true that a decision of corporate policy had to be made on behalf of the corporation, viz., whether to grant the consent required by the statute  in effect whether to settle an appraisal claim by according to the claimants the status of stockholders in the surviving corporation. No express authority in the transfer agent to make such a decision for the corporation is shown. Nor was such an act within the apparent scope of its authority. The burden to establish facts supporting the motions to dismiss rests on the plaintiffs. So far as appears here, the scope of the authority of the Hanover Bank was that of a transfer agent solely  not that of an officer or agent in control of litigation. Moreover, the plaintiffs were on notice that the corporation had decided to resist their attempt to abandon the appraisal proceeding and resume their status as stockholders. They could not reasonably have supposed that the transfer agent had authority to revoke that decision. Their counsel had notice that an appeal was imminent, and his knowledge is ascribed to them. Chadwick v. Parkhill Corp., 16 Del. Ch. 105, 110; 141 A. 823, 825. They therefore had information which would justify a reasonable man in believing that the transfer agent, in accepting their certificates and issuing new ones, was acting contrary to its principal's wishes. In these circumstances plaintiffs cannot hold the principal responsible. Restatement of the Law of Agency, Sec. 166, Comment a. Indeed, the record suggests the inference that the plaintiffs' tender of their stock to the transfer agent was prompted primarily by a natural desire to preserve, through record of an actual tender, their rights, if any, to the favorable conversion terms applicable to the preferred stock, which were about to expire. Plaintiff Sabath at least could hardly have expected the transfer agent to ignore the warning embodied in the notation endorsed upon her certificates. Whether or not the suggested inference be correct, it is clear that plaintiffs have failed to show approval of the corporation to their withdrawal of objections to and acceptance of the merger. It follows that the case may not be dismissed as moot; and we accordingly turn to the merits.