Court Opinion

ID: 9579303
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:53:38.163882+00
Date Added: 2024-06-11T13:35:26.125700
License: Public Domain

Hudgins, C. J.,
dissenting.
It is with deference that I dissent from the opinion of the *905majority, and submit herewith some of the controlling reasons therefor.
The only question presented is whether holders of minority stock who dissented from a merger of two corporations are entitled to interest on the fair cash value of their stock from the date of merger, or from the date of the judgment on the appraisers’ report.
In my opinion this is not an open question in Virginia. To substantiate this conclusion, I am citing below decisions of this court and other authorities indicating that pursuant to the former construction of the merger statutes, dissenting stockholders were entitled to receive interest on the fair cash value of their stock from the date of the merger until paid.
■ The pertinent language of the statutes (Sections 3820a and 3822 of Michie’s 1942 Code) that governs the decision in this case was construed in Tobacco Products Corp. v. Plummer. While the writ of error in the Plummer Case was refused, the able opinion written by the late William A. Moncure, Judge of the Chancery Court of the City of Richmond, was approved by this court.
In June, 1932, the minority stockholders of the Tobacco Products Corporation proceeded under the sale and merger statutes to have the fair cash value of their stock ascertained. The appraisers in their report fixed the fair cash value at $11.00 a share as of February 10, 1932, the date of the merger. The learned chancellor, in affirming their report, allowed interest from the date of the merger, or sale of the corporate assets. The pertinent parts of Judge Moncure’s opinion are quoted below. He states the precise question thus:
“Does the $11 share value carry interest from February 10, 1932, or does it only carry interest from the judgment of the Court established (ing) that value?
“It is contended on behalf of the Corporation that Section 3822 of the Code of Virginia does not provide that the award shall bear interest, but in effect expressly provides what the dissenting stockholder shall receive, when it says, he ‘shall *906be entitled to receive from the vendor corporation the fair cash value of the stock as of the day before the sale of all of the assets of said corporation was authorized by the written consent of the holders of two-thirds of all its issued and outstanding stock.’ And that the statute provides for the appointment of three appraisers whose duty it is to investigate the condition of the corporation and report to the Court, ‘the fair cash value of the stock of such dissenting stockholders as of the day before the sale of all of the assets of said corporation was authorized by the written consent of the holders of two-thirds, of all its issued and outstanding stock.’ Then counsel for the Corporation points out that the statute provides that, ‘the court if of opinion that the valuation is just shall confirm the same and the amount thereof.- And in any case in which the report of the appraisers is confirmed as hereinabove directed, the amount thereof shall immediately become and be a final judgment of the Court against the vendor corporation and may be collected &c.’ Then it is contended in behalf of the Corporation that even if the language of Section 3822 does not expressly negative the right of dissenting stockholders to interest prior to confirmation the language should be so construed under the settled principle that interest cannot be allowed upon an unliquidated demand. * # *
“Counsel for the Corporation cite the following cases as directly establishing his contention against the allowance of interest: In re Erlanger, 237 N. Y. 159, 142 N. E. 571; Trask v. Peekskill Plow Works, 6 Hun (N. Y.) 236; Shields v. Anderson, 3 Leigh (30 Va.) 729.
“Frankness compels me to admit that the Erlanger Case appears to be authority for his claim against the allowance of interest until from the judgment of. the Court on the award. On the other hand, the Trask Case seems to be authority for the allowance of interest only from the report of the appraisers.
“The language of the New York statutes concerning corporations are not identical with the statutes on the subject in Virginia, and as the liberal policy in Virginia, Section *9076259 of the Code of Virginia, authorizes the allowance of interest in certain enumerated cases, the New York cases ought not to be binding, if the equity and justice of the situation justify the conclusion that the dissenting stockholders should have interest allowed at an earlier date than allowed by the Erlanger Case, and the Trask Case.
“The report of the appraisers fixed the value of the stock as of February 10, 1932, at $11.00 the share and then added that they, ‘Did not take into consideration the lapse'of time since that date, but assumed that interest at six per centum per annum would run on the award from February 10, 1932.’
“The appraisers recognized, no doubt, the justice of the right of the dissenting stockholders to receive interest from February 10, 1932 and would have made the report carry interest from that date, but for the language of the Court order of their appointment.
