Ag Link, Inc. v. Shrum
| Decision Date | 01 December 2009 |
| Docket Number | 27397-1-III |
| Court | Washington Court of Appeals |
| Parties | AG LINK, INCORPORATED, a Washington corporation, Respondent, v. BRADLEY T. SHRUM and J. SHARDELL SHRUM, husband and wife, JEFFREY A. OSWALD and PAULA R. OSWALD, husband and wife, MURRAY CEDERBLOM, BRIAN CEDERBLOM and CYNTHIA CEDERBLOM, husband and wife, Appellants, MIKE PAUL individually and as personal representative of THE ESTATE OF MAXINE COLE, deceased, and THE ESTATE OF VERN ANDERSON, deceased, Defendants. |
UNPUBLISHED OPINION
Edwall Chemical Corporation and Lincoln Mutual Service, Inc. #1 planned to merge into Ag Link, Incorporated. Several of Edwall's shareholders dissented and sought fair value for their shares. The parties followed the corporate dissenters' rights statutory scheme, chapter 23B.13 RCW and came before the court for judicial resolution of the price owing the dissenters for their shares. The trial court held that because Edwall acted as a cooperative association the price of shares was subject to the remedy for dissenters' rights under RCW 23.86.145, the cooperative association statute, which permits payment of shares to a dissenting cooperative association member at less than fair value if allowed by the cooperative's articles of incorporation.
We conclude that Edwall was formed as a for-profit corporation and, although it amended its bylaws to operate as a cooperative association for tax purposes, it declined to form a cooperative association under chapter 23.86 RCW by amendment of its articles of incorporation. Additionally Edwall did not include in its articles of incorporation a valuation method for the payment of shares at less than fair value. Therefore, Edwall may not pay the dissenters less than fair value for their shares pursuant to the cooperative association dissenters' rights statute, RCW 23.86.145.
We further conclude that Edwall's bylaws and the membership and stock purchase agreements signed by the dissenters, which permitted the board of directors to set the price of shares in an amount no greater than book value in the event of redemption or termination, does not apply to the merger that occurred here. Instead, dissenters to the merger are entitled to fair value for their shares as provided for in the corporate dissenters' rights statutes, chapter 23B.13 RCW. Finally, we deny Ag Link's motion to dismiss that it sought under RAP 2.5(b).
We therefore reverse and remand for valuation of the shares according to the procedures of RCW 23B.13.300 and .310 and for the trial court to consider whether the dissenters should provide a bond to secure Ag Link's interests during the pendency of the action. See RAP 2.5(b).
On September 20, 2006, Edwall Chemical Corporation sent notices to its shareholders of its intent to merge with Lincoln Mutual Service, Inc. # 1, forming Ag Link, Incorporated. The notices informed the shareholders that the proposed action would create dissenters' rights under chapter 23B.13 RCW the chapter of the Washington Business Corporation Act that deals with corporate dissenters' rights. Shareholders Bradley T. Shrum, J. Shardell Shrum, Jeffrey A. Oswald, Paula R. Oswald, Murray Cederblom, Brian Cederblom, and Cynthia Cederblom informed Ag Link of their dissent to the merger and demanded payment for their shares.
Ag Link sent each dissenter payment of the book value of $0.15 per share plus each dissenter's pro rata share of Edwall's unallocated retained margins for 2005 and 2006 at an interest rate of 8.10 percent for 30 days. The dissenters rejected the payment and demanded payment of fair value under the corporation dissenters' rights provisions of chapter 23B.13 RCW.
Ag Link filed a petition pursuant to RCW 23B.13.300(1) for judicial resolution of the share price. Ag Link moved for summary judgment, alleging that its payment to the dissenters of the book value of $0.15 per share was in accordance with Edwall's bylaws and that book value plus each dissenter's pro rata share of unallocated retained margins constituted fair value for the dissenters' shares because Edwall was a cooperative association.
The dissenters opposed Ag Link's motion and also moved for summary judgment, asking the court to find that Ag Link failed to comply with chapter 23B.13 RCW in providing its estimation of fair value, which must be in accordance with generally accepted valuation practices.
At the conclusion of the October 11, 2007 hearing on the matter, the trial court requested supplemental memoranda to explore whether Edwall was a cooperative association and whether the cooperative association dissenters' rights statute, RCW 23.86.145, applied to the proceedings. The court also ordered an evidentiary hearing to determine whether Edwall was a cooperative association. The court ruled that Edwall was a cooperative and concluded that the share value advocated by Edwall was fair value. Findings of fact and conclusions of law were thereafter entered. Edwall sent payment to the dissenters.
