Farris v. Glen Alden Corporation
143 A.2d 25 (Pa. 1958)


PROCEDURE: Defendant corporation challenged the decree of the Court of Common Pleas of Luzerne County (Pennsylvania) that denied its motion for judgment on the pleadings on plaintiff's claims brought under § 908A of the Pennsylvania Business Corporation Law.

FACTS:Glen Alden Corp. (D) is a Pennsylvania corporation engaged principally in the mining of anthracite coal. This operation had resulted in $14 million in tax loss carry overs. In October, 1957, List Industries Corp. purchased 38.5% of the stock in D and placed three of its directors on D's board. In March of 1958, the two corporations entered into a reorganization agreement whereby List was to sell all assets to D in exchange for stock and changing the name of D to List Alden. Notice and proxy was sent on March 20, 1958 for the April 11 meeting to vote on the agreement. A majority of outstanding stockholders approved the agreement. Farris (P), a stockholder of D, alleged the notice was defective and the approval should be invalidated. P's complaint was that the reorganization agreement was actually a merger between defendant corporation and another company and that proper notice was not given to the shareholders of their right to dissent and claim fair value for their shares. D contends that the agreement was a purchase of corporate assets of which shareholders had no right of dissent or appraisal.

ISSUE: Whether a shareholder be entitled to appraisal rights if a combination of two corporations is consummated by contract plus is not in accordance with the statutory merger procedure?

RULE: If a contemplated transaction's result is the same as a merger, the transaction is a de facto merger, and the target corporation's shareholders have the right to dissent and receive fair value for their shares.

HOLDING:Affirmed.

The Supreme Court,, held that where consummation of reorganization agreement would transfer a primarily coal mining company into diversified holding company whose interests would range from motion picture theaters to textile companies, and control of coal mining company would pass to directors of holding company, and ownership of coal mining company would pass to stockholders of holding company, and book value of coal mining company's stock would go from $38 a share to $21 a share and book value of holding company's stock would go from $7.50 a share to $21 a share, the reorganization would result in a ‘merger’ and consequently coal mining company stockholders had right of dissent under the statute.