Ladd v. Stockham

• Decision Date: 25 March 2016
• Docket Number: 1140407.,1140365
• Citation: 209 So.3d 457
• Parties: Virginia LADD v. Margaret STOCKHAM, as personal representative of the Estate of Herbert Stockham, deceased. Margaret Stockham, as personal representative of the Estate of Herbert Stockham, deceased v. Virginia Ladd.
• Court: Alabama Supreme Court

209 So.3d 457

Virginia LADD

v.Margaret STOCKHAM, as personal representative of the Estate of Herbert Stockham, deceased.

Margaret Stockham, as personal representative of the Estate of Herbert Stockham, deceased

v.Virginia Ladd.

1140365

1140407.

Supreme Court of Alabama.

March 25, 2016.

Rehearing Denied May 27, 2016.

Andrew P. Campbell, A. Todd Campbell, and John C. Guin of Campbell, Guin, Williams, Guy & Gidiere, LLC, Birmingham; and J. Timothy Francis, Birmingham, for appellant/cross–appellee Virginia Ladd.

Lee H. Zell and Chase T. Espy of Balch & Bingham LLP, Birmingham, for appellee/cross–appellant Margaret Stockham, as personal representative of the Estate of Herbert Stockham, deceased.

PARKER, Justice.

Virginia Ladd appeals from a summary judgment entered against her by the Jefferson Circuit Court ("the circuit court") in favor of Margaret Stockham, as personal representative of the estate of Herbert Stockham, deceased ("Stockham") (appeal no. 1140365). Stockham cross-appeals the circuit court's denial of her motion for reimbursement of costs and attorney fees (appeal no. 1140407).

I. Facts and Procedural History

The following facts are undisputed. Ladd is a beneficiary of three trusts that each held preferred and common stock in SVI Corporation ("SVI"):¹ the Kate F. Stockham Trust, the Herbert C. Stockham Trust, and the Virginia C. Stockham Trust (hereinafter referred to collectively as "the trusts"). Ladd served as an individual cotrustee of the Kate F. Stockham Trust; Herbert Stockham ("Herbert") served as an individual cotrustee of both the Herbert C. Stockham Trust and the Virginia C. Stockham Trust. At all times relevant to these appeals, one or more predecessors of Wells Fargo Bank, N.A. ("Wells Fargo"), served as the corporate cotrustee of each of the trusts. At all times relevant to these appeals, Herbert served either on the board of directors or as an officer of SVI.²

In 1997, SVI's board of directors, on which Herbert then served, agreed to sell nearly all of SVI's assets to Crane Co. ("Crane") for $60 million. The one asset Crane did not want to purchase was SVI's Birmingham plant and foundry facility because of potential environmental-contamination concerns. As a condition to the proposed sale, SVI agreed to manufacture an order of valves for Crane to be completed by May 1998. Before the sale between SVI and Crane could become final, SVI's shareholders had to pass a resolution approving of the sale of substantially all of SVI's assets. Accordingly, SVI's board of directors notified SVI's shareholders that a meeting to consider such a resolution would be held on December 1, 1997.

On December 1, 1997, SVI's board of directors held a meeting for SVI's shareholders to consider the resolution to sell substantially all of SVI's assets to Crane. Ladd attended that meeting. At the meeting, SVI's board of directors thoroughly explained the proposed sale. SVI's board of directors explained that, should the proposed sale be approved by the shareholders and following the completion of the manufacture of the valves Crane requested, SVI's board of directors would begin the process of dissolving SVI. An attorney hired by SVI's board of directors, Jim Hughey, stated at the meeting that proceeds from the proposed sale would allow SVI to redeem SVI's preferred stock "in full" with "something left over for the common shareholders." An accountant hired by SVI's board of directors, Ron Travis, stated at the meeting that SVI would make the "final liquidating distribution" "three years down the road."

At the conclusion of the December 1, 1997, meeting, SVI's shareholders voted in favor of authorizing SVI's board of directors to sell substantially all of SVI's assets to Crane. Ladd, in her capacity as cotrustee of the Kate F. Stockham Trust, which held SVI stock, was entitled to vote on the sale issue; Ladd voted against the sale. On December 9, 1997, SVI and Crane entered into an agreement for the sale of SVI's assets.

On April 30, 1998, SVI completed the manufacture of the valves Crane had ordered as part of the sale. Once the manufacturing of the valves was completed, SVI ceased operations and began to wind up its affairs. As part of winding up its affairs, SVI had to remedy the environmental-contamination concerns with its Birmingham facility and dispose of that property. SVI also had to satisfy all outstanding liabilities, which included workers' compensation obligations, asbestos-exposure lawsuits, and product-liability lawsuits.

