Greco v. Tampa Wholesale Co.

• Decision Date: 31 March 1982
• Docket Number: No. 80-1288,80-1288
• Citation: 417 So.2d 994
• Parties: John GRECO, Cynthia Marie Greco, Mary Josephine Castro, Linda Jo Greco, Jo Ann Greco and Exchange Bank of Tampa, as Trustee, in the name of Tampa Wholesale Company, Appellants, v. TAMPA WHOLESALE COMPANY, Appellee.
• Court: Florida District Court of Appeals

Page 994

417 So.2d 994

John GRECO, Cynthia Marie Greco, Mary Josephine Castro, Linda Jo Greco, Jo Ann Greco and Exchange Bank of Tampa, as Trustee, in the name of Tampa Wholesale Company, Appellants, v. TAMPA WHOLESALE COMPANY, Appellee.

No. 80-1288.

District Court of Appeal of Florida Second District.

March 31, 1982.

As Amended on Denial of Rehearing

Aug. 18, 1982.

Paul B. Johnson of Gregory, Cours, Paniello, Johnson, Hayes & Hoft, Tampa, for appellants.

David A. Maney of Gordon & Maney, Tampa, Charles P. Schropp of Shackleford, Farrior, Stallings & Evans, Tampa, and William T. Keen, Tampa, for appellee.

Bruce A. Walkley and David H. McClain of McClain, Walkley & Stuart, P. A., Tampa, as amicus curiae.

HOBSON, Acting Chief Judge.

Appellants John Greco, his four daughters, and Exchange Bank of Tampa, as Trustee, appeal three orders: a final summary judgment rendered in favor of Tampa Wholesale Company, and two orders denying appellants' motions for order compelling discovery. We reverse the final summary judgment and affirm the orders denying motions for order compelling discovery.

Tampa Wholesale is a closed family corporation formed in 1948. Its outstanding stock consisted of 4,000 shares owned equally by the families of four individuals: Joe Greco, Americo (Mac) Greco, Frank Guinta, and John Greco. After the death of Joe Greco in January, 1977, the remaining shareholders discussed the possibility of locating a buyer for Tampa Wholesale Company. As that possibility neared reality, John Greco voiced his disapproval of a sale and subsequently filed a complaint asking the trial court to restrain the sale of the assets of Tampa Wholesale. In April, 1978, an order on request for temporary relief was entered, restraining the sale of the assets of Tampa Wholesale and, pursuant to stipulation, a temporary injunction was entered by the trial court. In January, 1979, these orders were dissolved.

In November, 1978, an exchange agreement between Tampa Wholesale and Lucky Stores, Inc. was executed by all shareholders of the corporation except appellants in this action. Under the terms of the exchange agreement, Lucky Stores agreed to acquire substantially all the assets of Tampa Wholesale for the sum of $9,000,000, plus 225,641 shares of Lucky Stores voting preference stock.

In December, 1978, Tampa Wholesale sent appellants a document entitled "Notice to Nonconsenting Shareholders Pursuant to Florida Statutes, Section 607.394," advising that on December 22, 1978, Tampa Wholesale had consented in writing to the sale of its assets and that the sale had been consented to by holders of outstanding stock having not less than a minimum number of votes necessary to authorize the sale as required by section 607.241, Florida Statutes (1979). A copy of the statute was furnished to each appellant. Appellants were informed of their rights under a paragraph captioned "Rights of Dissenting Shareholders." They were advised that if they wished to dissent they should make a written demand on Tampa Wholesale within fifteen days of the mailing. Appellants filed timely dissents and written demands for payment of the fair value of their shares in Tampa Wholesale Company. They advised the company that they were dissenting as to all but one share owned by each appellant; thus, they retained a total of six shares of stock.

Tampa Wholesale notified each appellant that, pursuant to section 607.247(10), they had 20 days from the date of demand in which to submit their stock certificates to Tampa Wholesale for notation of their demands. ¹ Appellants had through and including February 8, 1979, within which to tender their stock certificates for notation.

On February 14, 1979, Wilbur Hall, President of Tampa Wholesale, mailed letters to appellants advising them that, inasmuch as they had failed to comply with section 607.247(10), Tampa Wholesale Company was exercising its option to terminate their rights as dissenting shareholders. On February 23, an associate of the law firm representing appellants appeared at the corporate offices of Tampa Wholesale in order to submit the certificates for notation. Mr. Hall was not present in the corporate offices at that time. The associate delivered certain correspondence dated February 23 from appellants' counsel and Exchange Bank, as Trustee. The letters reiterated appellants' objection to the proposed corporate action, denied any waiver of their rights as dissenting shareholders, and demanded payment of the fair value of the shares pursuant to chapter 607, Florida Statutes.

