Fred H. BIXBY, Petitioner and Appellant, Robert Bixby Green, Intervenor and Appellant, v. Robert H. VOLK, Commissioner of Corporations of the State of Californla, Defendant and Respondent; FRED H. BIXBY RANCH COMPANY, a California corporation, Real Party in Interest and Respondent.
Petioner Fred H. Bixby and intervenor Robert Bixby Green1 (hereafter ‘petitioners') appeal from a judgment denying a petition for a writ of mandamus (Code Civ.Proc. § 1094.5) praying the court to order respondent Robert H. Volk, the Commissioner of Corporations of the State of California (hereafter ‘commissioner’), to set aside his decision approving a recapitalization plan submitted for approval by the respondent-real party in interest Fred H. Bixby Ranch Company, a California corporation (hereafter ‘applicant’).
Petitioners contend: (1) the superior court erred in applying the substantial evidence rule instead of the independent judgment (limited trial de novo) rule in its review of the commissioner's decision, and (2) the commissioner erred in disregarding the provisions of section 25510 of the Corporations Code2 in arriving at his decision.
We have concluded: (1) petitioners' first contention has merit; and (2) in view of our disposition of petitioners' first contention, the case is not in a posture to permit us to rule upon their second contention of error. We do make certain observations as to certain subsidiary questions under the second contention to assist the superior court in its review under the independent judgment (limited trial de novo) upon remand of the case.
Applicant is a California corporation, incorporated in 1951, with 150,000 authorized shares of a single class. Shares outstanding number 68,400, which are closely held. Since its inception applicant has been a family-owned corporation and, with minor exceptions, all of its present shareholders received their holdings, directly or indirectly, by way of a gift or a bequest from Fred H. Bixby, deceased, who founded applicant's business.
It has been applicant's policy, in the event of a shareholder's death, to purchase enough shares of the applicant from the deceased shareholder's estate to provide the estate with sufficient cash to meet the costs of death taxes and administration. Applicant is presently concerned with the possibility of an outsider acquiring control by purchases of stock from the estates of shareholders who might die and then forcing a corporate liquidation. The liquidation value of the shares is considerably greater than their market value. In fact, upon the last occasion of a shareholder's death, an outsider did bid for the shares to be sold by the estate.
Under the present capital structure, each share outstanding is entitled to one vote. Currently, some 52% of the voting power is in the control of a voting trust, of which Preston B. Hotchkis, applicant's president, is the voting trustee. If applicant should purchase shares from the estate of any shareholder who dies, the voting power probably would be re-distributed ratably among the other shareholders surviving in accordance with their proportionate holdings. This would mean a decrease in the Hotchkis' voting power to some extent if the shareholder dying is one whom he represents through the voting trust.
Petitioners contend that the real purpose of the recapitalization plan is to benefit the majority shareholders by providing them with non-voting stock to be sold without relinquishment of any voting control and thus perpetuate the present management to petitioners' detriment.
The proposed recapitalization plan briefly is as follows: Applicant proposes to amend its articles of incorporation to create a new class of 68,400 shares to be designated as preferred shares. These are to be nonconvertible. Each such preferred share is to be entitled to a cumulative dividend of $5 per year and an additional noncumulative dividend of $2 per year. In event of liquidation, the preferred share will be entitled to receive $400, plus accrued dividends, with remaining assets of the corporation to be distributed to holders of the common shares. The common shares are to have exclusive voting rights unless dividends on the preferred shares fall in arrears for eight quarter-years; in which event, the preferred shares shall have the right to elect a majority of the board of directors. Approval of majority of the voting power is to be required for liquidation of the applicant prior to December 31, 1971, with each preferred share being entitled to cast 9 votes and each common share 10 votes.
The application also seeks approval of the issuance of a new type of common shares, so that there would be exchanged one new common and one new preferred share for each share of the present common stock now outstanding. There would then be 68,400 shares of the new common and 68,400 shares of the new preferred outstanding. It is planned to transfer $684,000 from paid-in surplus to the capital account.
The proposed plan for recapitalization has been approved by a vote of 3–to–2 of applicant's board of directors and by a vote of 70 percent of applicant's shareholders of the common shares outstanding.
In passing upon the company's application for a permit, the commissioner found the following inter alia:
Finding VIII: ‘The grounds set forth by objectors for the making of their objections are that the proposed reorganization will benefit only the majority shareholders by providing them with non-voting stock that can be sold without changing voting control of the company and that such reorganization will be detrimental to the other shareholders.’
