Guller v. Waks

• Decision Date: 26 December 2017
• Docket Number: Nos. ED 105311,ED 105449,s. ED 105311
• Citation: 550 S.W.3d 505
• Parties: James GULLER, Plaintiff/Appellant, v. Michel WAKS, Defendant/Respondent.
• Court: Missouri Court of Appeals

550 S.W.3d 505

James GULLER, Plaintiff/Appellant,

v.Michel WAKS, Defendant/Respondent.

Nos. ED 105311

ED 105449

Missouri Court of Appeals, Eastern District, DIVISION FOUR.

Filed: December 26, 2017

FOR APPELLANT: John Talbot Sant, Jr., 1610 Des Peres Road, Suite 100, St. Louis, Missouri 63131.

FOR RESPONDENT: Mitchell A. Margo, Katherine E. Henry (co-counsel), 130 South Bemiston, Suite 200, Clayton, Missouri 63105.

Lisa Van Amburg, Judge

James Guller appeals the trial court’s summary judgment in favor of his former business partner, Michel Waks, in this dispute involving Guller’s departure from their jointly-owned company. We affirm.

Background

Cooperative Home Care, Inc. (CHC) was formed by Waks’s mother-in-law in 1986. Waks and his wife, Ruth Sontag, took over the business in 1990 and hired Guller as a salesman in 1997. In 1998, Waks and Guller entered into an operating agreement as equal shareholders and executed a Restrictive Stock Agreement (RSA) providing for the continuation of the company in the event of a shareholder’s departure, death, or disability. As relevant here, the purpose of the RSA is stated in the recitals as follows:

The Stockholders and the Company believe it is in their mutual best interest to provide for continuity and harmony in the management and policies of the Company. It is the mutual purpose of the Stockholders and the Company: (a) to provide certain options to the Stockholders and to the Company to purchase a Stockholder’s Shares prior to any voluntary lifetime or involuntary transfer by such Stockholder and upon the termination of Waks' or Guller’s employment with the Company; ... and (f) to provide an option to Waks to purchase all of the Shares of Guller in the event the Stockholders agree they are unable to work together.

Article II of the RSA sets forth the triggers and procedures for a shareholder buy-out. In short, if any shareholder wishes to sell his shares or receives a bona fide offer from a third party, he must first notify the other shareholder, who has the option to purchase those shares at the lesser of either the price dictated by the valuation terms of the RSA (Article IX) or the same price offered by the third party, whichever is less. Article IX provides for a purchase price of fair market value as determined by appraisers appointed by each party, reconciled using averages. These features are discussed further below as relevant to particular points.

From 1998 to 2009, CHC’s board of directors was comprised of Waks, Sontag, Guller, and Guller’s wife, JoAnne. The Gullers divorced in 2009, and their dissolution judgment divested JoAnne of all interest and role in the company. In the years that followed, tensions mounted between the parties. According to Waks, Guller was ineffective and deceitful in his management of the company. According to Guller, he wished to sell the company starting in 2014 and discussed it openly with Waks, but Waks rejected the idea. In early June 2015, Guller explored an opportunity to sell the company to a third party, Michael Laycob, and facilitated Laycob’s due diligence inspection of CHC’s operations and finances. Around that same time, Waks decided to terminate Guller’s employment. On June 26, 2015, Guller received a formal letter of intent from Laycob seeking to buy CHC for $5 million. Three days later, Waks terminated Guller for cause and excluded him from the premises. Waks subsequently obtained an appraisal of CHC and attempted to purchase Guller’s shares in the company as provided in the RSA.

Guller refused to accept payment and instead filed a petition to dissolve the company pursuant to § 351.467, though the accompanying business plan proposed a sale of the entire company rather than dissolution. Waks filed a counterclaim alleging breach of contract and seeking declaratory and injunctive relief to enforce the buy-out and prohibit Guller from disclosing confidential information or attempting to sell the company. The parties filed cross-motions for summary judgment and statements of uncontroverted material facts with supporting affidavits, depositions, and other evidence.

The trial court entered summary in favor of Waks, reasoning that § 351.467 was inapplicable here in that the RSA governs the parties' rights and obligations in the event of a third-party offer or termination of employment. The court further found that Guller’s termination was effective and properly ratified by CHC’s board, including by Guller himself by acquiescence. Consequently, the court ordered Guller to accept the buy-out and pay Waks’s attorney fees as required by the RSA.

