High Point Bank And Trust Co. v. Sapona Manufacturing Co., Inc., 032716 NCSUP, 08 CVS 1065

Docket Nº:08 CVS 1065
Opinion Judge:Tennille, Judge.
Party Name:HIGH POINT BANK AND TRUST COMPANY, as Executor of the Estate of Elizabeth M. Simmons, Plaintiff, v. SAPONA MANUFACTURING COMPANY, INC., ACME-McCRARY CORPORATION, RANDOLPH OIL COMPANY, C.W. McCRARY, JR., C. WALKER McCRARY, III, W.H. REDDING, JR. a/k/a WILLIAM H. REDDING, JR., S. STEELE REDDING, JOHN O.H. TOLEDANO, JOHN O.H. TOLEDANO, JR., ROBERT...
Attorney:Roberson Haworth & Reese, PLLC by Robert A. Brinson, Thomas F. Foster, and Christopher C. Finan for Plaintiff. Ellis & Winters, LLP by J. Donald Cowan, Jr. and Schell BrayAy cock Abel & Livingston PLLC by Doris R. Bray for Defendants.
Case Date:March 27, 2016
Court:Superior Courts of Law and Equity of North Carolina
 
FREE EXCERPT

2010 NCBC 11

HIGH POINT BANK AND TRUST COMPANY, as Executor of the Estate of Elizabeth M. Simmons, Plaintiff,

v.

SAPONA MANUFACTURING COMPANY, INC., ACME-McCRARY CORPORATION, RANDOLPH OIL COMPANY, C.W. McCRARY, JR., C. WALKER McCRARY, III, W.H. REDDING, JR. a/k/a WILLIAM H. REDDING, JR., S. STEELE REDDING, JOHN O.H. TOLEDANO, JOHN O.H. TOLEDANO, JR., ROBERT C. SHAFFNER, BRUCE T. PATRAM, JOHNNY R. KNOWLES a/k/a JOHNNY R. KNOWLES, SR., DEAN F. LAIL, VIRGINIA R. WEILER, JAMES W. BROWN, JR., DONNIE R. WHITE a/k/a DONALD R. WHITE, DIANE L. DONAHUE, LARRY K. SMALL, LARRY D. ELMORE, and M. GIL FRYE a/k/a MICHAEL G. FRYE, Defendants.

No. 08 CVS 1065

Superior Court of North Carolina, Randolph

March 27, 2016

Roberson Haworth & Reese, PLLC by Robert A. Brinson, Thomas F. Foster, and Christopher C. Finan for Plaintiff.

Ellis & Winters, LLP by J. Donald Cowan, Jr. and Schell BrayAy cock Abel & Livingston PLLC by Doris R. Bray for Defendants.

ORDER & OPINION

Tennille, Judge.

{l} These cross-motions for summary judgment require the Court to decide, as a matter of law, whether the plaintiff minority shareholder has a right or interest in the Defendant Corporations and, if so, whether those rights or interests are in need of protection. See generally Meiselman v. Meiselman, 309 N.C. 279, 307 S.E.2d 551 (1983). The "right or interest" claimed by Plaintiff is the right to tender the shares owned by decedent, Elizabeth M. Simmons, for redemption at fair value by each of the Defendant Corporations. The Court concludes that Plaintiff has not established a Meiselman right and grants summary judgment in favor of Defendants.

I. PROCEDURAL BACKGROUND

{2} Plaintiff High Point Bank and Trust Company ("Plaintiff or the "Bank"), as Executor of the Estate of Elizabeth M. Simmons ("Mrs. Simmons"), filed a Notice of Designation contemporaneously with the Complaint in Randolph County on April 18, 2008. This matter was designated a mandatory complex business case by Order of the Chief Justice of the North Carolina Supreme Court dated April 28, 2008, and was subsequently assigned to the undersigned Chief Special Superior Court Judge for Complex Business Cases.

{3} On October 20, 2009, the parties filed cross-motions for summary judgment pursuant to Rule 56 of the North Carolina Rules of Civil Procedure. Plaintiff and Defendants each filed a memorandum of law in opposition to the other side's motion on November 20, 2009, and the Court heard oral arguments on February 8, 2010.

II. THE PARTIES

{4} Plaintiff is the duly appointed and qualified Executor of the Estate of Mrs. Simmons and is currently administering Mrs. Simmons's estate.

{5} Defendant Sapona Manufacturing Company, Inc. ("Sapona") is a corporation duly organized and existing under the laws of the State of North Carolina, with its principal place of business in Randolph County, North Carolina.

{6} Defendant Acme-McCrary Corporation ("Acme-McCrary") is a corporation duly organized and existing under the laws of the State of North Carolina, with its principal place of business in Randolph County, North Carolina.

{7} Defendant Randolph Oil Company ("Randolph Oil") is a corporation duly organized and existing under the laws of the State of North Carolina, with its principal place of business in Randolph County, North Carolina.

{8} Defendants C.W. McCrary, Jr., C. Walker McCrary, III, W.H. Redding, Jr., S. Steele Redding, John O.H. Toledano, John O.H. Toledano, Jr., Robert C. Shaffner, Bruce T. Patram, Johnny R. Knowles, Dean F. Lail, Virginia R. Weiler, and James W. Brown, Jr. served on the Board of Directors at Sapona.

{9} Defendants C.W. McCrary, Jr., C. Walker McCrary, III, W.H. Redding, Jr., S. Steele Redding, John O.H. Toledano, John O.H. Toledano, Jr., Bruce T. Patram, Virginia R. Weiler, Donnie R. White, Diane L. Donahue, and Larry K. Small served on the Board of Directors at Acme-McCrary. {See PL's Ex. 11.)

