Before MAJOR and FINNEGAN, Circuit Judges, and PLATT, District Judge.
This action, predicated upon Section 4a of Chapter 101, Indiana Acts of 1933, as added by Chapter 65 of the Acts of 1939, Burns' Ind.Stat.Ann.1951 Replacement, § 55-223a, hereinafter called the appraisal statute, was filed July 11, 1952, in the Circuit Court of Sullivan County, Indiana, and removed on motion of defendant to the United States District Court for the Southern District of Indiana. The complaint alleged that the plaintiff Lesch was the beneficial, and Ira Haupt & Company the registered, owner of 1,000 shares of Class A preferred stock of the defendant corporation. (All individuals named in the caption other than Lesch are partners doing business in the name of Ira Haupt & Company.) The complaint further alleged that at an annual meeting of the stockholders of the defendant corporation, held on May 9, 1952, a proposal to amend the certificate of incorporation was adopted "to authorize and empower the Board of Directors to pay, discharge and satisfy $2.00 of the dividends accrued on the Class A stock as of January 1, 1952, by declaring a dividend of $2.00, payable by the issuance of common stock of the Company"; that plaintiffs voted against the amendment and within thirty days after its adoption objected in writing and demanded payment of the fair value of plaintiffs' shares for the reason "that the amendment is of such nature that its adoption without his consent and without giving him a remedy would unconstitutionally deprive him of his rights," and that the parties did not agree on the value of plaintiffs' shares of Class A stock within thirty days after the effective date of the amendment and within ninety days thereafter this suit was commenced.
The relief sought was the appointment by the court of an appraiser to determine the value of said shares of Class A stock and payment of the value as so determined. There was attached to the complaint Exhibit A, which was a notice, issued April 8, 1952, by defendant to its stockholders, calling for a meeting on May 9, 1952, at which the amendment under attack was adopted. There was also attached to the complaint Exhibit B, copy of a notice of written objection and demand signed by Ira Haupt & Company, dated May 15, 1952, which was served upon the defendant.
Defendant raised no factual issue either in its answer or subsequently, but disputed the legal consequences which Lesch claimed resulted therefrom. Both sides moved for a summary judgment, with affidavits in support thereof. Defendant's motion was filed May 4, 1954, and plaintiffs' motion, June 18 of the same year. The court, on October 7, 1954, denied plaintiffs' motion and at the same time sustained defendant's motion, and entered judgment accordingly. From this judgment the appeal comes to this court.
It is evident from the fact that both parties moved for a summary judgment in connection with the concessions made in this court that no material issue of fact is in dispute and that the case may be properly disposed of by summary judgment. The question, therefore, is whether the court erred in entering such a judgment for the defendant rather than for the plaintiffs.
We discern no plausible escape from setting forth the lengthy statutory provision upon which plaintiffs rely, but prior to doing so some further statement of facts perhaps should be made. As already noted, Lesch was the beneficial owner of 1,000 shares of defendant's Class A preferred stock of which Ira Haupt & Company was the registered owner and holder of the certificates therefor. This stock had never been registered n the name of Lesch. It represented an infinitesimal part of defendant's outstanding stock which consisted of 383,267.25 shares of Class A preferred stock and 367,560.40 shares of common stock. While Ira Haupt & Company, a brokerage firm (as well as the individual partners thereof), was named in the caption of the complaint as parties-plaintiffs, the fact is that the complaint was filed by Lesch, without the consent, approval or even the knowledge of Ira Haupt & Company or any of its partners. Mr. Worms (a partner of Ira Haupt & Company) testified on March 25, 1953 that Lesch had not been authorized by Ira Haupt & Company or by any of its partners to commence the action or to name it as a party-plaintiff. He also testified that knowledge that Ira Haupt & Company had been made a party-plaintiff was first acquired on the date of his testimony (March 25, 1953). There was, however, filed with plaintiffs' motion for summary judgment an affidavit executed by two of the partners of Ira Haupt & Company in which it was stated, "Plaintiff Lesch never requested Ira Haupt & Company to join as plaintiffs in his action against the defendant Railroad," but that since March 25, 1953, Ira Haupt & Company had ratified the action of Lesch in joining it as a party-plaintiff, which ratification was stated to be in consideration of Lesch having indemnified it for all costs and expenses in connection with the action.
