Waters v. G & B FEEDS, INC.

• Decision Date: 04 March 2010
• Docket Number: No. SD 29745.,SD 29745.
• Citation: 306 SW 3d 138
• Court: Missouri Court of Appeals
• Parties: Stephanie (Younger) WATERS, Respondent, v. G & B FEEDS, INC., and William Younger, Appellants.

306 S.W.3d 138

Stephanie (Younger) WATERS, Respondent, v. G & B FEEDS, INC., and William Younger, Appellants.

No. SD 29745.

Missouri Court of Appeals, Southern District, Division One.

March 4, 2010.

Gary J. Barrett, Hancock, Lane & Barrett, PLLC, Little Rock, for Appellants.

Bryan O. Wade and Ginger K. Gooch, Husch, Blackwell, Sanders, LLP, Springfield, for Respondent.

ROBERT S. BARNEY, Judge.

Appellants G & B Feeds, Inc. ("G & B") and William Younger ("Bill") (collectively "Appellants") appeal the judgment of the trial court which found in favor of Respondent Stephanie Younger Waters ("Respondent") by dissolving G & B and distributing its assets and liabilities per sections 351.494-502.¹ Appellants now raise three points of trial court error.

"Viewed in the light most favorable to the judgment," Cannon v. Monroe, 285 S.W.3d 375, 376 (Mo.App.2009), the record reveals G & B was incorporated on August 3, 2001, by Bill and his son, Greg Younger ("Greg").² Bill and Greg each owned 500 shares of stock in G & B with Greg co-owning his stock with Respondent. At the organizational meeting of the Board of Directors Greg was appointed President and Bill was appointed Vice-President and "Secretary-Treasurer." It was also determined that Respondent and Greg would loan $60,000.00 to G & B and Bill would do the same. On September 1, 2001, Respondent and Greg wrote a check to G & B in the amount of $70,000.00, a sum which stemmed from Respondent's sale of stock in her own employer, Jack Henry.³ The Board of Directors determined G & B would purchase real estate and improvements for the location of its feed operation from Bill for $45,000.00, consisting of a down payment to Bill of $5,000.00 and the execution of a corporate promissory note in his favor in the amount of $40,000.00 payable upon demand at six percent interest per annum, secured by a deed of trust. In September of 2001, G & B also obtained a collateralized $200,000.00 line of credit from Security Bank of Southwest Missouri ("Security Bank"). The individual members of the Board of Directors and Respondent also signed certain guaranty instruments further securing the line of credit.

G & B's By-Laws⁴ provided for a shareholders meeting at least annually and the first shareholder meeting of G & B was held on July 1, 2002. At that meeting Greg and Bill were elected as "Directors;" Greg was appointed "President;" and Bill was appointed as "Vice-President, Secretary-Treasurer."

In November of 2003, Greg and Respondent were divorced and upon their divorce Respondent was awarded all of their shares in G & B as part of the divorce settlement such that she owned 50 percent of G & B or 500 shares. After the divorce, Greg had no further involvement with G & B and Bill thereafter assumed full control of the operations of G & B without discussing with Respondent any action taken by him on behalf of G & B.⁵ The membership of the Board of Directors of G & B did not change after Greg ceased involvement with G & B. Indeed, as best we discern the record, despite the requirements of the corporate By-Laws, thereafter no annual or special meetings of the stockholders took place; three members of the Board of Directors were not appointed to manage the business of the corporation; Bill continued in his capacity as Vice-President while acting as President; and no other corporate officers were appointed by any Board of Directors. Furthermore, we have not been presented records showing that salaries had been fixed by the Board of Directors as prescribed by G & B's By-Laws.

On May 23, 2003, Bill refinanced the outstanding balance on loans made by Security Bank to G & B by obtaining $127,000.00 from Cassville Ford Center, Inc. He executed a personal promissory note to Cassville Ford Center, Inc., and secured it by his own farm property. He then executed a corporate promissory note made payable to himself in the amount of $127,000.00. Again, Respondent was not consulted about these transactions.

Thereafter, on behalf of G & B, Bill executed a corporate promissory note in the amount of $50,000.00, in favor of Shirley Blythe ("Ms. Blythe") secured by corporate real property. Again, Respondent was not consulted about this transaction.

On November 26, 2004, Bill also executed a $20,045.00 promissory note on behalf of G & B in favor of Security Bank secured by a skid loader owned by G & B. This was followed on December 31, 2004, by Bill executing a corporate promissory note to himself from G & B for $18,470.00 and subsequently paying himself the same amount with a corporate check denoting the payment was for "payroll." Respondent was not consulted about either of these corporate transactions.

