22 Del. Ch. 262 | New York Court of Chancery | 1937
At a hearing on bill and answer under Rule 43, all the well-pleaded material and relevant allegations of the answer are taken to be true.
One of the grounds upon which the bill relies for relief is that the resolution by which the amendment was adopted did not receive the requisite number of votes. The answer demonstrates by averments of fact that a sufficient number of shares of each class of stock voted in favor of the proposed amendment.
A second ground which the bill advances as a reason for decreeing the amendment to be invalid is that the amendment is to the advantage of the common stockholders and to the corresponding disadvantage of the preferred stockholders, and that the directors, who are largely interested as common stoqkholders, proposed the amendment and, by reason of the voting power they possessed, caused it to be adopted in the interest of unfairly benefitting their common stock. The answer by its rather full recital of facts relevant to that charge, completely refutes it.
A third ground of attack made by the bill is that the favorable vote of the requisite majority of preferred stockholders was secured by fraud and deceit practiced upon
The other respects in which the letter to the preferred stockholders is said to have been infected with fraud and deceit, consist of charges, not of things falsely stated, but of things omitted to be explained. As an illustration it is said that the letter failed specifically to point out to the preferred stockholders that if the amendment was adopted, they would not be entitled to receive in cash four dollars of the five dollars accumulated on the preferred stock by way of unpaid dividends. There are other particulars in which it is charged that a like and similar omission to explain the effect of the amendment was not plainly pointed out to the stockholders. Now with respect to all of those particulars of omission, which are about eight in number, this general observation is applicable to all but one of them, viz., that the letter quite accurately laid the facts before the stockholders from which any person who was sufficiently intelligent to raise an inquiry ought to have been able to find his answer. A little bit of thought and some slight arithmetic would have enabled any stockholder to discover from the facts supplied him by the letters just what the consequences of the proposal would be if it was adopted. If facts which are not highly involved and complicated, are truthfully stated, I do not see how fraud can be affirmed because of an omission to state the obvious consequences of those facts.
There was one particular in which the letter to the stockholders omitted entirely to state a fact. It was this. Under the certificate of incorporation as it now exists, no dividend on the common stock can be declared if such divi
If what has been touched on in the foregoing were all that the case involved, the complainant’s bill would have to be dismissed.
There is another aspect of the case, however, which requires that a decree should be entered in favor of the complainant, declaring the proposed amendment to be beyond the power of the corporation to adopt as against the complainant and that a permanent injunction should issue as prayed.
The case is exactly similar in principle in all but one respect to Keller, et al., v. Wilson & Co., Inc., 21 Del. Ch. 391, 190 A. 115, 125, decided by the Supreme Court of this State on November 10, 1936. The only distinguishing feature consists of this, viz., that in the Keller Case the corpora-, tian was created before the amendment to the General Cor- \ poration Law in 1927, whereas the corporation in this case was created after said amendment of 1927 (Rev. Code 1915, § 1940, as amended by 35 Del. Laws, c. 85, § 10). As the enactment of 1927 purports to enlarge the power of corporations to amend their own charters, and as the defendant was created after this enlarged power of self-amendment of charters was conferred, and, as it is contended, the
I find language in the opinion of the court in Keller, et al., v. Wilson & Co., however, which, as I understand it, makes the law as there declared equally applicable to the situation of the defendant here. The language is as follows :
“Section 26 of the General Corporation Law is the section authorizing amendments of corporate charters. It authorizes nothing more than it purports to authorize, the amendment of charters. The cancellation of cumulative dividends already accrued through passage of time is not an amendment of a charter. It is the destruction of a right in the nature of a debt, a matter not within the purview of the section. The cancellation of the right to such dividends is foreign to the design and purpose of the section. The effect of the charter amendment, in so far as it concerns the status of the shares and the rights of the owners, speaking from the time of its accomplishment, is not denied by the complainants; but there is nothing in the language of the section, as amended, which compels a retrospective operation. The rights of cumulative preferred shareholders to the stipulated dividends accrue to them by virtue of the contract. That right exists and persists. When the necessary corporate action, under the amended statute conferring the power is taken, the status of the shares may be changed, and the right thereafter to claim the dividends as originally stipulated may be cancelled, but the amended statute under the general rule of construction, ought not to have a retroactive effect.”
A decree will be entered as prayed.
Note. Affirmed on appeal. See post p. 407, 197 A. 489.
No opinion for publication.