31 Del. Ch. 20 - Morris v. Standard Gas & Electric Co.’s Empirical Analysis

Citation profile

8 federal appellate · 3 state decisions

Most-quoted passages

The sentences later courts lift from this opinion, ranked by how many decisions quote each — the parts of the opinion doing the work. These counts are smaller than the citation total above because most of the 13 citing decisions cite the case generally; a passage count includes only decisions quoting that exact language verbatim.

1. “• The board reviewed the requirements of the statute requiring that dividends be paid from surplus. In order to evidence the existence of surplus, the board requested an independent competent appraiser familiar with the corporation’s assets to prepare an appraisal of assets (consisting of utility stocks) to determine whether “in its judgment” the assets less the liabilities exceeded the amount needed to pay the proposed dividends. The report, which was presented to the board for the express purpose of considering a declaration of dividends, concluded, in general terms, that the net assets of the corporation exceeded the paid in capital and the proposed dividend. Id. at 579 . • The vice president and treasurer of the company, found to be “completely] familiar” with the assets of the corporation and “eminently qualified both in education and experience to make ... a valuation,” reported to the board that the net assets “substantially exceeded” the amount needed to lawfully declare the proposed dividend. Id. at 580 . • The board obtained opinions from “two Delaware attorneys and one Chicago attorney as to whether a dividend might legally be declared under the Delaware statute.” Id. • The balance sheet showed “earned surplus” of over $25 million, many times the amount of the proposed dividend, but the directors, in an abundance of caution, sought permission from the S.E.C. to pay dividends, which permission was required to pay dividends from unearned surplus or capital in the eve”

   1 later decision quote this exact passage
   e.g. Sheffield Steel Corp. v. HMK Enterprises, Inc. (In Re Sheffield Steel Corp.)

2. “If by an appraisal plaintiff means that all the assets had to be viewed and evaluated separately by the directors or experts ..., I conclude that the statute imposes no such requirement on the directors .... In large companies, ... an appraisal of the type suggested by plaintiff would mean that as a practical matter the provisions of Section 34(b) [permitting declaration and payment of dividends] would be unavailable. [Citations omitted]. I prefer the view expressed in the following language of the New York Supreme Court in Randall v. Bailey, ... 288 N.Y. 280 , 43 N.E.2d 43 : I see no cause for alarm over the fact that this view [taking assets at actual value] requires directors to make a determination of the value of assets at each dividend declaration. On the contrary, I think that is exactly what the law always has contemplated that directors should do. That does not mean that the books themselves necessarily must be altered by write-ups or write-downs at each dividend period, or that formal appraisals must be obtained from professional appraisers or even made by the directors themselves. That is obviously impossible in the case of corporations of any considerable size. In concluding that a formal appraisal of the type mentioned is not required, I do not mean to imply that the directors are not under a duty to evaluate the assets on the basis of acceptable data and by standards which they are entitled to believe reasonably reflect present “values.” It is not practical to a”

   1 later decision quote this exact passage
   e.g. Sheffield Steel Corp. v. HMK Enterprises, Inc. (In Re Sheffield Steel Corp.)