“Every stockholder has an inherent interest in the assets and property of the Corporation in proportion to the number of his shares of stock. If the Corporation is dissolved he has a like property right in the assets and property of the dissolved corporation, and may demand such share in distribution.
“If a stockholder is a dissenter, and the corporate property is sold, he does not lose his property right, that property right, whether legal or equitable, should remain his until its value is paid to him.
“Such dissenter has the right under Sections ”3820a and 3822 Code of Virginia to proceed to have the value of his property right ascertained and paid to him; but there is, I think, reserved to him (the right) under general law to go into equity and have his property right valued and paid to him.
“In speaking of the summary remedy given by statute to a dissenting stockholder in the case of Winfree v. Riverside Cotton Mills Co., 113 Va. 717, at page 724, 75 S. E. 309, it is said: ‘While this summary remedy is given by statute, and the appellant might have pursued it, he was *908not bound to do so. Although the consolidating statute took away from him the right to defeat the consolidation by refusing to consent to it, it did not take away from him the right to refuse to surrender his stock for stock in the new corporation, or refuse to take anything for it less than its actual value at the date of the consolidation.’ The demurrer to the bill in the Winfree Case was therefore overruled.
“Is it justice that a dissenting stockholder whose property right remains until its value is ascertained and paid to him, be paid only the value of his stock as of the date of sale, without interest, notwithstanding the intervening time between the sale and payment for his stock, the large part of the property sold has at all times yielded large amounts in. rental revenue?
“I do not think that would be justice. * * * *
“If the dissenting stockholders had filed a bill in equity to have their rights fixed, the value of their stock ascertained and decreed them, can it be said that the Court would have no right and power to consider the lapse of time since February 10, 1932, in determining the amount to be paid the dissenting stockholders?
“I think the Court would have such power. I do not think that the summary remedy given a dissenting stockholder as provided by statute was intended, or should be construed as diminishing the amount he should receive if he were in a court of equity.
“Just here it may not be inappropriate to make another quotation, in Miller v. Robertson, 266 U. S. 243, at page 258, 45 S. Ct. 73, 69 L. ed. 265, it is said, ‘One who has had the use of money owing to another justly may be required to pay interest from the time payment should have been made. Both in law and in equity interest is allowed on money due. Spalding v. Mason, 161 U. S. 375, 16 S. Ct. 592, 40 L. ed. 738. Generally interest is not allowed on unliquidated damages. Mowry v. Whitney, 14 Wall. (81 U. S.) 620, 20 L. ed. 860. But where neces*909sary to arrive at fair compensation, the court in the exercise of a sound judicial discretion may include interest, or its equivalent, as an element of damage.’
“In Minors Institute, Vol. 4 part 1, pp. 819-21 after stating the common law rule on the allowance of interest, says, ‘Our courts in Virginia, with some aid from the legislature have long established a different doctrine; namely, that it is natural justice that he who has the use of anothers money should pay interest on it. . .’ The growing favor of allowing interest in Virginia as a result of legislation is shown if provision on the subject in Code of 1819 page 508 is compared with the provisions of the Code of 1849.
“By the Code of 1849 interest in tort cases was for the first time permitted.
“A further comparison of the Code of 1849 with the Code of Virginia 1919 shows that this favorable attitude in the allowance of interest continued to grow.
“Section 6259 Code of Virginia, 1919, permits the jury in any case to fix the time from which interest shall run; and the section further provides, ‘In any suit in equity, or in an action or motion founded on contract, where no jury is impaneled, decree or judgment may be rendered for interest on the principal sum recovered, until such decree or judgment is paid.’
“The next consideration is, does this obligation to pay the dissenting stockholders the fair cash value of their stock as of February 10, 1932, arise out of contract, or does it arise as a tort.
“If the dissenting stockholders right arose as a tort, then there was a conversion, and it seems that in all cases of conversion, interest runs from the time of the conversion.
“Fletcher on Corporations, Section 5120, says, ‘Generally the plaintiff is entitled to interest on the value of the stock from the time of the conversion to the time of the verdict.’
