Voeller v. Neilston Warehouse Co.Voeller v. Neilston Warehouse Co.
delivered the opinion of the Court.
Wе granted'certiorari in this case to review a decision of the Supreme Court of Ohio invalidating a state statute on the ground that it constituted a denial of procedural due process guaranteed by the Fourteenth Amendment. 1 The statute in question provided that the value placed upon his stock by a dissenting shareholder should, after six months and under 'certain circumstances, “cоnclusively be deemed to . be equal to” the fair cash value. 2 The state court held that since the statute required that the demands of the dissenters be made.known only to the corporatiоn, the majority shareholders' were unconstitutionally deprived of property without notice and an opportunity to be heard. "
Concretely, the question was raised here in the following, manner: Petitioners, holders of stock in respondent corporation, were among those who dissented when a vote was called on a sale of substantially all the corporate assets. Two-thirds of the shareholders voted for the sale, which was thereupon consummated. Petitioners gave written notice to the corporation of their objection, the number óf shares they hеld, and the claimed fair cash valuó of their’ stock. The corporation refused in Writing to pay the amount asked, but made no counter
All of these proceedings were in accordance with the applicable Ohio law.- 3 In their suit, petitioners relied on a section of that law which provided that the value claimed by the dissenting shareholders should “conclusively be dеemed to be equal to” fair cash value if the corporation had neither made a counter-offer nor requested an appraisal. 4 One of the majority shareholders filed an intеrvening petition on behalf of herself and all other shareholders similarly situated, alleging that the section of the statute involved was unconstitutional. A judge of the Court of Common Pleas struck out this intervеntion at the request of petitioners, saying that the statute was constitutional, the petition for intervention irrelevant, and the majority shareholders without standing to intervene. 5 No appeal wаs taken from this ruling. When the case came on for trial on the merits, a different judge sat, and it was his opinion that the statute was unconstitutional. The Court of Appeals, one judge dissenting, reversed the triаl court, and was itself reversed, two judges dissenting, by the Supreme Court of Ohio.
We agree with petitioner’s position that notice to' the corporation of the demand for payment constituted notice to the majority stockholders, and that such notice was an adequate compliance with the constitutional requirement of due process. The objective of tibе Ohio' statute permitting the right of appraisal to dissenting shareholders was the elimination of abuses that had long been a fixture in the field of corporate finance.
6
To assure that the right to appraisal would be promptly resorted to and to provide for the contingency that in some cases no such resort would be taken, the Ohio legislature thought it advisable to provide thаt under some circumstances the original offer or counter-offer should
it is true, as respondent urges, that after the majority authorizes the corporation tо effect a sale, the alternatives are thereafter expressly open only to the corporation and the dissenters; no provisiones made for notice to the majority shareholders as individuals. But the majority, by their vote approving the sale of assets, have indicated their intention to remain part and parcel of the corporation; the dissenters, on the other hand, by voting against the sale and by demanding payment, have indicated an intention to sever relationships. If thereafter the failure of the directors to make a counter-offer mаterially prejudices the‘financial stake of the majority, it is no more a want of due process to consider the major-, ity bound thereby than it is to consider them bound by any other act of manаgement. The majority are participants -in a corporate enterprise. In entrusting their capital to the corporation, they accept the disadvantages of the cоrporate'-system along with its advantages. What claimed to be a disadvantage here is a necessary con
The constitutional issue is here raised for the majority shareholders by the corporation, which admittedly itself had notice. Exercising the very delicate responsibility of passing upon the validity of state statutes, this Court has many times declared the rule that only those who have been injured as-the result of the denial of constitutional rights can invoke our jurisdiction on • constitutional questions. 7 Yet here the corporation would have us say that it is sufficiently the representative of the majority to raise in their behalf the constitutional issue, but not sufficiently their representative to receive notice. We hold that, so far as the constitutional requirement of due process is conсerned, it is in this case sufficiently their representative for both purposes, and accordingly we find it necessary to reverse the judgment below. 8
. There is nothing unusual in such a holding; the rights of parties are habitually protected in court by those who act in a representative capacity; an executor or administrator may act for the beneficiaries of an estate; a receiver may represent the collective interests of stockholders, partners, or creditors; a lawyer may appear for his clients; and a corporation may reprеsent the collective interests of its shareholders. In this case, in fact, ■the unappealed ruling of the trial judge on the attempted intervention by the majority stands as an adjudication that in those respects- here material the majority had .committed their interests to the corporation itself.
Reversed.
Notes
Ohio Code Ann. (Throckmorton, 1940) § 8623-72, paragraph 7.
Ohio Code Ann. (Throckmorton, 1940) §§• 8623-65, 8623-72.
The exact langúage is: “If such petition [for appraisal] is not filed within such period, thе fair cash value of the shares shall conclusively be deemed to be equal to the amount offered to the dissenting shareholder by the corporation if any .such offer shall have beеn made by it as above provided, or in the absence thereof, then an amount equal to that demanded by the dissenting shareholder as above provided.”
“The judge said: “The failure to take аdvantage of the statutory provisions may result unfortunately for other stockholders, but their remedy would be against those directors who were derelict in their duty.”
At common law, unanimous shareholder consent was a prerequisite to fundamental changes in the corporation. This made it possible for an arbitrary minority to establish a nuisance, value for its shares by refusal to cooperate. To meet the situation, legislatures authorized the making of changes by majority vote. This, however, opened the door to victimization of the minority. To solve the dilemma, statutes permitting a dissenting minority to recover the appraised value of its shares, were widely adopted. See S. E. C. Report-on the Work of Protective and Reorganization Committees, Part VII, pp. 557, 59Q. The Ohio appraisal statute here in issue was not adopted until after respondent had acquired its charter, but the Ohio Constitution expressly reserves to the state the right to alter or repeal the pnmnrate law. Ohio Const., Art. 13, § 2.
Tyler
v.
Judges,
Christopher
v.
Brusselback,