Keck v. Schumacher, 7014

• Decision Date: 05 April 1967
• Docket Number: No. 7014,7014
• Citation: 198 So.2d 39
• Parties: Blanche I. KECK, Appellant, v. Floyd M. SCHUMACHER, Woodrow W. Harshman, Sebring Packing Company, Inc., a Florida corporation, Appellees.
• Court: Florida District Court of Appeals

Page 39

198 So.2d 39

Blanche I. KECK, Appellant, v. Floyd M. SCHUMACHER, Woodrow W. Harshman, Sebring Packing Company, Inc., a Florida corporation, Appellees.

No. 7014.

District Court of Appeal of Florida, Second District.

April 5, 1967.

Rehearing Denied May 16, 1967.

Claude Pepper Law Offices, Miami Beach and Tallahassee, for appellant.

E. Snow Martin, of Martin & Martin, Lakeland, for appellees.

ODOM, ARCHIE M., Associate Judge.

This appeal is taken from a Final Decree entered in the Circuit Court of Highlands County. The record on appeal contains ten volumes with eight being devoted to the testimony of witnesses. The Chancellor made extensive findings of fact which are a part of the Final Decree and which are supported by the record. We find that we cannot improve or digest these findings, so the same are hereby incorporated in this opinion.

'This extensive and protracted litigation was instituted by the Plaintiff widow seeking the dissolution or distribution of assets of two corporations in which she has become, by inheritance from her husband, the owner of a one-third interest.

'The record establishes that, during the late depression, a packing house in Sebring, operationally allied with the Florida Citrus Exchange, was failing financially. The successful operation of such an enterprise is dependent upon the existence of growers who would have large quantities of fruit packed in such facility and shipped through the marketing organization of the Exchange.

'The Defendants Harshman and Schumacher owned citrus groves and through their caretaking business controlled the disposition of large volumes. One Sebring had managed the almost bankrupt concern and Plaintiff's decedent (hereafter referred to as Keck) was experienced in the physical operation of the packing house. Neither Keck nor Sebring were financially able to purchase or operate the house despite its obsolescence. Harshman and Schumacher were interested in having a packing house convenient to their grove interests. Mr. Harshman arranged for his mother to lend money to Keck and Sebring to form the corporation and buy the packing house. Schumacher and Harshman advanced funds. Of the 140 share of corporate stock, Keck received 35 and Sebring 105, but Schumacher and Harshman were given an option to purchase 70 of Sebring's shares or the equivalent of one-half of the total authorized and issued stock. Sebring considered Schumacher and Harshman to be the owners of the half interest and were always consulted in any major decisions. Salaries were paid by the corporation to Sebring and Keck who devoted full time to the corporate business. Profits were plowed back into improving equipment and facilities as Schumacher and Harshman desired this action. Groves were purchased as the corporation prospered. The operation was in all respects in accord with the corporate structure.

'In 1948, for reasons not reflected in the record, Sebring left the corporation turning his stock over to Schumacher and Harshman without compensation because they had already paid for it and that he had held it in trust for them all along. Upon the departure of Mr. Sebring, Harshman became President, Schumacher, Vice President and Keck, Secretary-Treasurer, and the three were the only directors, Sebring's 35 shares were returned as treasury stock leaving the three as each owning 35. Schumacher transferred 5 to his wife, 20 to a bank in trust for his children, holding a proxy to represent them in all corporate matters. With the stock thus issued, Keck had no right of control or control over the affairs of the corporation. He had no proprietary interest in the subject matter. He had no right to share in the profits and no obligation or duty to share in the losses.

'The corporation continued to prosper, with Schumacher devoting part time to the office and Keck in full charge of the physical operation--devoting full time thereto. Keck received a salary commensurate with this work and above that an amount equal to the salaries of Schumacher and Harshman; until this change in 1954, Schumacher and Harshman received no compensation whatsoever. In one year when the corporation experienced a loss the three waived an equal amount of salary.

'Policies of the Exchange discourage membership of packing houses which buy and sell fruit, and Keck, Schumacher and Harshman as partners speculated by buying and selling fruit, and this business was incorporated in 1952, as Fruit Purchasers, Inc. The original incorporators were the Plaintiff, her son, Charles, and Harshman, although on organization the operation was taken over by Keck, Schumacher and Harshman. Stock ownership was evenly divided between the three. Salaries were subsequently set upon a similar formula to that of the packing company, i.e., Keck received a basic $3,000.00 for his work and then each received a salary equal to 20% Of net income in excess of 10% Of the net worth of the company.

'The two companies prospered and there is no evidence of any discord or even disagreement between the three. Activities of Schumacher and Harshman, now complained of, were not objected to by Keck, although it is inconceivable that he was not fully aware of them.

'Mr. Keck died not Mrs. Keck was elected to his position on the Board of the corporations and as an officer. She was unquestionably untrained to assume his duties. Salaries were set equally for her, Schumacher and Harshman, with a base salary for Schumacher who took over the physical operation of the plant.

'Only twice in the history of the two companies were dividends declared.

'The pleasant atmosphere of the operation which had existed so long disappeared as difficulties developed between Mrs. Keck on one hand and Schumacher and Harshman on the other. Mrs. Keck was not re-elected as an officer and her income in the form of salary terminated. Only one dividend was declared and that only after the...