On December 1, 2004, Respondent filed her "Petition for Involuntary Dissolution on Grounds of Deadlock or Oppression" in which she requested judicial dissolution of G & B, pursuant to section 351.494;⁶ an accounting of G & B's assets and investments; and dissolution of the corporation due to her exclusion from the business by Bill as well as his "dissipation of corporate and shareholder assets to the detriment of Respondent." In August of 2006, Respondent filed her "Motion for Order of Sale . . ." in which she requested the real estate and tangible property of G & B be sold. Bill acquiesced in this motion and from August of 2006 to July of 2007, G & B's real estate was listed for sale at the price of $325,000.00. An initial offer to purchase the property for $303,000.00 was rejected by Bill, as was a second offer for the full asking price of $325,000.00, which included the caveat of a non-compete agreement from Bill. Respondent and Bill were unable to reach an agreement regarding the sale of G & B's real and personal property such that on July 3, 2007, Respondent filed a motion for sale of G & B's assets at public auction which was granted by the trial court.

On October 27, 2007, an auction was held and G & B's personal property sold for $20,162.00 for a net profit of $15,744.79 after deductions of auction commissions and costs. The real estate sold for $270,000.00 with settlement charges consisting of $17,842.15. Thereafter, $40,768.23 was paid to Ms. Blythe; $3,437.99 went toward taxes; and $19,880.00 was paid to Security Bank on the loan secured by the skid loader. The remainder of the sale proceeds were deposited into an escrow account pending the trial court's order of distribution.

On May 16, 2008, the trial court entered a judgment dissolving G & B pursuant to section 351.494; ordered Bill to give notice to the various creditors; and required him to compile a final report listing all creditors and debts of G & B. On February 17, 2009, Bill filed his final report in which he listed the following creditor claims: $34,997.13 to Furst-McNess for feed; $1,782.51 to the Internal Revenue Service ("IRS") for the December 31, 2006, tax period; $1,631.06 to the IRS for the July 30, 2007, tax period; $1,382.69 to the IRS for the July 30, 2006, tax period; $40,000.00 to Bill to reimburse him for the sale of his real property to G & B at the time of its incorporation; $98,717.23 to Cassville Ford Credit/Etta Nesbitt; $18,470.00 to Bill for "2004 salary reinvestment;" $41,600.00 to Bill "for 4/27/06 through 10/6/07 wages;" and $1,653.18 to Taylor and Associates f/k/a Angel and Company for 2007 tax return preparation. Respondent and Bill agreed as to the amounts on the debts to the IRS and Taylor and Associates, but Respondent took issue with the amounts Bill said he was due from G & B.

The trial court's final hearing in this matter was held on February 20, 2009, and on March 24, 2009, it entered its "Findings of Fact, Conclusions of Law and Final Judgment of Judicial Dissolution and Termination of Corporation" ("the Judgment").

In the Judgment, the trial court found, inter alia, that in "mid 2003, Bill assumed full control of the corporation and operated the business and made all decisions and took all actions for the corporation without seeking any assent or assistance from Respondent." It also found Respondent had contributed $79,912.24 to G & B as an initial cash contribution⁷ but that Bill failed to make "an initial cash contribution to the corporation." It then ordered that "the $70,000.00 contribution of Respondent constituted a corporate debt to be paid." The trial court then recited a medley of actions taken by Bill which the trial court considered as "acts of shareholder oppression:"

he assumed control of the corporation and the operation of its business without lawful authority and in complete disregard for the rights of Respondent. He borrowed money and refinanced debts on his own without consultation with Respondent. He testified that throughout the term of the business he purchased livestock feed at cost for his herd of 500-600 head of livestock, a substantial savings over a period of six years. However, the court has no evidence, other than Bill's testimony, as to any such amounts paid for feed. He declined the opportunity to pay Respondent $70,000.00 for her stock, the amount she had paid for it, and thus be in a position to have complete ownership of the corporation and the lawful right to operate the corporation business as he was doing without lawful right. He refused to cooperate in the sale of the business property to the ultimate financial detriment of both shareholders. He retained all rental receipts from the storage units and gave no accounting therefore. He has totally failed to give a proper accounting of his stewardship of the business affairs.

On the other hand, the court takes into consideration the practical fact that the establishment and initial financing of the business was largely based on the credit of Bill, and the departure of his son from the business required that he become active in the operation of the business. However, it did not require that he treat Respondent as a nonentity when, in fact, she was the only shareholder who honored the agreement to

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