Brand v. Lowther, 14886

CourtSupreme Court of West Virginia
Citation285 S.E.2d 474,168 W.Va. 726
Decision Date18 December 1981
Docket NumberNo. 14886,14886
PartiesK. C. BRAND, Jr. v. Leon LOWTHER and Rest Haven Memorial Gardens, Inc.

Syllabus by the Court

1. A contract for the sale of all the shares of stock in a corporation will not be specifically enforced when the contract is entered into by a party who does not own all of the shares of stock and who does not have the authority to sell the shares of other shareholders.

2. Kinship or marital relation alone does not imply an agency.

3. The president of a corporation has no authority to contract to sell all, or substantially all, of the property or assets of the corporation without a recommendation of the corporate board of directors, written notice to all shareholders and the approval of a majority of the shareholders, when such sale is not in the regular course of the corporation's business. W.Va.Code § 31-1-121 (1975 Replacement Vol.).

Wilson, Frame & Poling and Clark B. Frame, Morgantown, for appellants.

Alfred R. Putnam, Fairmont, for appellee.

McGRAW, Justice:

This case comes to us on appeal from a judgment of the Circuit Court of Marion County which decreed specific performance of a contract for the sale and conveyance of all of the capital stock and corporate assets of Rest Haven Memorial Gardens, Inc. The appellants, Leon Lowther and Rest Haven Memorial Gardens, contend that the case did not warrant a decree of specific performance and that the appellee, K. C. Brand, was guilty of laches. After a careful review of the record in this case we agree with the appellants' contentions and we reverse the judgment of the circuit court.

Leon Lowther is the president of Rest Haven Memorial Gardens, Inc. (Rest Haven), a West Virginia corporation engaged in the business of operating a cemetery on a tract of some eighteen acres of land south of the City of Fairmont. The sole stockholders in Rest Haven are Leon Lowther and his wife, Mary Lowther, who each own five of the ten outstanding and issued shares of capital stock in the corporation. K. C. Brand is the owner and operator of a business which sells and services tractors and manufactures portable storage buildings. On August 12, 1974, Mr. Lowther and his son, Leslie Lowther, went to Mr. Brand's place of business in order to make payment on a debt owed by Rest Haven for work done by Mr. Brand on cemetery equipment. The Internal Revenue Service had threatened to attach the bank accounts of Mr. Lowther and Rest Haven for the payment of taxes, and Mr. Lowther was attempting to pay off his creditors before this occurred. During the course of the discussion, Mr. Lowther brought up the possibility of selling the cemetery. After some discussion and a view of the property by Mr. Brand, Mr. Lowther agreed to sell the cemetery for his asking price of $80,000, after assuring Mr. Brand that he was able to sell the corporation. The parties returned to Mr. Brand's office and executed a written agreement for the sale of Rest Haven. Present at that time were Mr. Lowther, Leslie Lowther, and Mr. Brand and Mr. Brand's secretary.

The agreement of August 12, 1974, provided for the sale of all capital stock in Rest Haven by Mr. Lowther, and the transfer of all of the assets of the corporation, except equipment, including the land. The transfer was to be debt free, with the seller paying all outstanding and accrued land, income and personal property taxes and all assets sold pre-need. The seller agreed that all pre-need merchandise would be on the property or installed at the time of the sale and the buyer agreed to handle the pre-need merchandise to customers. A $1,000 deposit was to be paid immediately and an installment of $10,000 was to be paid by August 18, 1974. The failure of the buyer to tender the $10,000 payment by August 18 would result in forfeiture of the $1,000 deposit. The further amount of $9,000 was to be paid at the time of the completion of the deal, not to exceed thirty to sixty days. The balance was to be paid in four equal installments at seven percent interest on the unpaid balance, and payment was to commence twelve months from the completion of the deal. The agreement was signed by Leon Lowther, individually, and by K. C. Brand, and bore an undated acknowledgement signed by Mr. Brand's attorney, who was not present when the document was executed.

