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MATTER LIPE-ROLLWAY CORPORATION v. JULIUS SELIGSON ET AL. (03/14/69)
SUPREME COURT OF NEW YORK, ONONDAGA COUNTY
1969.NY.40837 <http://www.versuslaw.com>; 300 N.Y.S.2d 478; 59 Misc. 2d 805
March 14, 1969
IN THE MATTER OF LIPE-ROLLWAY CORPORATION, PETITIONER,v.JULIUS SELIGSON ET AL., RESPONDENTS
Hancock, Ryan, Shove & Hust for petitioner.
Shea, Gallop, Climenko & Gould for respondents.
Francis R. Moran, J.
This is a special proceeding under section 623 of the Business Corporation Law to determine the value of respondents' common shares of stock of Lipe-Rollway Corporation. The respondents dissented from a proposed recapitalization of this corporation. The court is satisfied that the remaining respondents have complied with the notice conditions set out in section 623 of the Business Corporation Law and are entitled to receive payment for their shares.
On October 23, 1967, the court appointed attorney N. Earle Evans, Jr., appraiser to hear and report with respect to the value of the shares of stock as of March 28, 1967, the recapitalization having been authorized at a stockholder meeting March 29, 1967. The court has considered the findings of the appraiser together with all of the moving papers and memoranda of law submitted by the attorneys representing petitioner and respondents. The record is voluminous, indicating the careful and competent preparation by opposing counsel.
The petitioner did offer the respondents $19.75 per share for what it considered the fair market value of the stock on March 28, 1967, the valuation date. The respondents contend that the same share of stock on that date was valued at $40 per share. No issue was more simply and concisely presented than in this case, namely, what is the fair value of the common stock as of March 28, 1967.
Certain guidelines have been established by the courts in determining the value of stock. The cases which recite these guidelines are referred to by both parties and are primarly the following: Matter of Fulton (257 N. Y. 487); Matter of Standard Coated Prods. Corp. (61 N. Y. S. 2d 179, affd. 271 App. Div. 1007); Matter of Silverman (Hoe & Co.) (282 App. Div. 252).
Using these precedents to guide us, we note that there are at least three constant formulae we can apply to a going concern in determining stock value. The first factor is market value, which is the attraction a stock has in the market place and the extent to which the movement of this stock reflects the unfettered judgment of the buyers and sellers. A price quotation, except for some unusual or extraordinary development, for example, merger, is governed by dividend returns, the regularity of these returns, the potential for expansion and improvement in the commercial field, price-earnings ratios and other variables.
Closely allied to the market value of a stock is the second factor which is its investment value. The latter formula takes into account and overlaps some of the indicia of market value, namely:
1. The market value of comparable securities
3. Earnings and dividends
5. The company's position in the particular field
6. The company's potential.
It may be more satisfying to use investment value alone in our determination to arrive at the fair value of stock, since this approach is apt to produce more definitive answers to some of the afore-noted factors than market value. But the value of the stock may not be fair unless you do include the variables that are an integral part of any share valuation. For example, you must consider the nature of the business, its relationship to the vastly increasing technological process and the timeliness of its products at a particular date. What we must find is the answer to this question -- what would an informed buyer pay and what would an informed seller sell for a share of Lipe-Rollway stock on March 28, 1967, on the open market. To quote Standard (61 N. Y. S. 2d 179, 183, supra): "It is ...