Cannon v. Monroe

• Decision Date: 05 May 2009
• Docket Number: No. ED 92391.,ED 92391.
• Citation: 285 S.W.3d 375
• Parties: William O. CANNON, Respondent, v. Thomas E. MONROE, Appellant.
• Court: Missouri Court of Appeals

285 S.W.3d 375 William O. CANNON, Respondent,
v.
Thomas E. MONROE, Appellant. No. ED 92391. Missouri Court of Appeals, Eastern District, Division Three. May 5, 2009.

[285 S.W.3d 376]

Francis E. Pennington, St. Louis, MO, for appellant.

Gary A. Growe, Clayton, MO, for respondent.

CLIFFORD H. AHRENS, Judge.

Thomas Monroe appeals from the judgment of the trial court that ordered him to sell his entire interests in the Safe Deposit Company ("SDC"), in CompuVault, Inc. and in Vault II, L.L.C. to William Cannon for $1,755,000. Finding no error, we affirm.

Viewed in the light most favorable to the judgment, the facts are as follows. Monroe and Cannon are fifty-fifty equal shareholders in SDC and CompuVault, both Missouri corporations, and equal partners in Vault II, as well as its only members. Monroe and Cannon have been in business together for a number of years. In July 1989, they entered into an agreement concerning the ownership of SDC ("SDC Agreement"). There are no agreements concerning the ownership of CompuVault or Vault II. The SDC Agreement had a number of provisions, some of which were not kept by the parties as related to regularly determining valuation of SDC.

Both Monroe and Cannon have held various executive and managerial offices within the several companies. At the time litigation started in the present case, Cannon was the president, principal executive officer, treasurer, and a director of SDC, and president of CompuVault. Monroe was chairman, CEO, secretary, and a director of SDC, and chairman, CEO, secretary and a director of CompuVault. Neither company had meetings to elect officers or directors for years. Management of the companies became deadlocked over time.

On January 16, 2004, Cannon filed a petition under sections 351.467 RSMo 2000 and 347.143 RSMo 2000.¹ Monroe filed an answer, later amended and asserting a counterclaim. Cannon's first amended petition, filed on September 3, 2004, consisted of three counts. Count I sought corporate dissolution of SDC and CompuVault, asserting that the two shareholders could not agree on continuing the businesses, and asking the court to take jurisdiction if they could not agree on some plan to dissolve and distribute the assets, and appoint a trustee or receiver to administer and wind up the affairs of the two firms. Count II of the first amended petition sought dissolution of Vault II, alleging that it was not reasonably practicable to carry on the business, and requesting that the court take jurisdiction of Vault II and appoint a trustee or receiver to administer and wind up its affairs if the parties could not reach an agreement to that effect. Count III sought a declaratory judgment from the court regarding SDC, and seeking to have a number of shares of common stock issued to Cannon based on his excess capital contributions, as well as costs of the litigation. Monroe filed an answer to the first amended petition raising several defenses and asserting a counterclaim with two counts. Count I, denominated an action under section 351.494 et seq., asserted that Monroe and Cannon were the two shareholders of SDC and deadlocked in voting power and in the management of the company's affairs, unable to break the deadlock. Monroe averred that Cannon had taken unilateral actions that were damaging, at least potentially, to SDC. Monroe sought a judgment from the court, pursuant to sections 351.855 and 351.860, where shareholders and directors of a corporation are deadlocked, ordering Cannon

285 S.W.3d 377

removed as an officer and director of SDC, and ordering that a third party be appointed as a director, and ordering Cannon to sell all of his shares of SDC to either SDC or Monroe "for fair value." Count II was an action for declaratory judgment, alleging that Monroe has made excess capital contributions to SDC, and requesting that the court declare that Cannon and Monroe, as directors, issue 425 shares of SDC common stock to Monroe, and award him costs for the litigation.

A hearing was held on April 7, 2005, and by agreement of the parties no evidence was adduced at the hearing. The parties stipulated as follows:

1. [Cannon] and [Monroe] each own 50% of the issued and outstanding stock in [SDC], CompuVault and are 50-50 members in Vault II[ ].

