MARIS, Circuit Judge.
These consolidated appeals involve three class actions brought in the District Court for the District of Delaware by former and present stockholders of Axton-Fisher Tobacco Company, a Kentucky corporation which manufactured tobacco products, against its majority stockholder, Transamerica Corporation, a holding and investment company incorporated in the state of Delaware. The stockholders charged that Transamerica had fraudulently deprived them of their rightful participation in the liquidation of Axton-Fisher in 1944.
Prior to April 30, 1943, Axton-Fisher had outstanding three classes of stock, designated as Preferred and Class A and Class B common. The Preferred stock, which had a par value of $100 per share, was entitled to preferential cumulative dividends of $6 per share annually, was redeemable at $105 per share plus accrued dividends and was entitled to this same amount on liquidation, before participation of any other class of stock. The Class A common stock had a par value of $10 per share and was entitled to cumulative dividends of $3.20 per share after payment of dividends on the Preferred stock but before dividends on
In 1944 William S. Speed brought suit on behalf of Class A and Class B stockholders of Axton-Fisher who had sold their stock to Transamerica pursuant to a public offer made by Transamerica by letter dated November 12, 1942,
The matter of Transamerica's controlling ownership has been the subject of much litigation in the district court and this court
In the Zahn and Friedman actions the district court found that Transamerica had exercised its position as controlling stockholder to cause the board of directors of Axton-Fisher to call the Class A stock for redemption and that although Transamerica at that time knew that the board was doing so on the assumption that it was for the purpose of improving the capital structure of the company as a going concern, the real purpose of Transamerica in causing the call to be made was by liquidation, merger, consolidation or sale of Axton-Fisher's assets to gain for itself the appreciation in the value of those assets. Accordingly the district court held Transamerica accountable to the Class A stockholders, both those who had redeemed their stock pursuant to the call and those who had not done so. The amount of damages and the persons for whose benefit the judgments should run were left for determination by a special master. Speed v. Transamerica Corp., D.C.1951, 99 F.Supp. 808.
As we have indicated, the district court concluded that Transamerica was liable both in tort for fraud and deceit and because of its violation of Rule X-10B-5 of the Securities and Exchange Commission. These conclusions were based upon its finding of Transamerica's deceptive concealment of the great appreciation in value of Axton-Fisher's tobacco inventory and of its secret intention to capture that appreciation for itself to the exclusion of the public stockholders. In this court Transamerica does not seriously argue that the legal conclusions drawn by the district court do not follow if the factual premise is accepted. But it does argue most strenuously that the evidence and the inferences properly to be drawn therefrom do not support the factual finding and that the finding should accordingly be set aside as erroneous.
This finding by the district court was based largely on inferences drawn from the testimony of Carl B. Robbins, former president of Axton-Fisher, which were in direct conflict with the testimony of L. M. Giannini, a director of Transamerica who supervised its relations with Axton-Fisher. The parties have discussed at great length the credibility of these and other witnesses and the inferences properly to be drawn from their testimony. But their credibility was a matter to be resolved by the trial judge, not by us. And it was within his province to draw the appropriate inferences. After examining the record we cannot say that the trial judge's actions in resolving these and the other factual issues in the cases were erroneous. The evidence is discussed in considerable detail by Chief Judge Leahy in his opinion determining liability. D.C., 99 F.Supp. 808, 816-827, 833-842. We need not repeat that discussion here. Suffice it to say that it furnishes adequate support for his findings of fact which in turn support his conclusion that Transamerica is liable to the plaintiffs in the three cases in damages.
We turn then to the appeals by the plaintiffs in the three cases which raise questions with respect to the district court's assessment of damages and award of interest. The first and principal question is the one raised by the holders of Class A stock as to the amount of damages to be awarded to them. The Class A stockholders contend that they are entitled to receive their aliquot shares in the liquidation distribution in the two-to-one ratio provided for in the charter for Class A stockholders participating in a liquidation. The district court held, however, that they are entitled only to recover as though they were Class B stockholders for the reason that a disinterested board of directors having knowledge of all the facts could and would have called the Class A stock for redemption in which event all of the Class A stockholders would have exercised their option to convert their shares into Class B stock on a one-for-one basis. We think that the district court was right in so holding.
The Court of Appeals of Kentucky has held that the Axton-Fisher Class A stock, although designated as a common stock was in the nature of a junior preferred stock, and that the provision of the charter for the redemption of the Class A stock was a continuing option allowed to the holders of the Class B common stock which the board of directors
All the plaintiffs contend that the district court erred in reducing the rate of interest to be allowed as a part of the recovery prior to judgment to 2% per annum. The district court determined that under all the circumstances 4% per annum was a fair rate of interest to be allowed for this purpose. This was a matter peculiarly within the discretion of the court and we find no reason to interfere with it. But the court went further and concluded that because of the long delay in prosecuting these cases to final judgment, for which the plaintiffs were in part responsible, the interest prior to judgment awarded to the plaintiffs should be cut in half to 2% per annum. Here we think the district court erred. For however it was caused the delay harmed only the plaintiffs. Transamerica, on the other hand, was benefited. For it was able to retain for its own use until now the funds which it derived from the Axton-Fisher liquidation and on the assets employed in its own business during the period in question the evidence indicates that it received a return very much in excess of 4% per annum. We conclude, therefore, that the full rate of 4% per annum fixed by the district court should have been allowed to the plaintiffs. We are satisfied, however, that the district court did not err in declining to direct that the interest be compounded.
Those plaintiffs who hold unredeemed Class A stock contend that they should receive interest from Transamerica on the redemption price of $80.80 which was tendered and made available to them by Axton-Fisher on July 1, 1943 but which they did not accept. We see no merit in this connection. This money was made available to these stockholders and since their claims against Transamerica would not have been prejudiced if they had accepted it, any loss resulting from their delay in taking it cannot be charged to Transamerica.
The judgments of the district court will be modified by increasing the rate of interest allowed prior to judgment from 2% to 4% per annum. As so modified the judgments will be affirmed. The plaintiffs will recover their costs on all the appeals.