“Doyle v. Bums, 123 Iowa 488, 99 N. W. 195, says, ‘With reference to the conversion of property in general, we have heretofore adhered to the rule announced by the great weight of authority that the measure of damage is the *910value of the property at the time of the conversion, with interest.’ In Vance v. Vandercook Co., 170 U. S. 468, at page 480, 18 S. Ct. 645, 42 L. ed. 1111, Mr. Justice White stated the rule to be, ‘The general rule of damage is the value of the property taken, with interest from the time of the taking down to the trial.’ To the same effect are these cases: Arkansas Valley Land, etc., Co. v. Mann, 130 U. S. 69, 9 S. Ct. 458, 32 L. ed. 854; Jones v. Missouri-Edison Elec. Co. (C. C. A.), 233 F. 49; Pittsburgh, etc., Gas Co. v. Pentress Gas Co., 84 W. Va. 449, 100 S. E. 296, 7 A. L. R. 901; 8 Ruling Case Law, page 537 and note.
“From the authorities just cited it may be stated that the law is, in case of conversion, the person whose property is converted is entitled to recover the fair cash value of the property at the time of the conversion with interest at the established rate from the date.
“What the majority stockholders did was, they lawfully appropriated the dissenting stockholders property to their ■own and expressed purpose. And the law gives the minority stockholders the right to be paid just compensation for their property thus lawfully appropriated.
“Whether the stock is tortiously taken, or taken under the statute, in either case it is taken against the will of the minority stockholder, the dissenter, and it seems to me that the value of the property, just compensation, should be the same in each case.
“Now this question presents itself, is not the duty to pay the dissenting stockholders • for the value of their stock, a duty founded on contract?
“I think it is.
“In the case of Winfree v. Riverside Cotton Mills Co., 113 Va. at page 717 [722], Judge Buchanan in stating the status of the corporation whose charter was amended after the present constitution became effective, said, ‘The charter which is to be so held is not only a contract between the State and the corporation, but is also a contract between the state and the stockholders, the corporation and the stockholders, and between the stockholders themselves.’
*911“Therefore, in like manner, the charter of Tobacco Products Corporation, the chart by which the stockholders conducted their undertakings and paid for their stock, was a contract between the corporation and the stockholders, and between the stockholders themselves.
“The two-thirds majority met and agreed upon what they would do; passed resolutions to that effect; among the things they agreed to do were to sell the assets, and dissolve the corporation. In doing this they agreed to dissolve this existing contract between the stockholders. The liability to the dissenting stockholders certainly was founded by reason of this breach of contractual relation.
“Among the things necessary and required by law in carrying out this dissolution of the stockholders contractual relation was the payment to the dissenting stockholders a fair cash value for their stock, and I think this was a contractual duty and undertaking. Section 6259, Code of Virginia, provides,
“ ‘In any suit in equity or in an action or motion founded on contract, where no jury is impaneled, decree or judgment may be rendered for interest on the principal sum recovered.’
“Therefore, exercising that discretion which I think the situation demands, and the law authorizes, it is my opinion that the petitioning stockholders of Class A stock should receive therefor $11.00 the share with interest thereon at the rate of six per centum the year, from the 11th day of February 1932 (that being the day their property was sold and thereby appropriated to the use of the majority).”
The judgment of this court refusing the appeal was entered on the 22nd day of January, 1934, and was in the following language:
“The petition of the Tobacco Products Corporation of Virginia for an appeal from and supersedeas to a decree entered by the Chancery Court of the city of Richmond on .the 10th day of October, 1933, in a certain chancery cause then therein depending herein Edward T. Plummer and others were plaintiffs and the said petitioner was de*912fendant, having been maturely considered and transcript of the record of the decree aforesaid seen and inspected, the court being of opinion that the said decree is plainly right, doth reject the said petition, the effect of which is to affirm the decree of the said chancery court.”
I have adopted the unusual course of quoting at length from the opinion of Judge Moncure and the order of this court refusing to review the case in order to remove all doubt of the fact that the same argument advanced in this case against the allowance of interest from the date of the merger was advanced in the Tobacco Products Corporation Case and was rejected by unanimous vote seventeen years ago-
In 21 Va. L. Rev., p. 825, Judge Moncure’s opinion in this case was discussed at length, and additional reasons were given for approval of what is there referred to as the “Virginia Doctrine.” The article concludes as follows:' “The instant decision, therefore, appears to be eminently sound in holding that the stockholder becomes a creditor of the corporation as of the appraisal date, and that the obligation bears interest from that time.”
