McDuffie v. O'Neal

Decision Date04 June 1996
Docket NumberNo. 2553,2553
Citation324 S.C. 297,476 S.E.2d 702
CourtSouth Carolina Court of Appeals
PartiesSteven F. McDUFFIE, Respondent, v. Thomas L. O'NEAL, Patricia O'Neal, Joseph E. Minshew & Blue Flame Gas Co., Inc., of Mt. Pleasant, Defendants, of whom Thomas L. O'Neal and Patricia O'Neal are, Appellants. . Heard

Stephen P. Groves, Michael A. Molony and Stephen L. Brown, Young, Clement, Rivers, & Tisdale, Charleston, for appellants.

Nicholas C. Sottile, of Sottile & Hopkins, of Mt. Pleasant; and James B. Richardson, Jr., Svalina, Richardson & Smith, Columbia, for respondent.


Steven F. McDuffie brought this stockholder action against Thomas L. O'Neal, Patricia O'Neal, Joseph E. Minshew, and Blue Flame Gas Co., Inc. of Mt. Pleasant (Blue Flame MTP), a closely held corporation, alleging, among other things, misappropriation of Blue Flame MTP's funds by the defendants and stockholder oppression. The master's order found (1) Blue Flame MTP was entitled to judgment for misappropriation of corporate funds against the O'Neals in the amount of $239,584, and against Minshew in the amount of $30,550; (2) McDuffie and O'Neal were equal owners of Blue Flame MTP; (3) Blue Flame MTP and/or Thomas O'Neal was required to purchase McDuffie's shares in the corporation for $467,317; (4) upon payment to McDuffie for his stock, McDuffie was to reimburse Thomas O'Neal $35,000 for the amount paid by Thomas O'Neal to Minshew for the 2 1/2 shares of stock that were realigned to McDuffie; and (5) McDuffie was entitled to judgment against the O'Neals for $15,918, and against Minshew for $1,967.40, representing their pro rata shares of McDuffie's attorneys' fees and costs.

The O'Neals appeal, alleging error in (1) the value placed upon Blue Flame MTP, (2) the finding that the expenditures of corporate funds by the O'Neals were misappropriations,

(3) the master's treatment of a $100,000 bonus to Thomas O'Neal, (4) the finding that McDuffie and O'Neal were 50/50 owners and, finally, (5) the holding that the action was not barred by the applicable statute of limitations or by equitable estoppel. We affirm as modified.


In September of 1982, McDuffie approached Minshew about starting a retail propane business in Mt. Pleasant. Minshew, who operated a propane business in Hollywood and Charleston, had the resources to establish the business. Minshew testified he was interested so that he could provide a business opportunity for his nephew, Thomas O'Neal, who also worked for him. Minshew variously testified that the startup business was his, or that it was primarily O'Neal's. McDuffie testified, however, that, at its inception, the business began as a 50/50 partnership between he and O'Neal, with Minshew providing the financing.

It is undisputed that Minshew, Thomas O'Neal, and McDuffie reached an informal agreement whereby Minshew and his corporation, Blue Flame Company, Inc. of Charleston (Blue Flame Charleston), would finance and provide the experience and equipment necessary for the operation of Blue Flame MTP. Minshew provided approximately $60,000 during the business's first year of operation. In the early years, McDuffie performed the field work, and Patricia O'Neal, Thomas O'Neal's wife, answered the telephones, dispatched the work orders, and managed the financial books and accounting. Thomas O'Neal, who continued to work at Blue Flame Charleston, assisted on weekends and other occasions. Thomas O'Neal began working exclusively for Blue Flame MTP in either 1987 or 1988.

In December of 1983, Blue Flame MTP was incorporated, and ten shares of stock were issued. McDuffie and Thomas O'Neal each received one share, and Minshew received eight shares. McDuffie testified Minshew held the eight shares as collateral or security for the money owed to Blue Flame Charleston, but he and Thomas O'Neal remained equal owners of the business. There were no written records or corporate resolutions documenting this arrangement.

According to McDuffie, when the indebtedness was repaid to Blue Flame Charleston, Minshew's eight shares were to be turned back to the corporation and, as a consequence, McDuffie and Thomas O'Neal would remain equal owners. Minshew testified he initiated the incorporation of the business in order to limit his liability. He further testified he received eight of the ten shares because "it was [his] deal." The corporate accountant testified that tax returns filed prior to incorporation indicated that McDuffie and Thomas O'Neal were equal partners.

On February 15, 1985, Minshew transferred one of his eight shares of stock in Blue Flame MTP to Thomas O'Neal doubling O'Neal's ownership interest. McDuffie testified he did not know about this stock transfer until 1989. Minshew testified, however, that the corporate stock certificate evidencing the transfer contained McDuffie's signature. McDuffie admitted it was his signature on the certificate, but testified he did not realize at the time what he was signing. Rather, he testified he was merely executing corporate documents that were placed in front of him, as was his custom.

In January of 1989, Minshew decided to withdraw from any involvement with Blue Flame MTP. Minshew asked his attorney to transfer 5 1/2 shares of his stock to Thomas O'Neal and 1 1/2 shares to McDuffie. McDuffie objected to this unequal distribution of Minshew's stock, but he testified Minshew told him that if he would not accept 1 1/2 shares, he would get nothing at all.

