Flarsheim v. Twenty Five Thirty Two Broadway Corp.

• Decision Date: 09 September 1968
• Docket Number: No. 1,No. 52888,52888,1
• Citation: 432 S.W.2d 245
• Parties: Robert H. FLARSHEIM, Plaintiff-Appellant, v. TWENTY FIVE THIRTY TWO BROADWAY CORPORATION, Defendant-Appellant
• Court: Missouri Supreme Court

Page 245

432 S.W.2d 245

Robert H. FLARSHEIM, Plaintiff-Appellant, v. TWENTY FIVE THIRTY TWO BROADWAY CORPORATION, Defendant-Appellant.

No. 52888.

Supreme Court of Missouri, Division No. 1.

Sept. 9, 1968.

Motion for Rehearing or to Transfer to Court En Banc Denied

Oct. 14, 1968.

Harry P. Thomson, Jr., Oscar S. Brewer, Kent E. Whittaker, Kansas City, for plaintiff-appellant, Shughart, Thomson & Kilroy Brewer & Myers, Kansas City, of counsel.

David Skeer, Leonard Rose, Kansas City, for defendant-appellant, Sheffrey, Ryder & Skeer, Kansas City, of counsel.

STORCKMAN, Judge.

The plaintiff and the defendant corporation both appealed from a judgment finding and determining the fair value of plaintiff's shares of the capital stock of the defendant corporation. The action is a statutory one under § 351.405, RSMo 1959, V.A.M.S. The plaintiff voted his shares against a sale of the property and assets of the defendant and in due time took the required preliminary steps and filed suit as provided by the statute.

The trial court sitting without a jury determined the fair value of plaintiff's 4376 shares to be $77.00 per share, for a total value of $336,952.00. The plaintiff contends the fair value per share on the valuation date was $110.00. The lowest amount testified to by defendant's expert witness is $47.54 per share. This court has jurisdiction of the appeal because the amount in dispute, exclusive of costs, exceeds the sum of $15,000.

The name of the defendant, a Missouri corporation, was changed from Seavey & Flarsheim Brokerage Company to Twenty Five Thirty Two Broadway Corporation about March 1, 1966. Its business was that of a food broker and was founded as a partnership in 1890. As a broker, the defendant served various manufacturers, packagers and processors of food in the sale and distribution of their products at both wholesale and retail levels. Over the years the business was quite successful; it had offices in ten midwestern cities and represented over 300 producers sometimes referred to as principals.

At the time in question, Louis Flarsheim was president, treasurer, and a director of the company; the plaintiff Robert Flarsheim was vice-president and a director. Each owned 4376 shares out of a total of 31,906 shares issued and outstanding. Henry Flarsheim, the father of Louis and Robert and one of the founders of the company, owned 17,504 shares which at the time of his death were placed in a testamentary trust. Another son Clarence had previously worked for the company but owned no stock. The trustees of the Flarsheim Trust were Mrs. Henry Flarsheim and the brothers Louis, Robert and Clarence until about January 14, 1966, when Robert resigned. There were nineteen individual shareholders, all of whom were officers and employees of the company.

The defendant being a brokerage company had little or no inventory or stock in trade although it owned considerable real estate, some of which was used for headquarters and office purposes. The success of the business depended largely upon a capable sales and service force. In recent years when Robert and Louis became less active in the business, there were unsuccessful negotiations on several occasions directed towards a sale of the shares of the Flarsheim Trust or a portion thereof to the officers and employees of the company exclusive of Robert and Louis. In the fall of 1965, Marsh H. Blackburn, president of Hoosier Brokerage Company, began negotiations for the purchase of the brokerage business of Seavey & Flarsheim and a contract was entered into under date of January 17, 1966. This contract provided for the purchase by Hoosier of all of the physical properties, the exclusive right to the name Seavey & Flarsheim Brokerage Company, together with the good will, business records and going-concern status of Seavey & Flarsheim. Excepted from the sale were non-operating assets, such as securities held by the company and generally referred to as the investment account.

On February 12, 1966, the directors and shareholders of the defendant met and all of the shareholders except the plaintiff and another approved the contract and voted in favor of the sale of the assets. The sales agreement was concluded on February 28, 1966, the corporate name of the defendant was changed, and the Hoosier Company assumed the trade name of Seavey & Flarsheim Brokerage Company.

