Kohler Company v. Sogen International Fund, Inc.

No. 99-2115

STATE OF WISCONSIN IN COURT OF APPEALS

DISTRICT II

Kohler Company,

Petitioner-Respondent,

Sogen International Fund, Inc., Helen Winter,

Catharine Bemis Stayer, Barbara H. Loveland,

John H. Strauss, Rita R. Strauss, Marie H. Kohler,

John M. Kohler Trust f/b/o Marie H. Kohler,

Julilly W. Kohler, John M. Kohler Trust

f/b/o Julilly W. Kohler, Gillian B. Kohler,

Robert E. Kohler, Jr., Victoria G. Kohler,

Cathlin Deborah Kohler, Briggs & Stratton

Corporation, Isbelle Miller and George M. Chester,

Trustees of George Chester Residuary Trust,

Smith Barney Incorporated, Verne R. Read,

Trustee of Marian C. Read Residuary Trust,

James F. and Mercedes C. Heyrman

Revocable Trust, Marshall & Ilsley Trust,

Willard and Eunice Kohlhagen, Dexter Defnet,

Bonnie Kohl, Laurie Andruscavage, Patrick M. Wilson,

ABN-AMRO, Inc., a foreign corporation,

Associated Bank Green Bay, N.A., as Trustee for

Janet A. DeSpirito, Associated Bank Green Bay,

N.A., as Trustee for Krueger International,

Inc., Salaried Employees' Retirement Plan,

Associated Bank Green Bay, N.A., as Trustee for

John Rose, Sr., Associated Bank Green Bay, N.A.

and Allan Ross as Trustees for the Thomas R. Nelson

Trust, Frederick E. Baer, Bank America

NT & SA, d/b/a Seafirst Bank, as Trustee for

the Rosebud Trust, Thomas J. Beno, M.D. as

Trustee for Thomas J. Beno M.D. Revocable

Trust, Gerald L. Buckley, Catherine Ann Calaway,

Susan A. Hook Czarnocki and Sara E. Cartledge,

Josephine P. Delorenzo as Trustee for

Josephine P. Delorenzo Trust UAD, John A. Denis,

Paul D. Dibley, DDS, S.C. as Trustee of

Profit Sharing Plan & Trust, Michael D. Donovan

as Trustee of Michael D. Donovan Rev. Living

Trust, Quinn M. Donovan, Milton Duescher,

Eugene W. Dwyer and Eileen M. Dwyer, George M.

and Margaret E. Evans, Paul W. Fairchild, Jr.,

Clara Mae Felts, Orlin F. Felts, Carolyn L. Fey,

Sara Fortune, Richard O. and Patricia P. Friday,

Mary E. Gehr and Robert J. Gehr as

Co-Trustees of the Mary E. Gehr Revocable

Living Trust, Mary E. Gehr and Robert J. Gehr

as Co-Trustees of the Robert J. Gehr Revocable

Living Trust, Marvin Gerlikovski, Donald J. Heinzen,

Scott D. Hendrickson, Dr. Harold J. Hoops, Jr.,

Mrs. Frances Hoops, Susan K. James,

Paul R. Johnson, Clarence M. and Juelaine Krahn,

James F. Kress, Laurie A. Lamberg,

Bonnie R. Laird, Benjamin W. Laird and

William D. Laird, Dr. Frederick Joseph Lamont,

Christopher Larson, M.D., and Randine Larson,

Herbert C. Liebmann, Jr. and Marie V. Liebmann

as Trustees for Herbert C. and Marie V. Liebmann

Revocable Trust, Leonard C. Liebmann

as Trustee of Leonard C. Liebmann Revocable

Trust, Ruth Liebmann as Trustee for Ruth Liebmann

Revocable Trust, John J. Mackin, Jr.,

Edward N. Martin, Margaret Ellen Martin,

Mary Ellen Martin as Trustee for Margaret Martin

Trust, Mary Ellen Neufeld Martin,

Patrick Albert Martin and Mary Ellen Neufled Martin,

c/o Fiduciary Trust Company as Trustees for

Mary Ellen Neufled Martin Trust A, Patrick

Albert Martin and Mary Ellen Neufeld Martin,

c/o Fiduciary Trust Company as Trustees for

Mary Ellen Neufled Martin Trust B, Patrick

Albert Martin and John C. Brogan as Trustee for

Mary Ellen Neufeld Martin 1997 Supplemental

Trust, Patrick Albert Martin, Christine E. Mayer,

Marilyn Kane Miller, Herbert J. Mueller,

E. Frederick Murphy, Elbridge N. Murphy,

John G. Murphy, Janet C. Muth, Franklin Mutual

Advisors, Inc., as Trustees for Mutual

Discovery Fund, MV Partners, Frederick W. Neveu

and Mercedes M. Neveu as Trustees for the

Frederick W. Neveu and Mercedes M. Neveu

Revocable Trust, Norbert & Company, c/o The

Premonstratensian Fathers, Wayne R. Peterson,

James W. Piette, Suzanne M. Piette, David Putz,

Myron and Robert Rabinovitz, Michael C. and

Jessica M. Raymaker as Trustee for Michael C.