One of the serious questions arising from the situation as related is whether Lesch as the beneficial owner of the stock was entitled to the benefit of the appraisal statute. A closely related question is whether the ratification by Ira Haupt & Company subsequent to March 25, 1953 should be given a retroactive effect and thereby the status of a proper party from the time the action was commenced. If not, is Ira Haupt & Company barred from maintaining the action by reason of the limitation period provided by the appraisal statute?
Section 55-223a provides as follows:
"If any shareholder of any such corporation who did not vote in favor of such amendment at the meeting at which the amendment was adopted by the shareholders of such corporation, shall, at any time within thirty (30) days after such adoption of the amendment by such shareholders, object thereto in writing and demand payment of the value of his shares, the corporation shall, in the event that the amendment shall be made effective, and in the event that the amendment is of such a nature that its adoption without his consent and without giving him a remedy would unconstitutionally deprive him of rights, pay to such shareholder, upon surrender of his certificates therefor, the value of such shares at the effective date of the amendment, which shall be the date the certificate required in section 4 [ § 55-223] shall be filed in the office of the secretary of state. If within thirty (30) days after such effective date the value of such shares is agreed upon between the shareholder and the corporation, as the case may be, payment therefor shall be made within ninety (90) days after the effective date. If, within thirty (30) days after such effective date, the corporation and the shareholder do not so agree, either such corporation or the shareholder may, within ninety (90) days after such effective date, petition the circuit or superior court of the county in which the principal office of the corporation is located, to appraise the value of such shares; and payment of the appraised value thereof shall be made within sixty (60) days after the entry of the judgment or order finding such appraised value. * * *
"Upon the effective date of the amendment any shareholder who has made such objection and demand shall cease to be a shareholder and shall have no rights with respect to such shares except the right to receive payment therefor. Every shareholder who did not vote in favor of such amendment and who does not object in writing and demand payment of the value of his shares at the time and in the manner aforesaid, shall be conclusively presumed to have assented to such amendment, if he do not within six (6) months thereafter, in a court of competent jurisdiction, question such action. * * *
In summary, this provision is applicable only to a shareholder who did not vote in favor of the amendment and who within thirty days after its adoption objects thereto in writing and demands payment of the value of his shares. The right to receive payment, however, arises only "in the event that the amendment is of such a nature that its adoption without his consent and without giving him a remedy would unconstitutionally deprive him of rights," and then only "upon surrender of his certificates." When these contingencies are met, a thirty-day period is provided for agreement as to the value of the shares, with payment to be made in ninety days, and in case no agreement is reached within the thirty-day period the shareholder has ninety days within which to petition the appropriate court for an appraisal of the value of his shares.
Any shareholder who did not vote in favor of the amendment and who did not object in writing and demand payment of the value of his shares, as previously provided, is conclusively presumed to have assented thereto unless such action is questioned in a court of competent jurisdiction within six months from the effective date of the amendment.
While the instant action was commenced within ninety days after the effective date of the amendment (May 9, 1952, when it was filed in the office of the Secretary of State), in the names of both Lesch and Ira Haupt & Company as plaintiffs, the latter, as shown, was named as plaintiff by Lesch without authority and without knowledge on its part. In fact, Ira Haupt & Company repudiated the use of its name as a party-plaintiff. The question, therefore, is whether Lesch as the beneficial owner of the stock was entitled to institute and maintain this action. While this question, so far as we are aware, has not been passed upon by an Indiana court, we are of ...