SVI continued the winding up of its affairs until 2006, when it filed articles of dissolution. During that time, SVI continued to pay dividends on the preferred shares of SVI stock until September 2004, at which time the payment of dividends was suspended based on SVI's declining financial position. SVI never redeemed any of its stock as it had promised to do at the December 1, 1997, meeting. Throughout this period, the SVI board of directors informed its shareholders regularly of SVI's declining financial condition. For instance, in November 2004, SVI's board of directors informed SVI's shareholders that the suspension of the payment of dividends begun in September 2004 would remain in effect until SVI's liquidation. Also, in July 2007 SVI's board of directors informed SVI's shareholders that there would probably not be any funds to distribute to SVI's shareholders after SVI satisfied all of its outstanding obligations.

Herbert resigned as cotrustee of the Virginia C. Stockham Trust on November 18, 2008, and he resigned as cotrustee of the Herbert C. Stockham Trust on November 25, 2008.

On July 21, 2010, in an unrelated proceeding, the Herbert C. Stockham Trust, the Kate F. Stockham Trust, and the portion of the Virginia C. Stockham Trust that held SVI stock were terminated by an order of the Jefferson County Probate Court.

On July 21, 2012, Ladd sued Herbert,³ Wells Fargo, and other individual directors of SVI.⁴ Ladd alleged that Herbert had breached his fiduciary duties as cotrustee of the Herbert C. Stockham Trust and of the Virginia C. Stockham Trust and that Wells Fargo had breached its fiduciary duty as cotrustee of the trusts. Specifically, concerning Ladd's claim against Herbert, Ladd alleged that Herbert "breached these fiduciary duties by managing SVI in such a way that the value of [the Herbert C. Stockham Trust and the Virginia C. Stockham Trust] was completely destroyed"; Ladd did not allege that Herbert, in his capacity as cotrustee of the Herbert C. Stockham Trust and the Virginia C. Stockham Trust, acted fraudulently. Ladd also asserted shareholder-derivative claims against Herbert and the other individual directors of SVI. Subsequently, Ladd amended her complaint several times. Ultimately, Ladd asserted nine claims against the defendants. The first two of Ladd's claims—one against Herbert and one against Wells Fargo—were characterized as "direct claims"; the remaining seven claims were characterized as derivative claims against Herbert, Wells Fargo, and the other individual directors of SVI.

On September 26, 2012, the defendants filed a motion to dismiss all of Ladd's claims against them. On June 18, 2013, the circuit court denied the defendants' motion to dismiss. The defendants were ordered to file answers to Ladd's complaint, which they did.

On March 7, 2014, having conducted some discovery, Stockham and the individual directors of SVI filed a motion to dismiss as untimely all of Ladd's derivative claims asserted against them in their capacities as former directors of SVI. On May 8, 2014, the circuit court granted the motion and dismissed all the derivative claims against Stockham and the individual directors of SVI; this order adjudicated all of Ladd's claims against the individual directors of SVI, leaving Stockham, Wells Fargo, and SVI as remaining defendants. On May 28, 2014, the circuit court certified its May 8, 2014, order as final pursuant to Rule 54(b), Ala. R. Civ. P. Ladd did not appeal the May 8, 2014, order dismissing her derivative claims against Stockham and the individual directors of SVI.

After further discovery, Ladd, Stockham, and Wells Fargo filed motions for a summary judgment on Ladd's remaining claims. In her summary-judgment motion, Ladd argued that Herbert would have had knowledge of SVI's financial situation by virtue of his position on the board of directors and that, as cotrustee of the Herbert C. Stockham Trust and the Virginia C. Stockham Trust, he breached his fiduciary duty to Ladd by failing to inform Ladd of SVI's financial situation and "by failing to take any action or demand that SVI redeem the preferred shares [of SVI stock held by the trusts] as [SVI] said it would at the time it said it would." Stockham and Wells Fargo argued in their joint motion for a summary judgment that Ladd's claims were barred by the applicable statute of limitations and by the doctrine of laches. In addition to their joint motion, Stockham and Wells Fargo also filed individual motions for a summary judgment related to the claims asserted against them.

On September 18, 2014, the circuit court entered a summary judgment in favor of Stockham and against Ladd, which is the subject of Ladd's appeal.⁵ In entering a summary judgment for Stockham, the circuit court set forth the following facts:

"Count I of Ladd's Complaint asserts a claim for breach of fiduciary duty against [Herbert] in his capacity as an individual co-trustee of the Herbert C. Stockham Trust and the Virginia C. Stockham Trust ('the Trusts' or the 'Ladd Trusts'), both of which held preferred and common stock in SVI Corporation beneficially for Ladd and others. Ladd served as the individual co-trustee of a third Trust, the Kate F. Stockham Trust, and was the lifetime income beneficiary, but not the only beneficiary, of each of the Ladd Trusts. At all relevant times, one or more predecessors of Defendant Wells Fargo Bank, N.A., served as the corporate co-trustee of each of the Ladd Trusts.

"[Herbert] resigned

...