The case of Richmond v. Henrico County, 185 Va. 176, 37 S. E. (2d) 873, is relied upon to support the argument set forth in the majority opinion. In my opinion the facts in that case are dissimilar to the facts in this case. There the court was not dealing with a right arising under a contract, but a right created by statute; hence the court applied elementary principles and strictly construed the statute creating the right.
In the case now under consideration we are dealing with a contractual right. At least it grows out of contractual relations and, without the statute, these rights would be protected in a court of equity.
The reasons advanced to support the conclusion of the majority is not in accord with the former decisions of this court, or with its construction of legislative enactments dealing with the subject. This is particularly true of that part of the opinion in which it is said: “This court is not con*913cerned with whether a dissenting stockholder, as a matter of ‘simple justice’ or under equitable principles, is entitled to interest on the fair cash value of his stock from the effective date of the merger. It is for the legislature and not for the courts to say upon what terms the consolidated or merged corporation should settle its differences with a dissenting stockholder.”
Prior to the decision in Adams v. United States Distributing Corp., 184 Va. 134, 34 S. E. (2d) 244, 162 A. L. R. 1227, the general rule was that a dissenting stockholder had the choice of one of two remedies by which he could enforce his rights—that is, he could invoke the plenary powers of a court of equity, or he could proceed under the statute.
I voted for that opinion because I thought that by so doing it would avoid the possibility of a multiplicity of suits in different forums and would render the administration of justice more orderly and expeditious. In so doing, I relied upon the views expressed by Judge Moncure in the Tobacco Products Corporation Case, to the effect that the statutory remedy was not intended to, nor would, be construed as diminishing the amount such stockholders would receive if the right to apply to a court of equity had been preserved.
The original merger statute (Acts 1902-3-4, p. 437) has been amended and readopted several times. (Acts 1922, p. 625; Acts 1944, p. 528). However, it is to be noted that there has been no substantial change in the pertinent language declaring that the dissenting stockholders “shall be entitled to receive from such consolidated or merged corporation his fair cash value of his stock as of the day before the vote for the agreement of consolidation or merger of his corporation was so cast as aforesaid, which fair cash value if not agreed on between the dissenting stockholder and the consolidated or merged corporation shall be determined in the manner” prescribed.
This was the language construed by Judge Moncure in the Tobacco Products Corp. v. Plummer, and by this court in Craddock-Terry Co. v. Powell, 181 Va. 417, 25 S. E. *914(2d) 363. In the latter case the trial court decided that interest should not begin to run until a year after the consolidation, or sale of the corporate property. In modifying that decree, we said: “Interest will be allowed on the total amount of recovery from January 23, 1939, the date the old corporation transferred the stock to the new corporation, instead of January 23, 1940.” (Italics supplied). This modification was made under the belief that this court was committed to the doctrine that interest should be allowed the dissenting stockholders from the date of consolidation, or sale, as was held in the Plummer Case. It is true that this particular point was not stressed in the briefs, but after the opinion was rendered, an elaborate petition for rehearing was filed, in which this particular point was argued at length. This court, after careful consideration of the petition refused a rehearing.
Judge Burks stated in Kelly v. Trehy, 133 Va. 160, 112 S. E. 757, that “Under well settled rules of construction, ‘when a statute has been construed by the courts and is then re-enacted by the legislature, the construction given to it is presumed to be sanctioned by the legislature and therefore becomes obligatory upon the, courts.’ Mangus v. McClelland, 93 Va. 786, 22 S. E. 364; Draper v. Commonwealth, 132 Va. 648, 111 S. E. 471.”
In the same opinion Judge Burks invoked the doctrine which should be controlling in this case, namely: “It is in the interest of the public that there should be stability in the laws by which they regulate their conduct. * * # the construction of statutes ought not to vary with every change in the personnel of the appellate court * * * .”
The former construction of the pertinent language of this statute was fair, reasonable and made after careful consideration. The learned chancellor who decided this case in the lower court relied upon the former construction in allowing interest from the date of merger. The failure of the majority to adhere to former decisions of this court will work a great hardship upon appellees, and, indeed, will penalize them for asserting their rights in the *915lower court and in this court. Every dissenting stockholder, except appellees, has received interest on the fair cash value of his stock since December, 1942, to different dates of payment. The merged corporation has had the use of appellees’ money ($41,580.00) since 1942, and, by order of the majority, will not be required to pay anything for nine years’ use of it.
Gregory, J., concurs in this dissent.