For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For reversal -- None. The opinion of the court was delivered by Jacobs, J.
The defendant appealed to the Appellate Division from a judgment for the plaintiff entered by Judge Wick in the amount fixed by appraisers appointed by him pursuant to N.J.S.A. 14:12-7. We certified on our own motion.
In March 1961 the defendant General Instrument Corporation announced plans for a merger with Pyramid Electric Company. Thereafter it called a stockholders' meeting for May 10, 1961 to vote on the proposed merger and it fixed April 7, 1961 as the record date for the determination of stockholders entitled to vote at the meeting. See N.J.S.A. 14:5-3. The plaintiff Bache & Co., a
reputable stock brokerage firm, held a substantial amount of General Instrument stock in its street name for the benefit of various customers including Colonial Realty Corporation. As of April 7, 1961 Bache was the registered owner of 33,400 shares including 2,690 shares held for Colonial Realty. Although many of its customers advised Bache to voice their approval of the proposed merger, Colonial advised Bache that it wished to dissent. On May 2, 1961 Bache wrote to General Instrument stating that it was the record holder of a number of shares including 2,690 shares which it had "for one customer who has asked us to dissent to the proposed merger." The letter formally advised that Bache was objecting to the proposed merger and would vote 2,690 shares against it at the scheduled meeting. When the meeting was held Bache voted 2,804 shares against the merger and 18,901 for it. A sufficient number of favorable votes were cast and on May 16, 1961 the merger agreement was filed in the office of the Secretary of State. See R.S. 14:12-3.
On June 15, 1961 Bache filed its complaint under N.J.S.A. 14:12-7 seeking (1) the appointment of three disinterested appraisers to fix the full market value of the 2,690 shares without regard to any depreciation or appreciation in consequence of the merger and (2) an order for payment of the amount fixed by the appraisers. An affidavit attached to the complaint set forth that Bache was the owner of 2,690 shares, that it had notified General Instrument of its dissent, and that it had not voted in favor of the merger. After filing its answer, General Instrument moved to dismiss the complaint because Bache was not the beneficial owner of the stock and had voted some of the stock held in its name in favor of the merger. An affidavit attached to the defendant's notice of motion pointed out that, as aforestated, Bache was the registered owner of 33,400 shares on April 7, 1961 and that at the stockholders' meeting, 18,901 of its shares were voted for the merger and 2,804 were voted against it; the affidavit also stated that up to that time
Bache had not indicated the person on whose behalf the negative votes were cast. An affidavit dated July 21, 1961 by Mr. Dorata, a member of Bache's legal staff, asserted that counsel for General Instrument had been advised orally on June 2, 1961 that the dissent with respect to the 2,690 shares had been made on behalf of Colonial Realty; this was disputed in a counter affidavit filed after the motion to dismiss had been denied and an order dated August 4, 1961 had been entered, determining that Bache was entitled to a judgment appointing appraisers and directing General Instrument to pay the sum ultimately fixed by the appraisers.
Pursuant to leave, General Instrument appealed to the Appellate Division from the order entered on August 4, 1961. In support of its appeal it reasserted the position taken before Judge Wick on its motion to dismiss, that since Bache was not the beneficial owner of the 2,690 shares and since it had voted other stock in favor of the merger it could not maintain an action under N.J.S.A. 14:12-7. Its position was rejected in a comprehensive opinion by Judge Goldmann. Bache & Co. v. General Instrument Corp., 74 N.J. Super. 92 (App. Div. 1962). The Appellate Division affirmed Judge Wick's order and this Court denied an application for certification. 38 N.J. 181 (1962). Thereafter an order dated September 11, 1962 was entered appointing three appraisers and directing that they make an award in the form of a final report as provided for in N.J.S.A. 14:12-7. The appraisers held hearings during which testimony was taken, and before the close of 1962 they filed their report fixing the fair market value in the sum of $52.75 per share.
On February 26, 1963 a hearing was held before Judge Wick. At that time counsel for General Instrument urged that the appraisers' report be rejected on the ground that it did not appear that in fixing the market value they had disregarded any depreciation or appreciation in consequence of the merger as required by N.J.S.A. 14:12-7. He further urged that there had been no proof "as to the agency
between Bache & Co. and its alleged customer" and no "identification of the shares involved in the dissent." In support of his contentions, counsel referred to the Dorata affidavit of July 21, 1961 which had listed certificate numbers for 2,690 shares being held for the account of Colonial Realty; apparently that list included 200 shares dated after April 7, 1961 and 500 shares which had been transferred in June 1961 to other brokers. Judge Wick suggested that General Instrument might well be taken to have conceded ownership of the 2,690 shares during the earlier proceeding before him and the Appellate Division, but that "in order to allay any possible feeling that full justice has not been done" he would give the defendant an opportunity "to see that the plaintiff produces these shares of stock." He then fixed an adjourned date for hearing during which the plaintiff could prove that it is "now the owner of 2,690 shares of stock which it says is for the benefit of Colonial Realty." On the adjourned date counsel for the plaintiff appeared with his witness Mr. Gunn but the then counsel for defendant did not appear.
Mr. Gunn testified that he was assistant credit manager for Bache and had been in its employ for 18 years, that he had handled Bache's Colonial Realty account for about ten years and that as of April 7, 1961 Bache held 2,690 shares of General Instrument for the account of Colonial Realty. He further testified that when Colonial Realty advised Bache to dissent, Bache's legal department verified the Colonial account as consisting of 2,590 shares in a margin account and 100 shares in a cash account and then instructed its cashier's department to place 2,690 shares in safekeeping and earmarked for Colonial Realty. He then produced certificates for 2,690 shares which were examined by Judge Wick who ordered them marked. When Mr. Gunn's attention was called to the fact that 200 of the ...