## Facts

- Postal Telegraph, Inc. was a Delaware corporation whose certificate of incorporation granted holders of noncumulative preferred stock a liquidation preference of $60 per share before any distribution to common stockholders.
- Goldman owned 500 shares of Postal’s preferred stock.
- Postal agreed to transfer all assets to Western Union Telegraph Company in exchange, in part, for 308,124 shares of Western Union Class B stock.
- The Western Union Class B stock to be received was valued substantially less than the aggregate $60-per-share liquidation preference owed to Postal’s preferred shareholders under the existing charter.
- Postal’s board proposed a three-step plan: (1) sell all assets to Western Union; (2) amend Postal’s certificate to replace the $60 liquidation preference with one share of Western Union Class B stock per Postal preferred share; and (3) dissolve Postal.
- At an August 10, 1943 stockholders’ meeting, the asset sale, charter amendment, and dissolution were approved by the required vote over Goldman’s objection.
- Goldman filed suit invoking diversity jurisdiction, challenging the validity of the charter amendment under Delaware law; Postal moved to dismiss.

## Issues

1. Whether Delaware’s corporate amendment statute permitted a corporation, by requisite stockholder vote, to amend its certificate of incorporation to reduce or alter a preferred stock liquidation preference over the objection of affected preferred shareholders.
2. Whether an amendment substituting one share of third-party stock for a $60-per-share liquidation preference in connection with an asset sale and dissolution was valid and binding on dissenting preferred holders.

## Decision

- The court granted the defendant’s motion to dismiss.
- The court held the charter amendment valid under Delaware law and enforceable against Goldman.
- As a result, preferred shareholders were bound to the amended liquidation treatment (one Western Union Class B share per Postal preferred share), notwithstanding the amendment’s economic reduction from the original $60 preference.

## Legal Principles

- Preferred stock rights stated in a Delaware certificate of incorporation are contractual in character but exist subject to the corporation’s statutory power to amend the certificate when statutory formalities and voting requirements are satisfied.
- Delaware’s general charter-amendment provision authorizes amendments altering stock rights and preferences, including liquidation preferences, unless the statute or the certificate itself expressly limits amendability.
- A dissenting minority stockholder is bound by a properly adopted charter amendment within statutory authority, even if the amendment diminishes the stockholder’s prior preference on liquidation.

## Conclusion

The court concluded that Delaware law allowed Postal, through a properly approved charter amendment, to modify preferred shareholders’ liquidation preference in connection with a sale of all assets and dissolution, thereby binding an objecting preferred shareholder to the amended, lower-value liquidation consideration.


Goldman v. Postal Tel., Inc., 52 F. Supp. 763 (D. Del. 1943)