Opinion ID: 1968591
Heading Depth: 1
Heading Rank: 3

Heading: Excess of appraised value over book value.

Text: (a) Pressed Metals. In December 1954 an appraisal was made by Manufacturers Appraisal Company of the land, buildings and equipment of Pressed Metals and of Acorn Products, its wholly-owned subsidiary. This appraisal was made on the basis of reproduction cost less depreciation. For Pressed Metals it shows a sound value of these assets of $7,470,860.55; and a liquidation value of $2,471,284. Plaintiff seizes upon the sound value, ignoring the other figure, although it might well be said that in the circumstances here presented the liquidation value was nearer to the market value than was reproduction cost. Comparing the sound value in the appraisal with the book value of these assets of $3,084,674, he finds a plus factor of $4,396,000, which he says should be added to the book value of the assets conveyed. Reproduction cost less depreciation is one recognized method of valuation, particularly in connection with a utility rate base in some states. But it is of little value in determining the market value of such assets. Market value does not contemplate cost or replacement value; it presupposes a willing buyer and a willing seller. It is apparent from the appraisal company's letter outlining its method of appraisal that one of the purposes of the appraisal was the ascertainment of insurable values for fire insurance. In the light of the decision to sell or dispose of the assets the appraisal figures are of little importance. What prospective buyer of this corporation would have based his offer on any such figures? Plaintiff says that the management of Pressed Metals used the appraisal figures to support its recommendation to the stockholders in April, 1955 that the Bellanca proposal be rejected. Hence, says plaintiff, the management cannot now repudiate it (the appraisal). What this means is not clear. The proxy statement spoke of the going concern values and the future prospects of Pressed Metals, and plaintiff seems to imply that the directors, having used this language, adopted reproduction cost as going concern value, and could not thereafter sell the assets on the basis of the best offer they could get. If that is the contention, it is obviously unsound. The Vice Chancellor held that the appraisal was not accepted by the corporate defendant's directors as an accurate reflection of market value for specialized plant and equipment under current business conditions. 117 A.2d 357, 362, 363. We agree. We are of opinion that the valuations in the Manufacturers' appraisal have little, if any, bearing upon the question before us (b) Acorn Products. Plaintiff finds a plus factor in the difference between the book value of the Acorn stock on Pressed Metals' books and the value of its assets appearing in the Manufacturers' appraisal. For the reasons stated above, this plus factor is likewise rejected. There is a difference between the value on Pressed Metals' books and the net worth of Acorn as shown by its books of about $153,000. This is too small an amount to have any bearing on the result.