Finding IX: ‘Applicant has large real estate holdings and has recently commenced development of such-property by means of large long-term projects. In addition to the officers of the company, its operations are run by two Vice-Presidents and a Secretary who are not shareholders. It is desirable for these persons to know that there will be continuity and stability in the ownership of the company, so that they can continue the projects which the company has now embarked upon. The proposed recapitalization will make the sale of the company's stock to other persons less likely in the event of death and, thus, will help achieve a continuity of shareholders and, in turn, a continuity of management. It, therefore, appears that the stability of ownership which may be achieved by the recapitalization is a proper corporate purpose for such plan.’
Finding X: ‘The earnings of the corporation, including non-operating income for a number of years, are sufficient to pay dividends on the Preferred shares.’
Finding XI: ‘Appraisals of the value of a share of proposed Preferred stock and a share of Common stock were made by two stock brokerage firms. Both appraisals indicated that such combined value would be $221.00 or in the range of $145.00–$155.00, which is a decline from the value which the present shares have.’
Among the conclusions pertinent to this appeal reached by the commissioner are:
I: ‘There is a proper corporate purpose for the recapitalization in that the corporation's ability to undertake long-range real estate projects will be facilitated by stability of shareholdings and a continuity of management which is likely to result therefrom.’
III: ‘The holdings of each shareholder will be changed in the same manner. The objectors contend that they will be adversely affected because profits on certain future sales of the Preferred shares would be taxed as ordinary income under Section 306 of the Internal Revenue Code. Such tax effects, however, were not conclusively established by the objectors. In any event, it is my belief that the making of a finding that a proposed issuance is fair, just and equitable does not require the Commissioner to consider the particular tax situations of each shareholder with regard to future transactions in such shares.’
VI: ‘The factor of a possible decline in the valuation of the shares is outweighed by the other factors involved here, which are contained in paragraphs V,3 IX and X of the Findings. Such valuations are not deemed to be especially significant in a company whose assets consist primarily of real estate and which has always been, and intends to remain, a closely-held family corporation.’
VII: ‘Therefore, it is my conclusion that the proposed plan of business of applicant and the proposed issuance of securities and the terms and conditions of such issuance and exchange are fair, just and equitable. Applicant intends to fairly and honestly transact its business. The securities which applicant proposes to issue and the method to be used by it in issuing them are not such as, in the opinion of the Commissioner of Corporations, will work a fraud upon the purchasers thereof.’
Based upon the foregoing, the hearing officer concluded that the application filed September 25, 1967, as supplemented and amended, should be granted and a permit be issued authorizing the company to sell4 and issue its shares in the manner and for the consideration proposed. The proposed decision of the hearing officer was adopted by the commissioner on January 22, 1968.
The record reflects that the superior court would have applied the independent judgment rule in its review had it not felt constrained to follow the holdings in Western Air Lines, Inc. v. Sobieski (1961) 191 Cal.App.2d 399, 12 Cal.Rptr. 719 and Crestlawn Memorial Park Assn. v. Sobieski (1962) 210 Cal.App.2d 43, 26 Cal.Rptr. 421, wherein the substantial evidence rule was declared to be properly applicable in those cases.
The parties dispute whether petitioners acquiesced in the application of the substantial evidence rule in the superior court thereby precluding them from raising the issue as to whether the superior court applied the correct standard in reviewing the commissioner's decision. The reporter's transcript is not free from ambiguity upon this point. We hold that there was no waiver and shall consider the question.
Section 25317 of the Corporations Code provides: ‘Every order, decision, license, or other official act of the commissioner is subject to review in accordance with law.’ It does not provide any further statutory guide as to the type of judicial review required.
The commissioner's decision in this case is a quasi-judicial adjudication of a statewide administrative agency of statutory rather than of constitutional origin. The case law applicable to a review of such an administrative decision or determination by the superior court has been summarized as follows: ‘The rule that emerges from the cases is that the [superior] court on review is authorized by law to exercise its independent judgment on the evidence (to apply the independent judgment test rather than the substantial evidence test) if the administrative adjudication affected a vested right and if the adjudicating agency was a state-level (rather than local) agency of legislative (rather than constitutional) origin.’ (Italics in original.) (Cal.Adm.Mandamus (Cont.Ed.Bar) § 5.62, p. 71.)
