Barber v. Vistarms, Inc.

• Decision Date: 15 September 2006
• Docket Number: Record No. 052094.
• Parties: Leon BARBER v. VISTARMS, INC.
• Court: Virginia Supreme Court

634 S.E.2d 706

Leon BARBER v. VISTARMS, INC.

Record No. 052094.

Supreme Court of Virginia.

September 15, 2006.

COPYRIGHT MATERIAL OMITTED

David A. Temeles, Jr. (Temeles & Temeles, on brief), for appellant.

Philip J. Harvey, Vienna (Linda M. Jackson, Varda Hussain, Venable LLP, on brief), for appellee.

Present: All the Justices.

OPINION BY Justice LAWRENCE L. KOONTZ, JR.

In this appeal, we consider whether the trial court correctly sustained a demurrer to an amended petition for writ of mandamus brought by a former employee of a closely held corporation who sought to compel the corporation to allow access to the corporation's books and records, issue notice of dissenting rights, and refrain from distributing assets of the corporation. The dispositive issue is whether the trial court correctly determined that the former employee's ownership of shares of stock in the corporation had been terminated pursuant to several agreements between the former employee and the corporation and, thus, that the former employee lacked standing to receive the requested relief when he filed his petition for writ of mandamus.

BACKGROUND

The principles of appellate review that guide our consideration of a trial court's judgment granting a demurrer are well-settled. A demurrer admits the truth of the facts alleged in the pleading to which it is addressed, as well as any facts that may be reasonably and fairly implied and inferred from those facts. See Yuzefovsky v. St John's Wood Apts., 261 Va. 97, 102, 540 S.E.2d 134, 136 (2001). Thus, we will recite the facts as alleged in the former employee's petition for writ of mandamus in the light most favorable to the former employee. Id. at 102, 540 S.E.2d at 137.

Leon Barber commenced employment in 1994 with VistaRMS, Inc., a closely held corporation initially owned by three shareholders. By 1998, the three original shareholders determined to extend ownership of common stock in the corporation to four designated employees of VistaRMS. Accordingly, the three original shareholders and this group of employees, which did not include Barber, entered into an agreement on December 22, 1998 ("1998 Agreement") whereby the employees received a limited number of shares of VistaRMS common stock.

The 1998 Agreement reflected the original shareholders' intent to ensure that VistaRMS would retain its character as a closely held corporation while simultaneously granting ownership interests to the employees. The preamble to the 1998 Agreement stated that allocation of stock was intended to be performed in a manner that "preserve[d] the closely held nature of the common stock of the [c]orporation." Consistent with this objective, the 1998 Agreement provided that "[i]t is specifically understood and agreed to by the parties that should [an employee] leave the employment of VistaRMS for any reason — either voluntarily, by termination of employment or death — [his] ownership of the common stock[ ] shall immediately cease." Additionally, the 1998 Agreement prohibited the employees' transfer of their shares of stock to a third party "without the expressed written joint approval" of the three original shareholders.

In 1999, an addendum ("1999 Addendum") to the 1998 Agreement was executed between VistaRMS and Barber. Pursuant to this Addendum, VistaRMS allocated and delivered to Barber a certificate representing two shares of VistaRMS common stock. In 2002, another addendum ("2002 Addendum") was executed by the parties under which Barber received additional certificated shares of VistaRMS common stock.¹ Other than allocating a different number of shares, the 1999 and 2002 Addenda, and the certificates issued upon execution of the Addenda, were virtually identical.² Like the 1998 Agreement, the Addenda expressed an intention to "preserve the closely held nature of the common stock" of VistaRMS and prohibited the transfer of stock by employees "without the expressed written joint approval" of the original shareholders. Regarding the consequences of Barber's departure or termination from employment by VistaRMS, the 1999 and 2002 Addenda stated:

It is specifically understood and agreed to by Barber that should he leave the employment of the Corporation for any reason — either voluntarily, by termination of employment or by death — her [sic] ownership of the common stocks . . . shall immediately cease. In such an event, the shares of common stocks owned by Barber shall be reallocated in accordance with the terms of the December 22, 1998 Agreement.

On January 15, 2004, VistaRMS terminated Barber's employment without explanation and, apparently, to Barber's surprise. On the same day, VistaRMS presented Barber with a Separation Agreement providing, in relevant part, that:

3. Except as required by law or as otherwise provided in this paragraph, [Barber's] right to all employee benefits from or through VistaRMS, including (without limitation) compensation, future compensation, bonuses, savings plans, stocks and stock options . . . are terminated as of January 15, 2004.

