Court Opinion

ID: 5393404
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:02:34.364115+00
Date Added: 2024-06-11T08:30:19.814798
License: Public Domain

Cohn, J.
(dissenting). The contention of appellant seems to be that in a case such as this where a corporate stock is listed on leading national security exchanges and is actively and freely traded, the current market price should be conclusive evidence of value, regardless of other circumstances, and if this market price coincides with the value fixed by the appraiser and the court, interest must be disallowed, and the court should order an apportionment and assessment of the appraisal costs among respondents. The statute does not so provide.
Market value is, of course, an important factor to be considered where the stock is listed on the stock exchange and freely traded, but that is by no means a conclusive factor. Investment value and net asset value are also to be weighed. *26in the appraisal process. (Matter of Fulton, 257 N. Y. 487, 492-495; Matter of Marcus [Macy & Co.], 273 App. Div. 725; Matter of Behrens, 61 N. Y. S. 2d 179, affd. 271 App. Div. 1007.)
Here the appraisal proceeding lasted over three months. Thousands of pages of testimony were taken and there were hundreds of exhibits, many of which had been offered by appellant. It would be extremely difficult to recite all the evidence offered pro and con on the question of value. Apparently, market value, investment value and net asset value were considered by the appraiser. He properly received proof of many factors to be regarded in establishing investment value of the stock. Among these were: the rate of return on the stock, the probability that the dividends would be regularly paid, prospect of increase in dividends, selling price of stocks of like character, size of accumulated surplus applicable to the payment of dividends; the record of the corporation and its prospects for the future (Matter of Fulton, 257 N. Y. 487, 495, supra).
Far from finding that respondents had been arbitrary and vexatious, and had not acted in good faith, or that their arguments were not based upon reasonable grounds, the appraiser obviously considered the matter of value to be unusually complex. He also stated that the concept of net asset value as break-up value admittedly posed a perplexing problem; that respondents “ presented persuasive arguments in support of their contention ’ ’ and ‘1 that the proof had raised a variety of serious questions with respect to almost every phase of the appraisal. ’ ’
In his affidavit, the appraiser, who had full opportunity to evaluate the testimony of objecting stockholders, observed that they were able to offer a formidable body of documentary proof as well as opinion evidence to support their claim that the investment value of the stock was the amount they sought, namely: $225 per share. Indeed during the course of appraisal proceedings the stock in the open market had risen to $163.
The Special Term was justified in finding that appellant had failed to maintain its burden of showing that the objectors acted arbitrarily and vexatiously or that they were not acting in good faith. To constitute bad faith some improper motive is essential. (Hearst v. McClellan, 102 App. Div. 336.) Mistake of judgment is not bad faith. (Lonsdale v. Speyer, 174 Misc. 532, 542, 543, affd. 259 App. Div. 802, affd. 284 N. Y. 756.) In Paramount Pictures v. Blumenthal (256 App. Div. 756, 760, appeal dismissed 281 N. Y. 682) this court made the following *27pertinent observation as to so-called vexations litigation: “It may be argued that most litigations are vexatious and annoying. In order, however, that litigation may be legally termed vexatious it must be shown that it is instituted maliciously and without probable cause. (Calvo v. Bartolotta, 112 Conn. 396 # e s ^
A finding that as a matter of law upon the record in this case the dissenting stockholders were arbitrary and vexatious or that they did not act in good faith, is not warranted.
The order of the Special Term should in all respects be affirmed.
Dore, J. P., Callahan and Breitel, JJ., concur with Van Voorhis, J.; Cohn, J., dissents and votes to affirm, in opinion.
Order and judgment modified by striking out the directions for the payment of interest upon the awards to all of the petitioners except Paulson, Cohen and Ames, and the trustees for William Schwab and, as so modified, affirmed, with costs of the appeal against all of the petitioners except those just named. New findings of fact are to be made in accordance with the opinion herein and contrary findings reversed. Settle order on notice.