The rationale for requiring the superior court to exercise its independent judgment (limited trial de novo) where a vested right is affected is premised upon the holding in Standard Oil Co. v. State Board of Equalization (1936) 6 Cal.2d 557, 559, 59 P.2d 119 ‘that the Legislature is without power, in the absence of constitutional provision authorizing the same, to confer judicial functions upon a state-wide administrative agency * * *.’ Adjudication of disputes which affect vested interests is a judicial function. Consequently, a review by any standard requiring less than an independent judicial judgment would constitute a viola tion of the constitutional prohibition. Where only a ‘privilege’ or a ‘non-vested interest’ is involved, the constitutional restriction does not apply and review by the substantial evidence rule is permissible. (Bertch v. Social Welfare Dept. (1955) 45 Cal.2d 524, 529, 289 P.2d 485; Beverly Hills Fed. S. & L. Assn. v. Superior Court (1968) 259 Cal.App.2d 306, 316, 66 Cal.Rptr. 182; County of Contra Costa v. Social Welfare Board (1962) 199 Cal.App.2d 468, 472–473, 18 Cal.Rptr. 573.) The court in Standard Oil Co., supra, further stated: ‘The decision in Dominguez L. Corp. v. Daugherty, 196 Cal. 468, 482, 238 P. 703, declares, in substance, that the commissioner of corporations exercises discretionary administrative functions and does not exercise judicial powers.’ (6 Cal.2d at p. 560, 59 P.2d at p. 120.)
The first Western Air Lines and Crestlawn cases, therefore, must be examined in the light of the foregoing rules and of the type of interest affected by the commissioner's action. To hold that all reviews of the commissioner's decisions are to be made by the substantial evidence rule, without analysis as to whether a vested right is affected, would be constitutionally impermissible under the existing state Supreme Court decisions. In Western Air Lines, the permit was denied; the status quo was preserved; no change in interests was made by the commissioner's adjudication; and hence no vested interest was affected. Crestlawn involved a modification upon the commissioner's own motion of a previously issued permit upon discovery that information relevant to his previous decision had been intentionally withheld by the applicant. The significant factor, however, is that the corporation was not ordered to reacquire any of its stock theretofore issued to innocent stockholders nor were any such stockholders ordered to transfer their previously acquired shares. No vested right of the innocent stockholders was affected and the case was held to be one where only a ‘privilege’ was at issue.
As contended by petitioners, the commissioner did find that in this case the combined appraised value of the proposed preferred share and common share would be less than that of the outstanding present share. In conclusion III, the commissioner found that certain future sales of the proposed preferred shares being taxed as ordinary income under section 306 of the Internal Revenue Code had not been conclusively established by petitioners. However, the record does not show that applicant proved that no hazard under that section of the Internal Revenue Code would result from the proposed recapitalization. Do these facts constitute an adverse or potentially adverse effect upon a vested right of the petitioners?
As this court pointed out in Beverly Hills Fed. S. & L. Assn. v. Superior Court (1968) 259 Cal.App.2d 306, at page 316, 66 Cal.Rptr. 183, at page 187, there is as yet no definitive touchstone to determine what is a ‘vested right’ in all instances. ‘The court[s] [are] still in the process of developing on a case-by-case basis the rights which fall into the ‘vested’ category and the rights which do not.'
The revocation of a license to engage in a profession or a business would clearly affect a vested right (see, e. g., Yakov v. Board of Medical Examiners (1968) 68 Cal.2d 67, 72, 64 Cal.Rptr. 785, 435 P.2d 553, fn. 4). Right to unemployment compensation is a vested right (Thomas v. California Emp. Stab. Comm. (1952) 39 Cal.2d 501, 504, 247 P.2d 561), but old age benefits are not vested in applicants seeking such benefits (Bertch v. Social Welfare Dept. (1955) supra, 45 Cal.2d 524, 529, 289 P.2d 485). In Beverly Hills Fed. S. & L. Assn. v. Superior Court (1968) supra, 259 Cal.App.2d 306, 316–317, 66 Cal.Rptr. 183, this court held that a savings and loan association's interest ‘in being free from competition’ is not a “vested' right.'
The decision of the commissioner in the instant case compels petitioners to exchange their currently held stock for stock which would be of less immediate value and which would be at least susceptible to, if not infected with, the germs of litigation under section 306 of the Internal Revenue Code. In our opinion, these circumstances cause a sufficient diminution of the property rights of the petitioners, so as to require that the superior court's review be governed by the independent judgment (limited trial de novo) standard rather than the substantial evidence yardstick which it applied in this case. (Drummey v. State Bd. of Funeral Directors (1939) 13 Cal.2d 75, 84, 87 P.2d 848; cf. Temescal Water Co. v. Dept. of Public Works (1955) 44 Cal.2d 90, 280 P.2d 1.)
