Bogosian v. Woloohojian Realty Corp.

• Decision Date: 31 July 1997
• Docket Number: C.A. No. 88-0373B.
• Citation: 973 F.Supp. 98
• Parties: Elizabeth BOGOSIAN, Plaintiff, v. WOLOOHOJIAN REALTY CORP., et al., Defendants.
• Court: U.S. District Court — District of Rhode Island

973 F.Supp. 98

Elizabeth BOGOSIAN, Plaintiff, v. WOLOOHOJIAN REALTY CORP., et al., Defendants.

C.A. No. 88-0373B.

United States District Court, D. Rhode Island.

July 31, 1997.

Eustace T. Pliakas, Tillinghast, Licht & Semonoff, Providence, RI, John W. Cannavino, William H. Bright, Jr., Charles D. Ray, Cummings & Lockwood, Hartford, CT, Michael J. Lepizzera, Providence, RI, for plaintiff Elizabeth V. Bogosian.

Everett Sammartino, United States Attorney's Office, Providence, RI, for I.R.S William Richard Grimm, Hinckley, Allen & Snyder, John H. Blish, William R. Landry, Blish & Cavanagh, Providence, RI, for defendants James H. Woloohojian, Harry J. Woloohojian and Woloohojian Realty Corp.

OPINION

FRANCIS J. BOYLE, Senior District Judge.

Plaintiff Mrs. Bogosian, a minority shareholder in the defendant Woloohojian Realty Corporation, ("WRC"), petitioned on January 19, 1989 to dissolve the corporation. WRC was a family-owned real estate business incorporated in Rhode Island and was highly successful by the time this litigation began, with a value in the millions of dollars. Various disagreements among WRC's three shareholders left the plaintiff, owner of one-third of the corporation's capital stock, at odds with her two brothers, James and Harry Woloohojian, who each owned one-third of the stock. As a result of these disagreements, the plaintiff petitioned this court for dissolution of the corporation under R.I.Gen. Laws § 7-1.1-90 (1985). James and Harry Woloohojian also were named as defendants. Harry Woloohojian died during the course of this action, and his estate, represented by his wife and a bank as his executors, has been substituted as a party.

Rather than see the corporation dissolved and the liquidation proceeds distributed among the shareholders, the plaintiff's brothers, controlling shareholders of the closely-held corporation, preferred to have WRC continue as a functioning business entity. Rhode Island law allows a corporation subject to a shareholder suit for dissolution to avoid termination by purchasing the shares of the petitioning shareholder, "at a price equal to their fair value," without the shareholder's consent. R.I.Gen.Laws § 7-1.1-90.1 (1985). Therefore, WRC, through its officers Harry and James Woloohojian, elected to purchase the plaintiff's shares on February 16, 1989. A later attempt to "revoke" this election to purchase plaintiff's shares was rejected by this court as not authorized by law. Bogosian v. Woloohojian, 749 F.Supp. 396 (D.R.I.1990), aff'd 923 F.2d 898 (1st Cir. 1991).

In effect, the corporation's election to purchase plaintiff's shares terminated her rights as owner of the shares, except her right to payment of the shares' full and fair value from the corporation. The parties did not agree on how much WRC would have to pay the plaintiff for her shares, however, and determination of share value by the court became necessary, Rhode Island law incorporates the procedure for determining the value of a dissenting shareholder's stock in an appraisal proceeding as the method of determining "full and fair value." R.I.Gen.Laws § 7-1.1-90.1 (referring to R.I.Gen.Laws § 7-1.1-74 (1985)). Once the stock's value has been determined through this process, the court "shall set forth in its order directing that the stock be purchased, the purchase price and the time within which the payment shall be made, and may decree such other terms and conditions of sale as it determines to be appropriate." Id.

The parties have been involved in a protracted and disputatious valuation process. By statute, the date the corporation elected to purchase the shares is fixed as the "valuation date;" the value of the plaintiff's shares on that date is the amount which will be paid to her in exchange for them. Id. That date is February 16, 1989. The plaintiff is also entitled to interest on the purchase price of her shares from "the date of the filing of the election," February 16, 1989, until the date of payment in full for the shares. Id.