Guller appeals and asserts that the trial court erred in that: (1) § 351.467 applies notwithstanding the RSA, (2) the letter of intent did not constitute a bona fide offer, (3) Guller’s termination was invalid, (4) Guller did not acquiesce to his termination, (5) the valuation of Guller’s shares did not comply with the RSA, and (6) Guller was entitled to discover Waks’s unredacted attorney invoices.

Standard of Review

Appellate review of summary judgment is de novo, viewing the record in the light most favorable to the party against whom judgment was entered. Comp & Soft, Inc. v. AT & T Corp. , 252 S.W.3d 189, 194 (Mo. App. E.D. 2008). "The purpose of summary judgment is to resolve cases in which there is no ‘genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.’ Rule 74.04(c)(6)." Id. "Where the ‘genuine issues’ raised by the non-movant are merely argumentative or imaginary, summary judgment is proper." Id.

Analysis

Applicability of § 351.467

For point I, Guller asserts that the trial court erred in concluding that § 351.467 is inapplicable. That statute states in pertinent part:

If the stockholders of a corporation of this state, having only two shareholders each of which own fifty percent of the stock therein, shall be unable to agree upon the desirability of continuing the business of such corporation , either stockholder may file with the circuit court in which the principal place of business of such corporation is located a petition stating that it desires to discontinue the business of such corporation and to dispose of the assets used in such business in accordance with a plan to be agreed upon by both stockholders or that, if no such plan shall be agreed upon by both stockholders, the corporation be dissolved. Such petition shall have attached thereto a copy of the proposed plan of discontinuance and distribution and a certificate stating that copies of such petition and plan have been transmitted in writing to the other stockholder and to the directors and officers of such corporation.

(emphasis added) Guller argues that this statute is "self-effectuating" and applies notwithstanding the RSA. In support of his position, Guller recounts the legislative history of § 361.467 suggesting that lawmakers considered but ultimately rejected an express exception for parties' private agreements. He claims that the statute should not be construed to contain such an exception but instead should be interpreted to apply here regardless of the RSA.

Both the plain language of the statute and on-point Missouri precedent squarely defeat Guller’s claim. By its own terms, § 351.467 invites shareholders to file a petition for dissolution only if they are unable to agree upon the desirability of continuing the business. The exception purportedly rejected by the General Assembly is already built into the existing language. Confirming this interpretation, on nearly identical facts, the Western District held that § 361.467 is inapplicable when a prior agreement among shareholders provides for the company’s continuity in the event of a shareholder’s departure. LaRue v. Alcorn , 389 S.W.3d 215 (Mo. App. W.D. 2012). In that case, the court reasoned:

By entering into this agreement, LaRue understood that, if his employment was terminated by Trans–Central for any reason other than by death or disability, this buyout provision would be triggered and he would be bound by it. "It is the most basic principle of contract law that parties are bound by the terms of the contracts they sign and courts will enforce contracts according to their plain meaning, unless induced by fraud, duress, or undue influence." Nitro Distributing, Inc. v. Dunn, 194 S.W.3d 339, 349 (Mo. banc 2006). The Shareholder Agreement anticipated the potential deadlock and provided a solution that insured the corporation's continued existence obviating the need for dissolution. The mere fact that LaRue now wishes to renege on the agreement in no way creates an actual inability to continue the business of the corporation. Therefore, section 351.467 is inapplicable because the corporate Shareholder Agreement represents an agreement between the two equal shareholders regarding continuing the business of the corporation under the circumstances of this case.

Additionally, the uncontroverted facts are that, in April of 2009, LaRue negotiated with Alcorn to purchase her portion of Trans–Central but was unable to obtain financing. Therefore, up until LaRue filed for dissolution under section 351.467, claiming that he and Alcorn were unable to agree on the desirability of continuing the business of the corporation, continuation of the business was never an issue, only which shareholder would continue the business.

Id. at 218.

Likewise here, by entering into the RSA, Guller understood that, if he received a bona fide offer for his shares, the buy-out provision would be triggered, and he would be bound by it. The RSA anticipated a deadlock and provided a solution that ensured the company’s continued existence. Additionally, the uncontroverted facts, including the proposed plan attached to Guller’s petition, establish that Guller sought to sell the entire company as a going concern, not to dismantle or dissolve it. Continuation of the business was never in doubt, only who would continue it.

Section 351.467 does not apply here;...