We are aware that the decision we reach may result in ‘a double standard for a single problem’ (see dissent of Chief Justice (then Justice) Traynor in So. Cal. Jockey Club v. Cal. etc. Racing Bd. (1950) 36 Cal.2d 167, 180, 223 P.2d 1, 9) depending upon whether the commissioner grants or denies a permit.5 Applicant argues that the independent judgment rule will result in the disregard of the expertise of the commissioner in the area of corporate reorganizations and corporate finance and the substitution of the non-expert opinion of innumerable superior court judges who are not conversant with either this esoteric area of the law or with the business and tax problems posed.6 Applicant further points out that, in effect, the superior court is left free to overrule the commissioner's determinations, while the appellate courts have no such equivalent review power over the superior court's decision, since the latter review by the appellate courts is governed by the substantial evidence rule. (Yakov v. Board of Medical Examiners (1968) supra, 68 Cal.2d 67, 72, 64 Cal.Rptr. 785, 435 P.2d 553.) These arguments are not new and have been cogently presented in the dissenting opinion of Chief Justice (then Justice) Traynor in Moran v. Board of Medical Examiners (1948) 32 Cal.2d 301, 315–320, 196 P.2d 20,7 but the majority has not accepted them. Moreover, the concern of applicant is ameliorated by Drummey v. State Bd. of Funeral Directors (1939) supra, 13 Cal.2d 75, 85, 87 P.2d 848, 854, wherein the superior courts were admonished that even in applying the independent judgment rule: ‘The findings of the board come before the court with a strong presumption of their correctness, and the burden rests on the complaining party to convince the court that the board's decision is contrary to the weight of the evidence.’ (Accord: Dare v. Board of Medical Examiners (1943) 21 Cal.2d 790, 798, 136 P.2d 304.) It was further stated in Dare at page 799, 136 P.2d at page 309: ‘It may be assumed that in the ordinary case [the record of the proceedings before the board] would disclose that the controversy between the parties had been tried out before the board as fairly and completely as the circumstances of the case would permit.’
As an intermediate appellate court, we are not free to depart from prevailing pronouncements of our Supreme Court. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 20 Cal.Rptr. 321, 369 P.2d 937.)
Having determined that the superior court erred in applying the substantial evidence rule, instead of the independent judgment rule (limited trial de novo), the case must be remanded to that court for its reassessment of the commissioner's decision that applicant be granted the permit sought. Hence, it would be premature for this court on this appeal to determine whether the commissioner's decision violates section 25510 of the Corporations Code. We make certain observations, however, which may be of assistance to the superior court upon remand of the case.
There can be no doubt that section 25510 controls over section 25507.8 Section 25510 was added by Statutes of 1947, ch. 130, § 1. We have not found any authoritative material which would enlighten us as to the intent and purpose of the Legislature in passing the last sentence of section 25510.9 However, section 25507 being the general provision and section 25510 being the specific provision applicable to exchanges of securities, the latter (McDonald v. Conniff (1893) 99 Cal. 386, 391, 34 P. 71; In re Ward (1964) 227 Cal.App.2d 369, 375, 38 Cal.Rptr. 650) controls the situation here presented in absence of a clear intention of the Legislature to the contrary. (Warne v. Harkness (1963) 60 Cal.2d 579, 588, 35 Cal.Rptr. 601, 387 P.2d 377; accord Simpson v. Cranston (1961) 56 Cal.2d 63, 69, 13 Cal.Rptr. 668, 362 P.2d 492; In re Ward (1964) supra, 227 Cal.App.2d 369, 374–375, 38 Cal.Rptr. 650.) In addition to the statutory requirements of section 25510, the regulations in force at the time of the hearing before the commissioner required that the plan of recapitalization give ‘full effect to the equities of outstanding securities' and that ‘each plan of * * * recapitalization * * * shall be * * * approved, disapproved, or modified on its own merits.’ (10 Cal.Adm.Code, §§ 768, 759, as amended by Register 54, No. 6, March 20, 1954, effective April 19, 1954.)