On March 1, 1966, the plaintiff delivered to the defendant his written demand for the payment of the fair value of his shares as of February 11, 1966, the day before the sale was approved as provided by § 351.405. No agreement was reached and the plaintiff filed this action to determine the fair value of his shares.

The first order of business at the meeting of the directors on February 12 was the adoption of a resolution recommending to the shareholders that the corporation 'be completely liquidated and dissolved in accordance with the plan of liquidation attached' to the minutes. The plan insofar as pertinent to the issue before us provided that the corporation be completely liquidated and all of its assets be distributed to its shareholders within 360 days from the adoption of the liquidation plan in accordance with the provisions of § 337 of the 1954 Internal Revenue Code of the United States. The plan also provided that the company should execute and file with the secretary of the State of Missouri its articles of dissolution at such time as determined by the board of directors but not later than the 299th day of the period beginning on the date of the adoption of the plan of liquidation, and upon the filing of such articles the company would cease to carry on any business except for the purpose of winding up its affairs. It further provided that the plan of liquidation would become effective as of February 12, 1966, if approved at that time by a vote of the shareholders holding not less than three-fourths of the voting shares of the company.

The next resolution approved by the directors at the February 12 meeting was a recommendation that the agreement for the sale and purchase of assets entered into under date of January 17, 1966, by Seavey & Flarsheim Brokerage Company, as seller, and Hoosier Brokerage Company and Marsh H. Blackburn, as purchasers, and a collateral agreement of the same date be ratified and approved by the shareholders. Other resolutions designed to implement the plan of liquidation and the carrying out of the agreement for the sale of the business were adopted by the directors. At a meeting of the shareholders held immediately after the adjournment of the meeting of the directors, all of the recommendations of the directors were accepted and adopted by a vote of more than three-fourths of the shares entitled to be voted. The plaintiff, Robert Flarsheim, however, dissented and voted against the sale of the business to the Hoosier Company.

At the outset we are confronted with the defendant's contention that the plaintiff is not entitled to maintain the action for valuation of his shares because the sale of assets to which he dissented was 'a sale in liquidation in the process of dissolution of defendant's corporate existence, and therefore plaintiff was entitled to only a stockholder's distributive share and not to a separate appraisal.' The plaintiff's petition filed May 10, 1966, briefly stated the facts and alleged that the action was brought pursuant to § 351.405. In its answer filed June 3, 1966, the defendant admitted the allegations of the petition and further alleged that the fair value of the shares on the valuation date was either the same or a lesser amount than had been offered and tendered to plaintiff which was the amount per share that would be paid to other shareholders out of the total assets of the corporation.

The contention that § 351.405 was not applicable was first raised in defendant's motion for summary judgment filed August 23, 1966. The motion asserted that the sale of assets referred to in plaintiff's petition was a sale pursuant to 'a legally adopted plan of liquidation and dissolution under the provisions of Sections 351.465 and 351.470' and that a dissenting shareholder had no right to demand the fair value of his shares when the sale is part of the liquidation of all assets as a necessary step to the dissolution of a corporation. Copies of the minutes of the meetings of directors and shareholders held February 12, 1966, and other documents were filed in support of and in opposition to the motion. The trial court heard the motion for summary judgment and overruled it October 14, 1966. One of the grounds in the defendant's motion for a new trial is that the plaintiff had no standing to maintain the suit or to have his shares appraised.

The plaintiff counters with the contention that the defendant corporation was not in liquidation on November 30, 1965, when the directors authorized the president to negotiate and execute a contract with Hoosier Company or on February 12, 1966, when the contract of sale dated January 17, 1966, was approved by the shareholders; that the company continued in the brokerage business until February 28, 1966, and did not file its articles of dissolution as required by § 351.470 until September 1, 1966, and up to that time was free to carry on its usual business. It is apparent that the 'plan of liquidation' adopted by the defendant was primarily concerned with compliance with § 337 of the Internal Revenue Code which provides that, if a corporation adopts a plan of complete liquidation, and if all of the assets of the corporation are distributed, less assets retained to meet claims, within a twelve-month period after the adoption of the plan, no gain or loss shall be recognized to the corporation from the sale or exchange of its property during such period. There is no requirement in the federal statute that the corporation cease to do business at any specific time as there is in § 351.470, subd. 2, pertaining to...