Southern Production Co.
[Copyrighted Material Omitted]
[32 Del.Ch. 499] Edwin D. Steel, Jr., and William S. Megonigal, Jr., of Morris, Steel, Nichols & Arsht, of Wilmington, for appellant.
John VanBrunt, Jr., of Killoran & VanBrunt, of Wilmington, for appellees.
SOUTHERLAND, C. J., and WOLCOTT and TUNNELL, JJ., sitting.
Appeal from a judgment of the Court of Chancery of New Castle County dismissing, over objection of the corporation, a stockholders' petition for appraisal of shares involved in a merger under the provisions of the General Corporation Law.
SOUTHERLAND, Chief Justice.
The appeal presents two questions:
First, is the appeal moot by reason of the fact that the transfer agent of the surviving corporation, pending the litigation, issued to the petitioning stockholders shares of stock of the surviving corporation in accordance with the provisions of the merger agreement?
[32 Del.Ch. 500] Second, if the case is not moot, was the Chancellor correct in dismissing the petition over the objection of the corporation?
The facts are these:
By agreement of merger duly approved on November 30, 1950, under the provisions of Section 59 of the General Corporation Law, Rev.Code 1935, § 2091, Danciger Oil & Refining Company (herein called 'Danciger') was merged into Southern Production Company, Inc. (herein called 'Southern'), the corporation surviving the merger. On and before the date of the merger the appellees Sabath and Herman (hereinafter called 'the plaintiffs') owned 1800 shares and 200 shares, respectively, of the stock of Danciger. Under the terms of the merger each share of Danciger (excluding treasury shares and shares owned by Southern) was converted into one share of preferred stock of Southern. Southern's preferred stock was in turn convertible at the option of the holder into common stock of Southern at the rate of 1.8 shares of common stock for each share of preferred stock surrendered for conversion on or before November 30, 1951; at a less favorable rate thereafter.
Plaintiffs dissented from the merger and took steps to establish their rights to appraisal under Section 61 of the General Corporation Law. They filed written objections to the merger prior to the stockholders' meeting, voted their shares at the meeting in opposition, and on December 14, 1950, demanded in writing from Southern payment for their shares. No agreement for payment having been reached, plaintiffs on May 15, 1951, filed a petition under Section 61 for an appraisal of their shares. The defendant filed a verified list of stockholders who had demanded payment and an answer admitting the material averments of the petition and praying the court to determine the shareholders entitled to valuation of and payment for their shares and to appoint an appraiser to determine the valuation.
[32 Del.Ch. 501] Thereafter further proceedings were had. By order dated September 10, 1951, plaintiffs were adjudged to have complied with the provisions of Section 61 so as to entitle them to appraisal and payment; and by order dated October 15, 1951, an appraiser was appointed and plaintiffs were directed to submit their certificates of stock to the Register in Chancery for notation of the pendency of the appraisal proceedings.
On October 15, 1951, the plaintiff Herman moved to dismiss the appraisal proceedings.
On October 26, 1951, the certificates of the plaintiff Sabath were submitted to the Register and endorsed with a notation referring to the pendency of the appraisal proceedings and stating that the rights of the holder of the stock were subject to the provisions of Section 61 of the General Corporation Law of Delaware and the orders and decrees entered in the ...