Since the last sentence of section 25510 uses the word ‘may,’ that provision is permissive and not mandatory; however, it is entitled to serious consideration. (Crestlawn Memorial Park Assn. v. Sobieski (1962) supra, 210 Cal.App.2d 43, 26 Cal.Rptr. 421; Western Air Lines, Inc. v. Schutzbank (1968) 258 Cal.App.2d 218, 225–226, 66 Cal.Rptr. 293.) In this Western Airlines case the court stated: ‘We consider, too, that the law of the case endorses the statutory standard on which such discretion, denying or granting the application, must be based, to wit: the order must be fair, just and equitable to all the stockholders of Western. (§ 25510).’
Invasion of vested rights have been permitted, despite the provisions of section 25510 of the Corporations Code and section 768 of the Regulations, where there is a proper corporate purpose of weighty consideration. (See Orschel, Administrative Protection for Shareholders in California Recapitalizations (1952) 4 Stan.L.Rev. 215, 231, 232, and 234.) There is, of course no simple answer and as section 759 of the Regulations states, each case must necessarily be decided upon facts and factors to be considered which are peculiar to that case.
The wording of the commissioner in his conclusion VII, supra, suggests that he reached his decision under section 25507 of the Corporations Code, rather than section 25510. However, a determinative conclusion cannot be reached without the benefit of additional evidence, because section 780 of the Regulations pertaining to recapitalizations (under section 25510) follows in part the wording of section 25507.10
We are not in entire agreement with conclusion III reached by the commissioner. It is true that the making of a finding that a proposed recapitalization plan is fair, just, and equitable does not require consideration of ‘the particular tax situations of each shareholder with regard to future transactions in such shares.’ But the matter cannot be passed off perfunctorily where the incidents of a recapitalization result in potential tax litigation to all the shareholders whose shares are to be exchanged. If by the statement that petitioners (objectors) have failed to establish conclusively that future sales of their preferred shares will be taxed as ordinary income under section 306 of the Internal Revenue Code, the commissioner was holding that the burden of proving the adverse effect was upon them, he was in error. The burden of proving the absence of an adverse effect is upon the applicant.11
The judgment is reversed and the cause remanded to the superior court with directions to review the decision of the Commissioner of Corporations in conformity with the views set forth in the foregoing opinion and thereupon to make an appropriate disposition.
1. Subsequent to petitioner Fred H. Bixby filing his petition for a writ of mandamus, Robert Bixby Green was permitted, by stipulation of the parties, to file his complaint in intervention. The complaint in intervention adopted most of the allegations of the petition and sought the same relief. For convenience, we shall treat both petitioner and intervenor as joint petitioners for the purposes of this appeal.
2. References to sections of the Corporations Code refer to the sections as they read prior to January 2, 1969, except as otherwise noted. ‘Except as expressly provided in this section, prior law exclusively governs all suits, actions, prosecutions or proceedings which are pending or may be initiated on the basis of facts or circumstances occurring before the effective date of this law.’ (Corporate Securities Law of 1968, § 25704 subd. (a).)
3. Finding V was: ‘The proposed recapitalization was approved by applicant's Board of Directors by a 3 to 2 vote. It was submitted to the shareholders by means of a proxy statement and was approved by 70% of the shareholders.’ Findings IX and X are set out earlier in the body of the opinion.
4. Exchanges of stock for a new type are deemed to be sales. (Corp.Code, § 25009; Western Air Lines, Inc. v. Sobicski (1961) infra 191 Cal.App.2d 399, 406, 12 Cal.Rptr. 719.)
5. This result, however, comports with the statutory scheme which gives the commissioner more discretionary latitude in denying a permit in a recapitalization case than in granting one. See footnote 8, infra.
6. See Eisenberg, The Legal Roles of Shareholders and Management in Modern Corporate Decisionmaking (1969) 57 Cal.L.Rev. 1, 4, which discusses the differences to be borne in mind when treating a closely held (privately held) corporation rather than a large publicly held corporation. See also: Note, Estate Planning for the Disposition of Control of a Family Corporation (1968) 52 Minn.L.Rev. 1019; Solomon, How to Deal with Section 306 (1968) 20 So.Calif.Tax Institute (Major Tax Planning), 167 et seq.
7. See also Note: Protection for Shareholder Interests in Recapitalizations of Publicly Held Corporations (1958) 58 Colum.L.Rev. 1030, 1054 (discussing California Administrative Regulations): ‘The scope of judicial review, in so far as it may presently involve an exercise of independent judicial judgment, should be limited to application of the substantial evidence test in order to preserve the advantages of expert administrative judgment.’
