FBI Farms, Inc. v. Moore
| Decision Date | 12 June 2002 |
| Docket Number | No. 76A03-0201-CV-24.,76A03-0201-CV-24. |
| Parties | F.B.I. FARMS, INC., Ivan Burger, Freddy L. Burger, Susan Burger Eash, and Linda Moore, Appellants-Defendants, v. Birchell MOORE, Appellee-Plaintiff. |
| Court | Indiana Appellate Court |
J. Richard Ransel, Jacob S. Frost, Thorne Grodnik & Ransel, Elkhart, IN, Attorneys for Appellants.
Leonard E. Eilbacher, Eilbacher Scott PC, Fort Wayne, IN, Attorney for Appellee.
F.B.I. Farms, Inc., Ivan W. Burger, Freddy L. Burger, Susan Burger Eash, and Linda Burger Moore ("Linda") appeal the trial court's grant of partial summary judgment to Birchell Moore ("Moore") on Moore's complaint for declaratory judgment. F.B.I. Farms raises two issues, which we restate as follows:
1. Whether restrictions on the transfer of F.B.I. Farms's stock were required to be honored prior to the stock being sold at the sheriff's sale; and
2. Whether the trial court erred by determining that certain restrictions on the alienation of F.B.I. Farms's stock were unenforceable.
We affirm.
The facts most favorable to the nonmovants follow. Moore was married to Linda, daughter of Ivan Burger. In 1976, Ivan Burger, Freddy Burger and Moore, along with their wives, incorporated F.B.I. Farms. Each couple deeded their farms and transferred their farm machinery to the corporation in exchange for common stock. Moore and Linda deeded a 180-acre parcel of real estate in exchange for their stock. After incorporation, Moore held 2,507 shares of stock in the corporation and Linda held 1 share of stock. Linda's father, Ivan Burger, later gave her an additional 417 shares of stock. As a director of the corporation, Moore was present at a meeting conducted in 1977 where the following restrictions on the transfer of shares were adopted:
1) [N]o stock of said corporation shall be transferred, assigned and/or exchanged or divided, unless or until approved by the Directors thereof;
2) That if any stock be offered for sale, assigned and/or transferred, the corporation should have the first opportunity of purchasing the same at no more than the book value thereof;
3) Should said corporation be not interested, and could not economically offer to purchase said stock, any stockholder of record should be given the next opportunity to purchase said stock, at a price not to exceed the book value thereof;
4) That if the corporation was not interested in the stock, and any stockholders were not interested therein, then the same could be sold to any blood member of the family. Should they be desirous of purchasing the same, then at not more than book value thereof.
Appellant's Appendix at 167-168.
Linda filed a petition for dissolution of her marriage to Moore in 1982. The divorce proceedings were the subject of a prior appeal to this court. See Moore v. Moore, 482 N.E.2d 1176 (Ind.Ct.App.1985). In the divorce proceedings, Linda was awarded all of the shares of stock in the corporation and Moore was awarded a judgment against Linda in the amount of $155,889.80 secured by a lien on Linda's stock in the corporation. Id. at 1181.
F.B.I. Farms experienced financial difficulties and filed for bankruptcy protection in 1989. F.B.I. Farms remained in bankruptcy until 1991. Linda failed to pay the judgment amount, and Moore sought to execute his lien upon Linda's stock in 1993. In 1999, after a writ of execution was issued, F.B.I. Farms sought to avoid the execution by attempting to cancel the 2,507 shares of stock for Moore's alleged non-payment of the subscription price. However, on February 16, 2000, Linda's stock was sold at a sheriff's sale. Moore purchased the stock for $290,450.67. On December 27, 2000, Moore filed a complaint for declaratory judgment, injunctive relief, and damages against F.B.I. Farms. Moore sought a declaratory judgment regarding the purported cancellation of the shares, the ownership of the shares, and the transferability of the shares.
Moore filed a motion for partial summary judgment. The trial court entered findings of fact and conclusions thereon and granted the motion for partial summary judgment. The trial court held that the "disputed shares of stock were not lawfully cancelled by the efforts of the directors of [F.B.I.] Farms at its special meeting of directors held on September 23, 1999." Appellant's Appendix at 35. The trial court further held that Moore was the "lawful owner" of the disputed stock. Id. at 38. Additionally, the trial court concluded that the restriction requiring director approval of stock transfers was "manifestly unreasonable" in this case and the restriction requiring that the stock be offered to "any blood member of the family" was also "manifestly unreasonable." Id. at 37. The trial court then determined that no just reason for delay existed and entered final judgment pursuant to Ind. Trial Rule 54(B).
