Hildreth v. Castle Dental

Summary

Case Description: Appellant common stockholders brought an appraisal proceeding against appellee corporation. The Court of Chancery in and for New Castle County rejected the claims of the common stockholders. The common stockholders appealed.

Proceedings Description The dispute revolved around the price paid per share in a merger. The common stockholders claimed that because of the failure to authorize sufficient shares of common stock, (i) the preferred stock should have been declared void, and (ii) the net merger consideration should have been allocated solely on the basis of the common stock authorized by the corporation's charter.

Outcome: the appellate court found that the corporation board properly adopted resolutions authorizing the issuance of the preferred stock. The only infirmity in the preferred stock was that its conversion rights were not fully enforceable because of an authorized share failure. Contrary to the common stockholders' argument, this did not nullify the original issuance of preferred stock. The common stockholders failed to present any evidence to the trial court concerning the proper allocation of value as between the preferred and common stock, separate and apart from the allocation method set forth in the merger agreement. In the absence of any such evidence, the trial court had the discretion to base its decision on the allocation agreed to in the merger agreement, and there was no abuse of that discretion. The judgment was affirmed.

http://courts.delaware.gov/opinions/download.aspx?ID=99680