Simultaneous with this transaction, Thomas O'Neal was paid a $100,000 bonus by the corporation. The corporation borrowed the $100,000 from the Bank of South Carolina. The borrowing and the bonus served a dual purpose, i.e., to provide funds for O'Neal to purchase the stock from Minshew, and to decrease the value of the corporation, enabling O'Neal and McDuffie to purchase Minshew's stock. McDuffie took out a personal loan to pay for his portion of Minshew's stock.

In June of 1991, McDuffie came to suspect Thomas O'Neal and his wife, Patricia O'Neal, had misappropriated funds. This lawsuit followed shortly thereafter.


A shareholder's derivative action is one in equity. Pelfrey v. Bank of Greer, 270 S.C. 691, 244 S.E.2d 315 (1978). So, too, is an action for stockholder oppression. See Hite v. Thomas & Howard Co. of Florence, 305 S.C. 358, 409 S.E.2d 340 (1991), overruled on other grounds by Huntley v. Young, 319 S.C. 559, 462 S.E.2d 860 (1995) (characterizing as equitable the relief provided by S.C.Code Ann. § 33-14-310(d)). In an action in equity referred to the master for final judgment with direct appeal to the supreme court, this court may view the evidence to determine facts in accordance with its own view of the evidence. Tiger, Inc. v. Fisher Agro, Inc., 301 S.C. 229, 391 S.E.2d 538 (1989). We are not required, however, to disregard the findings of the trial court. Id.


The O'Neals contend the master erred, not in his decision to fashion a buyout remedy, but in the valuation he placed upon the corporation. They assert there was insufficient probative accounting and audit evidence to sustain his determination of the fair market value of Blue Flame MTP.

In determining the fair market value of a corporation on the date of liquidation, the court should consider (1) the corporation's net asset value, (2) its market value, and (3) its earning or investment value. After these factors have been considered and determined, they should then be weighed as to their relative bearing upon the ultimate question of the fair value of the dissenter's stock. Santee Oil Co. v. Cox, 265 S.C. 270, 217 S.E.2d 789 (1975); Dibble v. Sumter Ice and Fuel Co., 283 S.C. 278, 322 S.E.2d 674 (Ct.App.1984).

"Fair value" does not restrict the appraising court to the use of any one method of valuation. Santee, 265 S.C. at 273, 217 S.E.2d at 791. In essence the trial court must undertake to compute the fair value of the corporate property as "an established and going business." Id. When attempting such an evaluation, each case must be decided upon its own facts and circumstances. Id.

Here, the master heard testimony from two expert witnesses concerning the valuation of Blue Flame MTP. McDuffie called Joe M. Gasaway, who had been involved in the propane gas business for approximately 50 years. He testified he operated a company entitled Propane Consulting Service, which handles appraisals of gas businesses for purchasers and assists in selling primarily large gas businesses. He testified he had done approximately 40 appraisals, which included 22 locations in South Carolina. Gasaway acknowledged that he had never testified as an expert witness in court and he had no formal training in accounting or finance. Gasaway conducted an asset evaluation of Blue Flame MTP based primarily upon information provided to him by McDuffie, which included estimates of Blue Flame MTP's profit margins, the number of gallons of fuel it owned and its total number of customers, including retail clients. McDuffie also provided Gasaway with lists of vehicles, real estate, equipment, and accounts receivable belonging to the corporation. Based upon his evaluation, which included a review of the foregoing information and an on-site review of Blue Flame MTP's physical plant and tank sites, Gasaway valued Blue Flame MTP at $889,609. Gasaway further testified a buyer would pay a seller a negotiated amount for a covenant not to compete. According to Gasaway's testimony, his valuation did not take into consideration the debts of the corporation or its cash on hand.

Blue Flame MTP retained Gregory Padgett, a certified public accountant, to testify to his valuation of the business as of August 31, 1991, and his analysis of the alleged misappropriations. Padgett testified he had no prior involvement in propane sales and had never valued a propane business before. Padgett testified he reviewed...

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    ...relief including a buyout of shareholders by other shareholders or the corporation, are also equitable. McDuffie v. O'Neal, 324 S.C. 297, 476 S.E.2d 702 (Ct.App.1996); See Hite v. Thomas & Howard Co. of Florence, 305 S.C. 358, 409 S.E.2d 340 (1991), overruled on other grounds by Huntley v. ......
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    ...A shareholder's derivative action, as well as an action for stockholder oppression, is one in equity. McDuffie v. O'Neal, 324 S.C. 297, 302-03 476 S.E.2d 702, 705 (Ct.App.1996). Therefore, this court may find facts in accordance with our own view of the preponderance of the evidence. Inlet ......
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    ...Jordan, 362 S.C. at 205, 608 S.E.2d at 131. An action for shareholder oppression is also one in equity. McDuffie v. O'Neal, 324 S.C. 297, 303, 476 S.E.2d 702, 705 (Ct.App.1996). In addition, an action to determine the fair market value of stocks owned by a dissenting shareholder constitutes......
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1 books & journal articles
  • The Application of Marketability or Minority Discounts in a Minority Shareholder Buyout
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    • South Carolina Bar South Carolina Lawyer No. 27-2, September 2015
    • Invalid date
    ...273-74, 217 S.E.2d 789, 791 (1975); Bowers v. Bowers, 349 S.C. 85, 96-97, 561 S.E.2d 610, 616 (Ct. App. 2002). [12] McDuffe v. O'Neal, 324 S.C. 297, 303-304, 476 S.E.2d 702, 705 (Ct. App. 1996). [13] Morrow v. Martschink, 922 F.Supp. 1093, 1104 (D.S.C. 1995) (citing Harry J. Haynsworth, Val......

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