Determining the value of plaintiff's shares consumed years of time and the efforts of this court, the Court of Appeals, a special master and a court appointed expert, not to mention the parties, their attorneys, and their several experts. Thus far, this litigation has spawned two Court of Appeals opinions, one published and one unpublished, in addition to four published opinions of this court. Moreover, as an offshoot of this litigation, both the Court of Appeals and the District Court have published opinions concerning the claims of plaintiff's former lawyers against plaintiff. The Court of Appeals aptly observed in the unpublished opinion, which although not precedent, is binding in this case, that the "issues presented in this appeal could have been resolved without our intervention if the parties were disposed to manage this litigation with a view toward resolving issues instead of proliferating them." Bogosian v. Woloohojian, No. 95-1949, slip op. at 2, 1996 WL 202226 (1st Cir. April 25, 1996). As this court is uniquely familiar with what has happened, it must be pointed out in fairness to plaintiff that the intervention of the Court of Appeals would not have been necessary had the defendant complied with the orders of this court rather than sought to terrorize the plaintiff into submission through financial starvation.

As of the valuation date, February 16, 1989, WRC's assets were substantially composed of twenty one parcels of real estate, including commercial buildings, residential apartments, and undeveloped land suitable for development. Report of the Special Master at 4. Although the parties stipulated to the value of 12 of the properties, the values of several of WRC's largest and most important properties were the subject of considerable dispute during the valuation proceedings. Id. at 10. Principally, the parties were unable to agree on fair values for two apartment complexes owned by WRC, the "Jamestown Apartments" and the "Seabury Apartments," a parking garage the corporation owned, the "Snow Street Block," and undeveloped land referred to as "the Shopping Center Site." The values the parties placed on these properties varied by as much as 60%. Id. Ultimately, after taking voluminous testimony and reviewing hundreds of documents submitted by the parties in support of their contentions, the Special Master determined that the value of the Jamestown Apartments was $5,200,000, the value of the Seabury Apartments was $970,000, the value of the Snow Street parking garage was $1,000,000, and the value of the Shopping Center Site was $3,300,000 as of the valuation date. Id. at 69 (Appendix A). The total value of all 21 parcels of real estate owned by WRC on the valuation date was determined by the Special Master to be $16,288,000. Id.

WRC's real estate made up the majority of its total assets, which the Special Master determined to be worth $19,031,404. When WRC's outstanding liabilities of $5,791,000 were balanced against its assets' value, the net worth of WRC was calculated to be $13,240,404. Id. at 65. The Special Master therefore determined that the plaintiff's one-third interest in WRC was worth one-third of the corporation's net worth, or $4,413,466. Id. at 67. Despite urging by the defendant, the Special Master did not then make any adjustment in WRC's net worth or in the value of the plaintiff's shares for what WRC would term "deferred tax liabilities," or the amount of capital gains tax which would be due if the properties which make up WRC's assets were sold in order to raise the funds with which to purchase the stock. Id. at 62.

Both parties objected to portions of the Special Master's report, a hearing was held and this court ordered the Special Master to re-evaluate certain property values under controlling principles of Rhode Island law with respect to the impact of zoning on property value, the time of valuation and the appropriate method of valuation. Bogosian v. Woloohojian, 831 F.Supp. 47 (D.R.I.1993). The Special Master thoroughly re-examined the questioned property values in light of the controlling law, and determined that WRC's net worth as of the valuation date was appropriately set at $14,705,404, and that the plaintiff's one-third interest in WRC was therefore worth $4,901,801. Supplementary Report of the Special Master at 28. Both parties objected on different grounds to the Supplementary Report, and this court again held a hearing on the matter. Bogosian v. Woloohojian, 882 F.Supp. 258 (D.R.I.1995). Like the Special Master, this court then refused to make any adjustment for "deferred tax liabilities," as WRC requested. Id. at 266. Therefore, after this court reviewed the Special Master's procedure and determinations, the findings contained in his Initial and Supplemental Reports were accepted and adopted as the findings of this court. Id.

This brief history of the Special Master's procedure demonstrates that a hallmark of this litigation to date has been unrelenting and bitter dispute between the parties on virtually every point. Certainly, other litigation involving family partnerships and business ventures which had been pursued in common by the individual parties has contributed to the delay, complications and rancor experienced throughout the course of this case. One particularly complicating matter during the span of this litigation, however, and one which has resulted in related litigation, has been the strained relationship the plaintiff has had with her counsel. As a result of various disputes, she has retained six different law firms at various points in this litigation, with concomitant difficulty and delay each time she changed her representation. Although it would be expected that this steady stream of different counsel would cause additional further controversy, this process of substitution has caused plaintiff to adopt a reactive posture.

One law firm which formerly represented the plaintiff in this...