Fix v. Fix Material Co., Inc.

• Decision Date: 08 June 1976
• Docket Number: No. 36648,36648
• Parties: 1976-1 Trade Cases P 60,933 Esther FIX, Plaintiff-Appellant, v. FIX MATERIAL COMPANY, INC., a corporation, Defendant-Respondent. . Louis District, Division One
• Court: Missouri Court of Appeals

Page 351

538 S.W.2d 351

1976-1 Trade Cases P 60,933

Esther FIX, Plaintiff-Appellant, v. FIX MATERIAL COMPANY, INC., a corporation, Defendant-Respondent.

No. 36648.

Missouri Court of Appeals, St. Louis District, Division One.

June 8, 1976.

Donald S. Hilleary, Clayton, for plaintiff-appellant.

Husch, Eppenberger, Donohue, Elson & Cornfeld, Carroll J. Donhue, Harry B. Wilson, St. Louis, for defendant-respondent.

RENDLEN, Judge.

Esther Fix, a minority shareholder, sued under § 351.485, RSMo.1969, ¹ to compel liquidation of a closely-held corporation for alleged illegal and oppressive conduct by those controlling the corporation. At the close of plaintiff's case, the trial court granted defendant's motion to dismiss under Rule 67.02 and from the order dismissing her petition with prejudice, plaintiff appeals.

A suit to compel liquidation under the Missouri Statute is an equitable action, Handlan v. Handlan, 360 Mo. 1150, 232 S.W.2d 944, 946(2) (1950); Kirtz v. Grossman, 463 S.W.2d 541, 545(7) (Mo.App.1971); and in such actions a motion to dismiss at the close of plaintiff's case constitutes a submission of the case by defendant as it stands when the motion is offered, 30A C.J.S. Equity § 579 at 643. The trial court is to weigh the evidence, resolve conflicts and on that basis rule the motion. Rigg v. Hart, 255 S.W.2d 778, 779(3) (Mo.1953). ² On appeal we review the record anew on the facts and applicable law, giving due deference to the trial court's superior opportunity to judge the credibility of witnesses. Rule 73.01(3). We are, however, to affirm the decree of the trial court 'unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law.' Murphy v. Carron, 536 S.W.2d 30 (Mo. banc, 1976). Further, we consider evidence properly admissible and exclude from consideration evidence improperly admitted. South Side Plumbing Co. v. Tigges, 525 S.W.2d 583, 589(14) (Mo.App.1975).

A defense witness, G. L. Alberici, was offered during plaintiff's case to which plaintiff made no objection and nothing in the record reflects why the witness was called out of turn. The trial court did not consider the Alberici testimony when ruling the motion to dismiss and plaintiff complains because the cross-examination developed testimony favorable to her case. Ordinarily, over proper objection, no part of defendant's evidence would be presented during plaintiff's case and if so admitted, would not be considered in ruling the motion. However, no objection appearing, the court in this case should have considered testimony of Alberici since a motion to dismiss submits the case for final determination as it stands when the motion is offered. We find no prejudice by the court's action and consider this testimony in our review.

Contending for reversal, plaintiff argues there was substantial evidence of oppressive and illegal conduct by those in control of defendant Fix Material Company, Inc., within the meaning of § 351.485, RSMo.1969. More particularly, that the corporation failed to fulfill its purpose of operating at a profit for shareholders; that the persons in control of the corporation acted oppressively by concealing financial information from plaintiff, by failing to attend the special shareholders' meetings called by plaintiff, by voting themselves twenty-year employment contracts as officers, and by engaging in price fixing contrary to § 416.040, RSMo.1969. Plaintiff's allegations focus on corporate operations from 1963 through 1972.

Defendant is a closely-held Missouri corporation engaged in the business of production, sale and delivery of ready-mix concrete, building and construction supplies. The company's annual audits and financial statements show a marginally profitable enterprise in a highly competitive industry. The major shareholders at the time of incorporation (sometime prior to 1963) were Ralph T. Fix and his brother Joseph E. Fix, plaintiff's deceased husband. Apparently, Joseph held his shares jointly with plaintiff. Other shares issued and outstanding were owned by Rosalia Fix, Donald Fix, Mary Fix, Dorothy Wieck, Sylvester W. Wieck, F. Joseph Weidinger and Virginia Marie Weidinger.