Appellants' attorney returned on February 26 with the certificates. At that time Mr. Hall advised him that after a conference with his attorneys he would not insert the notations on the certificates.

On March 1, 1979, the sale of the assets of Tampa Wholesale was effected and on March 2 appellants advised Tampa Wholesale that it was obligated to make a written offer to them to pay for their shares at the fair value of the stock. Tampa Wholesale responded by asserting that the statutory procedure was not appropriate and that Tampa Wholesale was refusing to abide by section 607.247(5).

On April 20, 1979, appellants filed a complaint for determination of the fair value of shares of stock and Tampa Wholesale answered, asserting that appellants had failed to comply with section 607.247(10) and were barred from maintaining the action. Tampa Wholesale filed a motion for summary judgment, which was granted and subsequently became the subject of this appeal.

The parties have not directed us to, nor have we been able to locate, a Florida case dealing with the precise issue of this appeal. We can, however, turn to decisions from those states which have similar statutes controlling corporations. Although these decisions vary as to the degree of procedural compliance required of dissenting shareholders, ² we have determined that the courts of New York are most closely aligned with our viewpoint in this matter.

Two New York cases were cited to us by the parties to the instant appeal. Both cases deal with New York Business Corporation Law, section 623 (formerly section 21), which is essentially identical to section 607.247(10), Florida Statutes.

In re Weidersum, 41 Misc.2d 936, 246 N.Y.S.2d 638 (1964), deals with dissenting stockholders who timely filed their written demand for payment, but did not submit their certificates for notation until six months and sixteen days after the deadline. The trial court noted that there had not been "even token compliance" with the statutory timetable. Further, the stockholders offered no excuses, but, rather, argued that their substantive right to payment was vested upon notification to the corporation of their dissent and demand for payment. ³ The trial judge stated:

Although the courts have excused, under certain circumstances, minor departures from the literal requisites of section 21 ..., to grant such relief to the present petitioners would so drastically tilt the sensitive equilibrium of interests ... as to constitute complete rejection of the mandate.

In the case of Saseen v. Danco Industries, Inc., 20 A.D.2d 657, 246 N.Y.S.2d 440 (1964), the appellate court reversed the dismissal of the dissenting stockholder's action for determination of value of shares. The facts are almost identical to those of the instant case. Saseen and other dissenting shareholders of the closely held corporation made their timely objection to the sale and demanded payment of the value of their shares. They were then obliged to submit their shares for notation by February 25, 1963. They failed to submit their shares before the deadline, but instead filed an action for determination of the value of their shares on March 21, 1963. The shareholders were in communication with the corporation at all times prior to filing the action. The appellate court stated:

Throughout this interval of time the corporation had no reason to believe that petitioners would relinquish their right to appraisal and to demand payment. Denial of relief to petitioners would result in substantial prejudice to them. They would be deprived of their right to payment and would be relegated to their status as minority stockholders. It is undisputed that respondent is a close corporation and there is no market in its shares. On the other hand, the corporation has not been prejudiced whatsoever.

In the case sub judice, appellants' objection to the sale of the corporate assets was vociferous and continuous. The record shows conclusively that the other stockholders and the corporate officers were acutely aware at all times of appellants' position.

The purpose of the notation requirement in section 607.247(10) is to protect the corporation in a situation where the dissenting shareholder transfers his certificates to a third party, thereby exposing the corporation to a third-party claim inconsistent with the dissenter's demand for payment. There was no possibility that appellants in the instant case could have disposed of their shares to third parties, since the corporation was a closely held one and the certificates contained an endorsement which restricted their transfer to third parties and required that the shares be first offered to the corporation for purchase. Thus, the fifteen-day delay in submitting the shares for notation was not prejudicial to the corporation.

Appellee stated in its brief that appellants made no effort to have a court set aside their failure to submit the shares for annotation and reinstate their dissenters' rights during the entire seventeen-month period from February 14, 1979, until July 2, 1980, the date of the final summary judgment. This inaction, appellee argues, allowed appellants to take a position of being able to "wait and see" how the sale turned out. In view of the fact that appellants objected repeatedly before, during, and after the sale, we fail to see the logic of this argument. Moreover, the violation...