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Bache & Co. v. General Instrument Corp.

Decided: May 2, 1962.


Goldmann, Freund and Foley. The opinion of the court was delivered by Goldmann, S.j.a.d.


Defendant corporation appeals from a Chancery Division order declaring plaintiff entitled, under N.J.S.A. 14:12-7, to the appraisal of certain stock it held for one of its customers.

Plaintiff, by order to show cause based on complaint and affidavit, sought the appraisal as a minority stockholder dissenting to a proposed merger involving the corporation. Defendant answered and filed a motion to dismiss, with supporting affidavit, to which plaintiff replied. The trial court, after a hearing and on the basis of the pleadings and affidavits, entered the order here in question. We granted defendant's application for leave to appeal.

Plaintiff, a stock brokerage firm, was on April 7, 1961 the registered owner of 33,400 shares of common stock of defendant corporation. That was the date defendant had set as the record date for a special meeting of stockholders to be held May 10, 1961 to consider, among other things, the merger of Pyramid Electric Company with and into defendant corporation. Among the 33,400 shares were 2,690 which plaintiff held in its "street name" for a certain customer who was the true owner.

On May 2, 1961 plaintiff wrote defendant that it held 2,690 common shares "for one customer who has asked us to dissent to the proposed merger," and formally advised that it was objecting to the proposed merger and would vote the shares against the plan at the May 10 meeting. Plaintiff further stated it was in the process of forwarding a duly executed proxy form to effect such vote. Defendant

claims it was never informed of the name of the beneficial owner of the shares. Plaintiff, however, asserts that one Dorato, an attorney in its law department, had informed defendant by telephone of the name, although defendant had never asked for it.

At the May 10 stockholders' meeting plaintiff voted 18,901 shares in favor of the merger and 2,804 shares against. The plan having been approved by a majority of the stockholders, the merger agreement was filed in the office of the Secretary of State on May 16, 1961.

Plaintiff thereupon filed its complaint on June 15, 1961, together with supporting affidavit, demanding appraisal of the 2,690 shares and payment of an award therefor. The complaint was timely, having been filed on the 30th and last day of the period fixed by N.J.S.A. 14:12-7. The complaint did not join or name the beneficial owner of the shares. Defendant filed its answer, motion to dismiss and supporting affidavit on June 28, 1961. The hearing was adjourned from June 30, the original date fixed, to August 3, 1961. Meanwhile, on July 26, plaintiff filed the affidavit of Dorato, alleging he had prepared and mailed the May 2 letter to defendant, and that plaintiff had in its possession certain numbered certificates totalling 2,690 shares, registered in its name, dated prior to April 7, 1961 and held for the account of Colonial Realty Corporation, the beneficial owner. Dorato further stated that defendant had at no time requested the name of the customer for whom plaintiff was formally dissenting. However, in the course of a telephone conversation on June 2, 1961 with one Mulcahy -- who, it appears, is a member of the law firm representing defendant -- he had informed Mulcahy that the dissent was being made for Colonial Realty Corporation, the beneficial owner of the 2,690 shares.

The matter was argued before the trial court on August 3, at which time the order under appeal was entered. Thereafter defendant, on August 11, 1961, filed an affidavit by Mulcahy, apparently for the purpose of rebutting the Dorato

affidavit of July 26. Mulcahy stated he first learned of the Colonial Realty Corporation on August 4 when he read the Dorato affidavit, and denied the allegation contained therein that Dorato had informed him of the name of plaintiff's customer during the phone conversation of June 2. Plaintiff moved in the Chancery Division for an order expunging the Mulcahy affidavit from the record because, among other things, it was filed after the August 4 order had been entered. No action on that motion seems to have been taken.

Defendant argues two grounds for reversal: (1) since plaintiff is not the beneficial owner of the 2,690 shares, it should not be permitted to initiate an action under N.J.S.A. 14:12-7, and (2) plaintiff, having voted other stock in favor of the merger, is precluded ...

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