and Jessica M. Raymaker Trust/Raymaker Living

Trust, Richard W. Ross and Ruth E. Ross,

Bruce H. Ruoff, George Sarkis, Ronald A. and

Janet M. Schauer, Robert T. Schmidt, M.D., as Trustee

for Robert T. Schmidt, M.D., and Jane S. Schmidt

Revocable Trust of 1990, Bank One Trust

Company as Trustee for Verna C. Sharpe

Revocable Trust, Gene H. Specht and Carol Ann Specht,

Norwest Bank WI, National Association

Investments and Trust as Trustee for

Walter J. Koepsell, Jr., Family Trust, Alice B. Stayer,

Dudley J. Godfrey, Jr., as one of the Trustees

for Ralph C. Stayer Life Insurance Trust,

Ralph F. Stayer, Jane F. Stoehr, Frances Stoll,

Marjorie C. Stolz, Margaret Stovic, Ralph Stovic,

Margery H. Uihlein, c/o The Glenora Company

as Trustee for the Margery H. Uihlein

Revocable Trust, Barbara Van Abel as Trustee of

Stoll Family Trust, Merlin A. and Delores A. Vanderheiden,

George and Aune A. Virt, Steven A. Virt,

Michael L. Wagner, William M. Wesley,

Jean A. Wielgus, Lloyd A. Wielgus,

Frederick C. Wieting, Jr., and Kathleen A. Wieting,

Rosa Wiza, John and Mary E. Martin Zellerbach as

Trustees for Zellerbach Living Trust, dated

2/14/91, Separate JWZ, John and Mary E. Marting

Zellerbach as Trustees for Zellerbach Living

Trust, dated 2/14/91, Separate MEMZ, David K. Dunn,

M.D., Edward F. Biedron, Thelma Harwitz

and Wm. H. Schield, Jr., as Trustees,

Respondents-(In T. Ct.),

Ted Petrie and Jane Petrie,

Respondents-Appellants.

APPEAL from an order of the circuit court for Sheboygan County: l. edward stengel, Judge. Affirmed.

Before Brown, P.J., Anderson and Snyder, JJ.

¶1 PER CURIAM. Ted and Jane Petrie appeal from an order granting Kohler Company a declaratory judgment. The circuit court concluded that the Petries waived their right to be a party to the proceeding to appraise the fair value of Kohler shares held by minority shareholders because they did not timely dissent from a proposed merger involving Kohler. Because we conclude that the Petries, through their nominee, received timely and appropriate notice of their dissenters’ rights but did not timely exercise those rights, we affirm.

¶2 The Petries were the beneficial owners of one share of Kohler stock. At the time Kohler gave notice of an April 24, 1998 special meeting of shareholders (the April 4 notice) at which shareholders would vote on a merger which would require Kohler’s minority shareholders to tender their shares at a price determined by Kohler, Kohler’s records identified CEDE & Company, the Petries’ nominee, as the recordholder of the Petries’ share of Kohler stock. Included with the April 4 notice were copies of the Wisconsin dissenters’ rights statutes and proxy materials (hereinafter the “proxy statement”). The proxy statement advised shareholders that those wishing to assert dissenters’ rights had to deliver a written objection before the merger vote was taken.[1]

¶3 On May 8 (the adjourned date for the meeting of the shareholders), Kohler’s shareholders approved the merger. On May 15, the Petries became aware of the merger, gave written notice of their objection and demanded payment for the fair value of their share of stock.

¶4 In July 1998, Kohler filed a petition under Wis. Stat. § 180.1330 (1997-98)[2] to determine the fair value of the dissenters’ shares of Kohler common stock. Kohler contended that the fair value of each share immediately before the merger was $55,400, and Kohler paid that amount to those dissenters/respondents who had made payment demands. See Wis. Stat. § 180.1325. Kohler’s petition asked the court to determine that it had paid the fair value of the common shares to the respondents and to exonerate Kohler from liability to the respondents. Kohler named as respondents those shareholders who had dissented from the merger within the meaning of Wis. Stat. § 180.1301(3) and exercised dissenters’ rights as required by Wis. Stat. §§ 180.1320 to 180.1328. The Petries were not named as respondents because they had not timely asserted their dissenters’ rights.