8. Section 25507: ‘If the commissioner finds that the proposed plan of business of the applicant and the proposed issuance of securities are fair, just, and equitable, that the applicant intends to transact its business fairly and honestly, and that the securities that it proposes to issue and the method to be used by it in issuing or disposing of them are not such as, in his opinion, will work a fraud upon the purchaser thereof, the commissioner shall issue to the applicant a permit authorizing it to issue and dispose of securities, as therein provided, in this State.’Section 25510: ‘When application is made for a permit to issue securities in exchange for one or more bona fide outstanding securities, claims, or property interests, * * * the commissioner is and has been authorized to approve the terms and conditions of such issuance and exchange and the fairness of such terms and conditions, after a hearing upon the fairness of such terms and conditions, at which all persons to whom it is proposed to issue securities in such exchange have the right to appear. After such hearing the commissioner may refuse to issue a permit authorizing such exchange if in his opinion the plan is not fair, just, or equitable to all security holders affected.’
9. Buhler, 1947 California Corporations Code and Other Corporations Legislation (1947) 35 Cal.L.Rev. 423, 432: ‘Chapter 130 amends section 4, relating to the power and duty of the commissioner of corporations to grant or refuse permits authorizing the issue and disposition of securities. These amendments may well have resulted from the recent decision in Transportation Bldg. Co. v. Daugherty [(1946) 74 Cal.App.2d 604, 169 P.2d 470]. Where the commissioner has heretofore been required to issue such a permit if he finds (among other things) that the proposed plan of business of the applicant is not unfair, or unjust, or inequitable, he is now required to issue the permit only where he finds both the proposed plan of business and the proposed issuance of securities fair, just and equitable. In the case of application for permit to issue securities in exchange for outstanding securities, claims or property interests, the commissioner is expressly authorized to refuse to issue a permit if in his opinion the plan is not fair, just, or equitable to all security holders affected.’ (Italics in original.)
10. 10 Cal.Adm.Code, § 780 (as amended Register 54, No. 6–B, March 20, 1954) read in part pertinent here: ‘The commissioner may * * * hold a public hearing for the purpose of determining whether the proposed plan of business is fair, just and equitable, that the applicant intends to fairly and honestly transact its business and that the securities that it proposes to issue and the methods to be used by it in issuing and disposing of them are not such as will work a fraud on the purchaser thereof and whether the terms and conditions of such issuance are fair, pursuant to the provisions of Section 4 of the Corporate Securities Act. * * *’
11. Schutzbank & Andrews, California Corporate Securities Law Analysis (Cont.Ed.Bar, 1968) pp. 83–84: ‘The most significant change to be noted in sec. 25140 (a), (b), and (c), as compared with former Corp C sec. 25507, is the partial shifting of the burden of proof. Under the former law all permits required an affirmative finding of fairness by the commissioner, thus placing the burden of proof on the applicant. Under the new sec. 25140 (a), when its provisions are applicable, the applicant is free to proceed unless the commissioner is able to make a finding that fairness does NOT exist, thus placing burden on the commissioner * * *. The relative positions are intended to remain substantially as under the former law when sec. 25140(b) and (c) are applicable.’ (Italics added.)Section 25140 subdivision (c) of the Corporate Securities Act of 1968 is former section 25510 of the Corporations Code simplified and provides: ‘(c) The commissioner may refuse to issue a permit under Section 25122 unless he finds that the proposed plan of recapitalization or reorganization and the proposed issuance of securities are fair, just, and equitable to all security holders affected.’Orschel, Administrative Protection for Shareholders in California Recapitalizations (1952) 4 Stan.L.Rev. 215, 222. ‘The corporation applying for a permit has the burden of proof. One of the most serious criticisms of court procedure is that the minority stockholder must assume the full burden of proving the soundness of his objections. When the question is merely one of statutory power to recapitalize, the issue is largely a legal one. But if the decision turns on fairness, the proof may require extensive investigation. * * * This burden causes many dissenters to throw up their hands and take the beating.In California the cost is borne by the corporation. A good example is In the Matter of Hotel Senator Corporation [Cal.Corp.Comm'r File No. SF 1472 and No. SF 53468 (1951)], where the applicant proposed a plan of recapitalization by statutory merger.'
ALSO, Associate Justice.
KAUS, P. J., and REPPY, J., concur.