The dissenters appealed. Edwall moved on the merits to affirm, asserting that the dissenters have lost their right to review because they accepted the benefits of the superior court decision. RAP 2.5(b). A commissioner of this court referred the issue to us.
This court reviews summary judgment orders de novo, engaging in the same inquiry as the trial court. Trimble v. Wash. State Univ., 140 Wn.2d 88, 92-93, 993 P.2d 259 (2000). Whether a trial court's reading and application of a statute is correct is a question of statutory construction and is also reviewed de novo on appeal. Ballard Square Condo. Owners Ass'n v. Dynasty Constr. Co., 158 Wn.2d 603, 612, 146 P.3d 914 (2006).
Ag Link contends that the dissenters did not properly assign error to the trial court's findings and conclusions. Findings of fact and conclusions of law are superfluous on summary judgment review. Wash. Optometric Ass'n v. County of Pierce, 73 Wn.2d 445, 448, 438 P.2d 861 (1968). Failure to assign error to the individual findings and conclusions has no effect on the dissenters' appeal.
The dissenters dispute the trial court's determination that Edwall is a cooperative association, which makes it subject to the dissenters' rights for cooperative associations under chapter 23.86 RCW. The dissenters argue that Edwall was formed as a for-profit corporation and it did not amend its articles of incorporation, as it must, to alter its corporate form. The dissenters acknowledge that Edwall contemplated a change of the corporate form to that of a cooperative association, but they assert that Edwall ultimately elected to maintain its status as a for-profit corporation.
Ag Link does not dispute that Edwall was formed as a for-profit corporation, as evidenced by its articles of incorporation filed July 20, 1953. Instead, Ag Link asserts that "[i]n 1961 the directors and shareholders of Edwall voted to convert to an agricultural supply co-op." Resp't's Br. at 6. The record does not support that assertion.
The record shows that in late 1960, Edwall's board began contemplating changes to the corporate structure to take advantage of the tax benefits available to cooperative associations. The board considered different ways to achieve eligibility under the tax code.
At a special meeting on November 30, 1960, "[a] discussion ensued relative to a contemplated change of the corporation to a cooperative form." Ex. 5(a). A meeting was scheduled with Edwall's accountant "to discuss the plan further." Ex. 5(a).
A special meeting was called on December 16, during which "[a] report was delivered" by the board president regarding his meeting with the accountant "relative to the changing of the company from a corporation to a cooperative form." Ex. 5(b). The minutes reflect that "[a] detailed discussion on the matter followed," but the substance of that discussion is not set forth. Ex. 5(b).
At the regular meeting of the board on February 7, 1961, the board again addressed "the possibility of changing the corporate form to that of a cooperative." Ex. 5(c). A committee was appointed by the board president to meet with corporate counsel "to discuss at the earliest possible date the contemplated change." Ex. 5(c).
On April 21, at a regular meeting of the board, "[t]he Board discussed the method of dissolution presented by the company attorney." Ex. 5(d). Attached to the minutes is a draft of a "Plan of Complete Liquidation and Dissolution" of Edwall. Ex. 5(d). The document proposed that Edwall "sell its assets, property and business to the Edwall Fertilizer Company, a Cooperative." Ex. 5(d). The minutes reflect that "[a]fter a full discussion, the Board felt that a complete dissolution at this time would be risky and that another method should be pursued." Ex. 5(d). Instead:
A motion was made . . . and seconded . . . that the Board of Directors have drawn up and present to the stockholders, at a special stockholders meeting, amendments to the by-laws to enable the company to be operated as a partially tax exempt Co-operative beginning June 1, 1961. The motion was carried unanimously. Ex. 5(d).
At the regular meeting on May 27, "the directors agreed to call a special stockholders' meeting and submit the Amendment of By-Law procedure for the purpose of obtaining a partially exempt tax status for their approval and adoption." Ex. 5(e).
A notice issued regarding a special meeting on June 9. The proposed changes to the bylaws were included in the notice. The proposed amendment restricted the issuance of capital stock to "those persons engaged in the production of farm products" and provided for payment of patronage to members based upon...
To continue reading
Request your trial