¶5 In December 1999, the court granted the Petries’ motion to intervene in the action to determine their rights, if any. Kohler moved for a declaratory judgment that the Petries had not satisfied the statutory requirements for asserting their rights as dissenters, were not entitled to payment under Wis. Stat. §§ 180.1301 to 180.1331, and could not be parties to a proceeding under § 180.1330 to appraise the fair value of Kohler shares.

¶6 The circuit court found that Kohler complied with the Wis. Stat. ch. 180 notice requirements relating to dissenters’ rights. The court specifically found that the April 4 notice to CEDE complied with the statutory requirements. Although the Petries did not receive the notice and were not in a position to comply with the statutory requirements for asserting dissenters’ rights, the court noted that the deficiency would be visited upon the Petries or their agent, CEDE, not upon Kohler. The Petries appeal.

¶7 The Petries do not contest that their nominee, CEDE, received the April 4 notice.[3] They also do not contest that CEDE appeared in Kohler’s records as the owner of their share of stock. The circuit court found that the April 4 notice to CEDE complied with the applicable statutes. Therefore, it is undisputed that Kohler complied with the notice requirement for corporate actions to which shareholders may object. See Wis. Stat. § 180.1321(1).

¶8 The Petries have offered no explanation for the failure of CEDE to alert them to the April 4 notice and the legal requirements emanating from it. The Petries’ failure to assert their dissenters’ rights in timely relation to the April 4 notice is the dispositive fact in this appeal. Cf. Wis. Stat. § 180.1323(3) (shareholder who does not demand payment by the date set in the dissenters’ notice is not entitled to payment for the shares under Wis. Stat. §§ 180.1301 to 180.1331).

¶9 In Enstar Corp. v. Senouf, 535 A.2d 1351, 1354-55 (Del. 1987), the court discussed the type of situation presented by this case:

The use of security depositories by brokerage firms now is a common practice. The decision in that regard, however, is a matter which is strictly between the broker and its clients …. In making that choice, the burden must be upon the stockholder to obtain the advantages of record ownership …. The legal and practical effects of having one’s stock registered in street name cannot be visited upon the issuer. The attendant risks are those of the stockholder, and where appropriate, the broker …. If an owner of stock chooses to register his [or her] shares in the name of a nominee, he [or she] takes the risks attendant upon such an arrangement, including the risk that he [or she] may not receive notice of corporate proceedings, or be able to obtain a proxy from his [or her] nominee …. Here, the problem is one between the [shareholders] and their brokers. (Citations omitted.)

¶10 We agree with the Delaware court and apply the reasoning of Enstar to this appeal. Under Enstar, the failure of CEDE to bring the April 4 notice to the Petries’ attention cannot be attributed to Kohler. We agree with Kohler and the circuit court that the April 4 notice to the Petries’ nominee was notice to the Petries, regardless of the steps taken or not taken by CEDE to alert the Petries that their dissenters’ rights were at stake. We conclude that the circuit court did not misuse its discretion in granting Kohler declaratory judgment. See Wisconsin Educ. Ass’n Council v. State Elections Bd., 156 Wis. 2d 151, 161, 456 N.W.2d 839 (1990).

¶11 Because we conclude that the April 4 notice to CEDE was sufficient under the applicable statutes, we do not address any arguments relating to events subsequent to the mailing of the April 4 notice.

By the Court.—Order affirmed.

This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.

[1] Shareholders who dissent from certain corporate actions may obtain payment of the fair value of their shares. See Wis. Stat. § 180.1302 (1997-98). In order to assert dissenters’ rights, a dissenting shareholder must deliver a written notice under Wis. Stat. § 180.0141 that the shareholder intends to demand payment for his or her shares if the proposed corporate action goes forward. See Wis. Stat. § 180.1321(1)(a). A shareholder or beneficial shareholder, see Wis. Stat. § 180.1301(1), who fails to comply with § 180.1321(1) is not entitled to payment for the shares under Wis. Stat. §§ 180.1301 to 180.1331. See § 180.1321(2).

[2] All references to the Wisconsin Statutes are to the 1997-98 version unless otherwise noted.

[3] The notice was effective when mailed. See Wis. Stat. § 180.0141(5)(b).