{10} Defendants C.W. McCrary, Jr., C. Walker McCrary, III, John O.H. Toledano, John O.H. Toledano, Jr., Robert C. Shaffner, Larry D. Elmore, and M. Gil Frye served on the Board of Directors at Randolph Oil.

{11} Acme-McCrary, Sapona, and Randolph Oil will be referred to collectively as the "Defendant Corporations, " and the parties listed in Paragraphs 8, 9, and 10 will be referred to collectively as the "Defendants."

III. FACTUAL BACKGROUND

{12} The pertinent and material facts are undisputed.

{13} Acme-McCrary has been in existence for over one hundred years. It was formed by D.B. McCrary and T.H. Redding in 1909. (W.H. Redding, Jr. Dep. 13:11-24.) It manufactures ladies hosiery and shape wear products. (W.H. Redding, Jr. Interview 9:3-19.) Sapona is even older. It started in the 1800s. (W.H. Redding, Jr. Dep. 20:3-4.) D.B. McCrary, T.H. Redding, and W.J. Armfield, Jr. purchased Sapona in 1916. Sapona processes natural and synthetic yarn, including textured nylon and covered spandex, and supplies Acme-McCrary and others with yarn product. Sapona and Acme-McCrary have a close business relationship. The companies share a number of services, including health insurance, accounting, and other personnel services. (S. Redding Dep. 18:5-16.)

{14} Randolph Oil is in a different industry. It sells fuel oil, gasoline, and LP gas at wholesale and retail and has several convenience store locations. (Elmore Dep. 10:22-11:19.) It was founded in 1934 by C.W. McCrary, who was the son of D.B. McCrary. The Redding and Armfield families are not significantly involved in Randolph Oil and the business is currently run by Larry Elmore, who is not related to any of the founding families. (Elmore Dep. 9:8-15.)

{15} Each company has a significant number of employees. Randolph Oil has approximately 49 employees, one of whom is a shareholder. (Randolph Oil Aff. ¶ 2.) Acme-McCrary has approximately 892 employees, five of whom are shareholders. (Acme-McCrary Aff. ¶¶ 2-3.) Sapona has approximately 200 employees, two of whom are shareholders. (Sapona Aff. ¶¶ 2-3.)

{16} The stock in each of the companies has been passed down through at least two generations and perhaps more. Mrs. Simmons is the granddaughter of D.B. McCrary, one of the founders of Acme-McCrary and Sapona, and the daughter of C.W. McCrary, Sr., the founder of Randolph-Oil. (C. Simmons Aff. ¶ 9; Answer ¶ 10.) She inherited her shares in the Defendant Corporations from her parents. (C. Simmons Aff. ¶ 9.) She is survived by her husband, Charles Simmons, and their four children. (C. Simmons Aff. ¶ 6.) All are beneficiaries of the trust. (C. Simmons Aff. ¶ 6.)

{17} There is evidence that Mrs. Simmons had been providing support for her son, Bo, and placed the shares in trust to continue that support. (Allen Dep. 71:14-72:7.) Such an action is not inconsistent with a belief that the dividends paid by the Defendant Corporations would provide that support. There also is evidence from the Bank's trust officer that when she raised the possibility that some of the stock in Defendant Corporations might have to be sold, Mrs. Simmons responded that there wouldn't be a problem without giving any explanation for why she did not think there would be a problem. (Allen Dep. 72:8-15.)

{18} Over time, the ownership in each of the companies has been spread over a larger number of shareholders as the founding owners and successive generations have died and passed their ownership to their children. Acme-McCrary now has eighty-one shareholders, while Sapona has fifty-one and Randolph Oil has twenty-five. (Acme-McCrary Aff. ¶ 2; Sapona Aff. ¶ 2; Randolph OH Aff. ¶ 2.) Non-family members have become shareholders and approximately seventy-five percent of the shareholders in Acme-McCrary and Sapona overlap. (S. Redding Dep. 18:5-11.)

{19} As a result of the increase in the shareholder base, each company has adopted corporate governance practices normally associated with a corporation. Regular shareholder meetings are conducted; shareholders are provided with financial information; proxies are solicited; and dividends are paid. (Acme-McCrary Aff. ¶¶ 5, 7; Sapona Aff. ¶¶ 5, 7, Randolph Oil Aff. ¶¶ 4, 6.) The companies also conduct their businesses in accordance with modern management practices. (Acme-McCrary Aff. ¶ 6; Sapona Aff. 1 6; Randolph Oil Aff. ¶ 5.)

{20} There is no evidence that there is a market for the minority shares held by the Trust or any other minority shares. (S. Redding Dep. 29:7-25.) The shares of all shareholders appear to be locked in absent some action on the part of a majority of shareholders to address that deadlock.

{21} While there is no significant number of shareholder employees in the companies, family members do participate at the board and officer levels. Seven of the eleven members of the Board of Acme-McCrary are related to D.B. McCrary and T.H. Redding, as well as four of the nine officers. (Acme-McCrary Aff. ¶ 4.) Seven of the twelve directors of Sapona are related to the three original founders, as well as four of the nine officers. (Sapona Aff. ¶ 4.) And at Randolph Oil, four of the seven directors are members of the McCrary family, as well as two of the five officers. (Randolph Oil Aff. ¶ 3.) In addition, there is substantial, but not complete, overlap in the boards of Acme-McCrary and Sapona. (Answer ¶¶ 5-6.)

{22} All the Defendant Corporations have a history of paying dividends. (See Sapona Aff. ¶ 7; Acme-McCrary Aff. ¶ 7, Randolph Oil Aff. ¶ 6.) Attached to this Order and Opinion is a history of the recent dividends paid either to Mrs. Simmons or the Bank as Trustee. See tbl.2. Equivalent per-share dividends were paid to all other shareholders. There is no evidence in this record that those dividends were determined in any way...

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