On August 17, 1974, Mr. Lowther was contacted by Mr. Brand's attorney, who requested that the parties meet at his office to draw up a supplemental agreement and to pay the $10,000. At trial Mr. Lowther testified that the meeting took place late at night in the attorney's office and that the parties could not agree on the terms of the supplemental agreement. At that time he and Mr. Brand signed a blank sheet of paper with the understanding that Mr. Brand's attorney would have the terms of the supplemental agreement typed on the paper and send a copy of the agreement to Mr. Lowther. Mr. Lowther testified that he had never received a copy of this agreement. Mr. Brand testified that although his memory was somewhat hazy he seemed to recall that the meeting occurred during the daytime and that the agreement was typed, read through, and signed by all the parties in the attorney's office.

The supplemental agreement of August 17, 1974 provided that the sellers would pay all claims of the Internal Revenue Service for income or other taxes from the $11,000 already paid by the buyer. The agreement allowed the buyer access to the business property and records and the right to deduct from the purchase price any payments made by the buyer to protect his investment. The closing of the sale was set for January 1, 1975 or after, and it was provided that Mr. Lowther would work for the buyer at a salary of $1,000 per month for a period of at least six months thereafter. Finally, the supplemental agreement provided that the transfer of assets to the buyer was to include the cemetery's perpetual care fund. 1 The agreement was signed by Leon Lowther, individually and as president of the corporation.

Apparently due to Mr. Lowther's problems with the Internal Revenue Service, no further action was taken on the contract until September 30, 1975. On that date Mr. Lowther approached Mr. Brand and informed him that he would need $2,100 to pay his obligation to the IRS. The parties entered into a second supplemental agreement acknowledging the receipt by the seller of the $2,100, and deducting that amount from the $9,000 to be paid at the time of the closing, which was set for January 2, 1976. Mr. Lowther testified that in the next several months he approached Mr. Brand on numerous occasions attempting to close the deal but that he was always put off by Mr. Brand, who stated that he would have to talk to his attorney.

On January 9, 1976, Mr. Brand and Mr. Lowther met once again to discuss closing the contract. At this time, however, a dispute arose as to the disposition of the perpetual care fund. It appeared that Rest Haven had borrowed some $7,150 from the perpetual care fund for corporate purposes and that this amount had not been returned to the fund. Mr. Lowther described the loan as an internal debt to be paid back at the rate of five percent of the purchase price of each lot until the debt was paid in full. Mr. Lowther said he advised Mr. Brand of the loan from the perpetual care fund at the time the second supplemental agreement was entered into on September 30, 1975. Mr. Brand, on the other hand, asserts that the first he heard of this outstanding debt to the perpetual care fund was on January 9, 1976. Mr. Brand took the position that Mr. Lowther, who had contracted to transfer Rest Haven debt free, was obliged under the terms of the contract to replace the funds in the perpetual care fund and transfer that account intact. Mr. Lowther did not regard the debt as an outstanding debt but rather an internal debt of the corporation, and refused to replace the money, preferring instead that the fund be transferred as it was, and that Mr. Brand deduct the $7,150 from the last payment. The parties attempted for several months to resolve this obstacle to the closing of the sale, but were unable to do so. 2 On July 23, 1976, Mr. Brand filed a civil action in the Circuit Court of Marion County for specific performance of the contract. Trial was held on June 20, 1978 before a judge sitting without a jury, and on September 19, 1979 an order was entered granting the appellee's request for specific performance. It is from that order that the appellants now appeal.

The appellants assert that this action is not a proper case for a grant of specific performance because the contract was made in the absence of and without the knowledge or consent of, Mary Lowther, who was the owner of fifty percent of the capital stock of the corporation and was not made a party to the action in the circuit court. The appellants also assert that the contract in question was indefinite and incomplete in that it did not include essential elements of an enforceable contract of sale. Finally the appellants contend that the record developed in this action shows the appellee to be guilty of laches and not entitled to the relief sought in the complaint. The appellee counters by arguing that the contract was sufficiently definite and complete to warrant specific performance and that appellant Lowther was acting as an agent for his wife in contracting to sell the stock of the corporation. The appellee does not address the question of laches.

Before addressing the specific issues raised by the parties, it is helpful to review the general law of the remedy of specific performance. The remedy of specific performance of a contract is not a matter of right in either party, but rests in the sound discretion of the court, to be determined from all the facts and circumstances of the case. Gray v. Marino, 138 W.Va. 585, 76 S.E.2d 585 (1953); Lowther Oil Company v....

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