Our standard of review when considering the grant or denial of a summary judgment motion is well settled. An appellate court faces the same issues that were before the trial court and follows the same process. Owens Corning Fiberglass Corp. v. Cobb, 754 N.E.2d 905, 908 (Ind. 2001). Summary judgment is appropriate only if the pleadings and evidence sanctioned by the trial court show that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Id. at 909; see also Ind. Trial Rule 56(C). We must determine whether the record reveals a genuine issue of material fact and whether the trial court correctly applied the law. Bader v. Johnson, 732 N.E.2d 1212, 1216 (Ind.2000). On a motion for summary judgment, all doubts as to the existence of material issues of fact must be resolved against the moving party. Owens Corning, 754 N.E.2d at 909. Additionally, all facts and reasonable inferences from those facts are construed in favor of the nonmoving party. Id. The party appealing from a summary judgment decision has the burden of persuading the court that the grant or denial of summary judgment was erroneous. Id. at 908. When a trial court grants summary judgment, we carefully scrutinize that determination to ensure that a party was not improperly prevented from having its day in court. Id.
Where a trial court enters findings of fact and conclusions thereon in granting the motion for summary judgment, as the trial court did in this case, the entry of specific findings and conclusions does not alter the nature of our review for a summary judgment. Rice v. Strunk, 670 N.E.2d 1280, 1283 (Ind.1996). In the summary judgment context, we are not bound by the trial court's specific findings of fact and conclusions of law. Id. They merely aid our review by providing us with a statement of reasons for the trial court's actions. Id.
The first issue is whether restrictions on the transfer of F.B.I. Farms's stock were required to be honored prior to the stock being sold at the sheriff's sale. The parties present no genuine material issues of fact with respect to this issue. Rather, F.B.I. Farms argues that the trial court erred in determining that Moore was entitled to summary judgment as a matter of law.
F.B.I. Farms argues that Moore should have been required to honor the restrictions on the alienation of the corporation's stock prior to compelling the transfer of the stock to himself by sheriff's sale. Moore points out that he did not own the shares and "had no authority to offer them for sale under any terms." Appellee's Brief at 6. He argues that the sheriff's sale was controlled by statute and not by Moore. Moreover, Moore contends that the corporation, its shareholders, and blood family members had statutory notice of the sale and "[t]here is no showing that [F.B.I. Farms] took any steps to enforce the restrictions at the sale" or "contested the sale in any fashion." Id. at 6-7. We agree with Moore that prior to the sale he did not own the shares and had no authority to require that the shares be sold in compliance with the transfer restrictions. Even though seven years elapsed between the time that Moore first filed a motion for a proceeding supplemental and the time that Linda's shares were sold at the sheriff's sale, F.B.I. Farms failed to attempt to enforce the restrictions despite its knowledge of the action.
Moreover, even if F.B.I. Farms had attempted to enforce the restrictions, its argument that the transfer restrictions should have been followed still fails. Restrictions on the transfer of shares are authorized by Ind.Code § 23-1-26-8(a), which provides in pertinent part that "[t]he articles of incorporation, bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of any class or series of shares of the corporation." However, few Indiana cases have discussed the validity of such restrictions. See, e.g., Doss v. Yingling, 95 Ind.App. 494, 500-504, 172 N.E. 801, 803-804 (1930) (); State v. Clarks Hill Tel. Co., 139 Ind.App. 507, 509-512, 218 N.E.2d 154, 156-157 (1966) ().
Although Indiana courts have not considered the specific issue in this case— whether shares may be involuntarily transferred by operation of law in violation of a corporation's transfer restrictions—other jurisdictions have approved the involuntary transfer of stock in certain circumstances. As a general rule, "restrictions on the sale of corporate stock apply only to voluntary sales, and not to transfers by operation of law, such as testamentary disposition, in the absence of a specific provision to that effect." 18 C.J.S. Corporations § 220 (1990); see also Castonguay v. Castonguay...
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FBI Farms, Inc. v. Moore
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