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Application of Atlas Powder Co.

Court of Chancery of Delaware, New Castle County

January 24, 1951

Application of ATLAS POWDER CO.

Proceeding in the matter of the application of Atlas Powder Company, a corporation, for a determination, pursuant to Section 61 of the General Corporation Law, of the value of certain shares of stock of Darco Corporation. The Court of Chancery in and for New Castle County, Seitz, Vice Chancellor, held that when no evidence of authority of stockholder's attorney to file a written objection for stockholder was received by corporation prior to vote on a merger, attorney's letter was not a sufficient objection in writing under the appraisal statute, and that the stockholder was not entitled to an appraisal.

Order on notice.

[32 Del.Ch. 15] H. James Conaway, Jr., of Hering, Morris, James & Hitchens, Wilmington, for claimant Zeeb.

Page 2

Clarence A. Southerland and Richard F. Corroon, of Southerland, Berl & Potter, Wilmington, for Atlas Powder Company.

SEITZ, Vice Chancellor.

The question is whether a certain stockholder filed a legally sufficient objection in writing under our appraisal statute.

Under the Delaware appraisal statute, Rev.Code 1935, § 2093, a stockholder desiring an appraisal must, inter alia, make a written objection and a separate written demand for payment within certain designated periods.

By court order all stockholders seeking an appraisal were directed to file their claims with the Register in Chancery. They were asked to attach to their claims, inter alia, copies of the statutory written objection to the merger which they had given the corporation. The copy of the written objection attached to Mr. Zeeb's claim was a letter of objection written within the proper statutory period. However the letter was not signed by Mr. Zeeb. It was signed by a person representing himself to be Mr. Zeeb's attorney.[1] [32 Del.Ch. 16] No evidence of the attorney's authority to file a written objection for Mr. Zeeb was provided to the corporation prior to the vote on the merger.

This court has held that under our appraisal statute, when an attorney files a written objection on behalf of a stockholder, the company must also be provided with evidence of the attorney's authority to do so. See Friedman v. Booth Fisheries Corp., 28 Del.Ch. 211, 39 A.2d 761. It has also held that when a written demand for payment is made by an attorney, evidence of the attorney's authority must be submitted within the statutory period provided for making such demand. See Lewis v. Corroon & Reynolds Corp., Del.Ch., 57 A.2d 632. The reasoning employed in the Lewis case in connection with the written demand is equally applicable to the written objection. It impels the conclusion here that where a written objection is made by an attorney, evidence of the attorney's authority must be submitted prior to the expiration of the time provided for making such objection. Under the statute, this must be done before the vote on the merger.

Since admittedly no evidence of the authority of the attorney to file a written objection for Mr. Zeeb was received by the corporation prior to the vote, it follows that the attorney's letter was not a sufficient objection in writing under the statute. If the rule announced in the Friedman case concerning the submission of evidence of the attorney's authority is to be changed, it should come from the Supreme Court or the Legislature.

I do not believe the facts estop the corporation from raising the present objection.

The next question is whether an earlier letter written by Mr. Zeeb himself was a sufficient objection in writing under the statute. I pause to note that this letter was not attached to the claim and was relied upon for the first time at the hearing as an objection under the appraisal statute. [32 Del.Ch. 17] Even though it was not attached to the claim, I shall assume that it should be tested to see whether it is otherwise legally sufficient as a written objection.

First, it should be noted that this letter was mailed to the corporation by Mr. Zeeb even before he had received formal notice of the proposed merger from the corporation and before the attorney mailed the letter heretofore discussed. Mr. Zeeb had apparently heard of the proposed merger in the newspaper. His letter reads as follows:

‘ I have read of the proposed merger of the Darco Corporation with the Atlas Powder Corporation. I would appreciate it if you would send me further information on this proposed merger.

‘ What I have to date would indicate that the common of Darco is to receive but one dollar per share. That seems very unfair when the majority stockholder is to receive so many benefits in other ...


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