2. Exhibit A to [Cannon]'s petition (denominated Plan of Discontinuance and Distribution[)] was served on all appropriate parties.

3. There has been no agreement reached between the parties with respect to the Plan of Discontinuance and Distribution since it was served.

4. The Court shall enter findings of fact and conclusions of law in accordance with pleadings, exhibits and arguments of counsel.

The trial court issued findings of fact and conclusions of law on May 3, 2005. There were no objections made to these findings and conclusions. Among its findings, the trial court accepted the allegations of Cannon's petition that he and Monroe were unable to agree upon continuing the business of SDC and CompuVault, and found that they had reached no agreement regarding Cannon's Plan of Discontinuance and Distribution. The trial court granted Cannon's claim under section 351.467, concluding that there was a clear disagreement between the parties regarding the desirability of continuing the business of the companies under its current ownership and governance structure, and that Cannon had complied with section 351.467 in the filing of his petition and exhibits. The trial court appointed attorney Dudley McCarter as the trustee ("Trustee") to serve the interests of the shareholders under section 351.467, with full authority to run the business and sell the company as a going concern or to liquidate its assets. The Trustee was to use his best efforts to settle any disagreements between the parties, and the parties were ordered to cooperate fully with Trustee in terms of disposing of the business, "including the sale of the business as a whole, or disposition of business parts." The Trustee was to make reports to the trial court.

Trustee made an initial report on June 8, 2005, in which he advised the trial court that he was working with the parties to negotiate a sale to a third party or between the two parties. Trustee filed a second report with the trial court on September 23, 2005. No objections were made by either party to Trustee's first two reports. Trustee recommended that a business broker be employed to market and sell the various companies. Pursuant to the procedure set forth in his second report, Trustee and the parties selected Clayton Capital as the desired broker, and Trustee moved the trial court to approve a contract with Clayton Capital. Thereafter, some problems arose, and Monroe filed several motions reflecting his concerns about the process. The trial court delayed its order to execute a contract with Clayton Capital several times, in part based on negotiations between Monroe and Cannon. On July 18, 2006, the trial court ordered Monroe and Cannon to deliver executed copies of the listing contract with Clayton Capital to Trustee by July 21, 2006. Cannon apparently complied, but Monroe did

285 S.W.3d 378

not. Cannon filed a motion for sanctions and/or contempt on August 21, 2006. Cannon withdrew the motion at a hearing on September 26, 2006, wherein the court was advised that the parties had agreed to participate in a binding private sale of their respective interests in the three companies. The trial court entered an order that same day directing Trustee to file a motion for approval of private sale, specifying the procedures to be used. No objection was filed by either party at that time. Trustee filed a motion to retain Brent Baxter of Clayton Capital, an investment banker, to act as a deputy trustee to assist with a private sale between Monroe and Cannon. Neither party objected to this motion. On November 6, 2006, Trustee filed a motion for approval to conduct private sale, which averred that Monroe and Cannon, through counsel, had advised him of their willingness to participate in a binding private sale of the respective interests in the three companies. Trustee stated his belief that it was in the best interest of the companies and the parties to have him conduct a private sale to conclude the litigation by having one of the parties acquire the other party's interests in the firms. Monroe had a change of heart, and on December 1, 2006, filed a motion to compel an alternative method for concluding the case. The trial court granted Trustee's motion to conduct a private sale, and set forth the requirements for that process on December 19, 2006.

The sale was held on February 20, 2007, and February 22, 2007, with Trustee reporting the results to the trial court. Trustee kept a record of each offer to buy or to sell, which was made a part of the court record, with over thirty offers and counter-offers made collectively by both parties. Monroe offered to purchase Cannon's interest for $1,735,000 at 2:30 p.m. on February 22, 2007. Cannon countered less than fifteen minutes later with an offer to buy Monroe's interest for $1,755,000. Monroe did not reply. Consequently Cannon was the last, and highest, bidder. Cannon filed a motion for entry of final judgment on April 20, 2007, and Trustee filed a motion...