In 1963 the officers were Ralph T. Fix, his son Donald Fix, F. Joseph Weidinger and Joseph E. Fix. Though the company's investment in land and equipment was small, 1963 was a successful year with an operation's profit of $34,619 and a net profit of $33,142. The investment in land and equipment was nearly doubled in 1964 with the purchase of a second concrete plant, new trucks, machinery and equipment. Construction of the plant was financed by a ten-year monthly amortized loan secured by first deeds of trust on the new facility and the existing plant. In conjunction with this expansion, the shareholders, including plaintiff, signed a buy-sale agreement as to corporate stock, which among other things, prohibited payment of cash dividends during the ten-year term of the loan. About this time shareholders Dorothy and Sylvester Wieck executed a ten-year irrevocable voting proxy in favor of Thomas J. McGarry, attorney for the corporation; the same year three officers, Ralph T. Fix, Donald Fix and F. Joseph Weidinger, with shareholder approval, received twenty-year employment contracts with the company. Although he was then a salaried officer, plaintiff's husband, for reasons not appearing, received no employment contract. The interim financial statements for 1964 showed an operating profit of $30,280 and a net profit of $33,972.

Operating profits were down in 1965 to $6,615, though with income from other sources the company realized a net profit of $12,183. There was evidence the decrease stemmed primarily from costs incurred in the expansion effort and slow conditions in the construction industry. Plaintiff's husband, Joseph E. Fix, died in 1965. After his death, Ralph T. Fix, Donald Fix and F. Joseph Weidinger continued as officers. Donald assumed the duties previously performed by Joseph.

The company sustained an operating loss in 1966 of $13,361 reduced by income from other sources to $6,636. Nineteen sixty-seven showed a smaller operating loss of $5,786. Again, outside income softened the effect so the company showed a small net profit of $910.

Plaintiff succeeded to her husband's position on the corporate board in 1966 and the board was increased by one member sometime in 1966 or 1967 to provide an additional director friendly to plaintiff's interests. From then until trial, the board consisted of (1) Ralph Fix, (2) plaintiff, (3) someone friendly to plaintiff's interests, (4) Thomas J. McGarry, and either (5) Donald Fix or F. Joseph Weidinger who alternated at the discretion of Ralph.

In 1968 the company increased its sales showing a profit on operations of $11,258 and net profits of $18,679. However, a serious loss occurred in 1969 with an operating loss of $27,050 and a net loss of $17,191. The annual report and financial statement showed gross sales down significantly and a decline in both current ratio and net worth. Signs of internal dissension among the shareholders regarding management control of the corporation surfaced that year. Plaintiff and the Wiecks were dissatisfied with the manner in which the three controlling officers were operating the corporation and personal conflicts developed between the Wiecks and Thomas J. McGarry, voting trustee under the trust agreement. There is evidence that the company's officers considered various answers to the internal dissension problem, including purchase of all shares held by plaintiff and the Wiecks, the sale of the business as a going operation and liquidation. No solution was reached.

Notwithstanding the losses and internal conflicts, the employment contracts of Donald Fix and F. Joseph Weidinger were modified to provide cost of living salary increases and bonus arrangements based on a stated percentage of annual net profits.

Fix Material Company, Inc., suffered a second serious loss on operations in 1970 in the amount of $29,465. The loss was due primarily to a labor strike against the company's suppliers, which initially reduced operations and finally caused a three-week shutdown during the peak-production period. Sales fell well below levels of prior years. Cushioning these losses, management, with the agreement of the participating banks, decided to sell all nonessential assets to meet working capital requirements. On authorization from the shareholders, some assets were sold and the company was able to show a net profit of $11,800 that year.

Nineteen seventy-one was a profitable year with operating profits of $13,687. Gross sales were up significantly and additional income from the sale of nonessential assets pushed net profits to $33,955. Dissension among the shareholders increased in 1971 when the officers were paid a bonus on the net-profit figure leading to a derivative action, not at issue on this appeal, challenging the bonus payment. In addition, plaintiff and her representative, Carl R. Moehlenhoff, specifically dissented from a board of director's decision to lease additional trucks on the ground that plaintiff was receiving no return on her investment in the corporation.

The company experienced a disastrous loss in 1972 of $115,076 resulting from a long labor strike, inclement weather and a general depressed condition in the construction industry. In addition, the company lost sales from an abortive attempt to raise prices in conformance with an alleged clandestine price-fixing agreement which management mistakenly regarded as industry wide.

During the ten-year period under discussion, no cash dividends were declared by the corporation. While plaintiff's husband Joseph E. Fix was alive and an active officer of the corporation, he received his salary but following his death, plaintiff received no return or benefit from her...