. . . .

5. The Parties agree that this agreement settles all existing claims to which [Barber] may be entitled. [Barber] acknowledges and agrees that he will not be entitled to receive any future compensation from VistaRMS, in any manner, including but not limited to bonuses, stock options or any other form of financial compensation.

. . . .

6.(a) [Barber] does forever waive, release and discharge VistaRMS . . . from any and all claims . . . of any kind whatsoever . . . arising out of [his] entire employment relationship with VistaRMS and the termination thereof . . . .

6. (b) All the persons and entities affiliated or associated with VistaRMS . . . hereby release [Barber] from any and all legal claims and causes of action . . . arising out of [Barber's] entire employment relationship with VistaRMS, and the termination thereof.

Barber signed the Separation Agreement.³

Barber retained possession of the stock certificates representing the shares issued to him by VistaRMS pursuant to the 1999 and 2002 addenda. Moreover, VistaRMS did not register in its corporate records that these shares had been reallocated or otherwise transferred following the termination of Barber's employment.

In December 2004, Barber learned that discussions were taking place concerning the possible sale of VistaRMS to another corporation.⁴ Barber presented VistaRMS with written requests for access to corporate records in order to "evaluate the transaction and determine monies that are due to me." VistaRMS refused, asserting that Barber's ownership of VistaRMS stock ceased upon the termination of his employment pursuant to the 1998 Agreement and the 1999 and 2002 Addenda.

On February 15, 2005, Barber filed a petition for writ of mandamus in the Circuit Court of Fairfax County ("trial court") seeking an order to require (1) that VistaRMS provide Barber the opportunity to inspect and copy various records concerning the financial reports and stock history of VistaRMS as well as documents relating to the sale of VistaRMS; (2) that VistaRMS provide Barber with notice of his dissenting rights; and (3) that VistaRMS be prohibited from directly or indirectly distributing assets to its shareholders. VistaRMS filed a demurrer to the petition contending that Barber was not a shareholder and, thus, had no legal right to the relief requested. The trial court sustained VistaRMS's demurrer, but granted Barber leave to file an amended petition.

Barber subsequently filed an amended petition for writ of mandamus that contained substantially similar allegations to those in the original petition. Specifically, Barber asserted a continuing ownership interest in VistaRMS, citing the terms of the stock certificates stating that the shares of stock could only be transferred on the books of the corporation upon the endorsement and presentation of the certificates. Barber further asserted that the termination provisions in the 1998 Agreement and the 1999 and 2002 Addenda were void because they lacked material terms and contravened several Virginia statutes. Additionally, Barber contended that VistaRMS waived any right to terminate Barber's interest in the shares through a provision in the Separation Agreement releasing Barber "from any and all legal claims and causes of action whatsoever . . . arising out of [Barber's] entire employment relationship with VistaRMS, and the termination thereof."

VistaRMS filed a demurrer to the amended petition for writ of mandamus. VistaRMS principally contended that Barber would only be entitled to inspect and copy records if he were a shareholder of VistaRMS, which VistaRMS maintained was disproved by the "clear and unambiguous documents attached to Barber's Amended Petition."

After briefing and oral argument by the parties, the trial court sustained VistaRMS's demurrer to Barber's amended petition for writ of mandamus, ruling that, under the 1998 Agreement, the 1999 and 2002 Addenda, and the Separation Agreement, Barber was no longer a shareholder in VistaRMS and, thus, did not have standing to obtain the requested relief. On July 11, 2005, the trial court entered a final order sustaining VistaRMS's demurrer to Barber's amended petition for writ of mandamus and dismissing the petition with prejudice. This appeal followed.

DISCUSSION

Barber has assigned error to the trial court's judgments sustaining the demurrers to both his original petition for writ of mandamus and his amended petition for writ of mandamus. However, "[w]hen a circuit court sustains a demurrer to an amended pleading which is complete in itself and fails to incorporate by reference allegations in earlier pleadings, we will consider only the allegations contained in the amended pleading that was the subject of the demurrer sustained by the judgment appealed from." Delk v. Columbia/HCA Healthcare Corp., 259 Va. 125, 129, 523 S.E.2d 826, 829 (2000); see also Bell Atlantic-Virginia,...