Mid-Missouri Telephone Co. v. Alma Telephone Co.

• Decision Date: 30 May 2000
• Citation: 18 S.W.3d 578
• Parties: (Mo.App. W.D. 2000) Mid-Missouri Telephone Company, Inc., et al., Respondents, v. Alma Telephone Company, Inc., et al., Appellants. WD57367 0
• Court: Missouri Court of Appeals

18 S.W.3d 578 (Mo.App. W.D. 2000)

Mid-Missouri Telephone Company, Inc., et al., Respondents, v. Alma Telephone Company, Inc., et al., Appellants.

WD57367

Missouri Court of Appeals Western District

05/30/2000

Appeal From: Circuit Court of Lafayette County, Hon. Joseph Paul Dandurand

Counsel for Appellant: Bruce Brown Waugh

Counsel for Respondent: Mark Thomas Kempton

Opinion Summary: Defendants Alma Telephone Company, Inc., Citizens Telephone Company of Higginsville and Chariton Valley Telephone Company, three independent telephone companies, and their three wholly owned cellular subsidiaries appeal the trial court's grant of summary judgment in favor of plaintiffs Mid-Missouri Telephone Company, its wholly owned cellular telephone subsidiary Mid-Missouri Cellular, Inc. and the Jones family, sole shareholders of Mid-Missouri Telephone Company. The court found that the plaintiffs were not obligated by certain agreements to offer the defendants a first right of refusal to buy the 25% partnership interest held by Mid-Missouri Cellular, Inc. in a limited partnership in which the four cellular subsidiaries were the sole partners. The defendants argue that the Joneses' plan to sell their 100% interest in Mid-Missouri Telephone Company to CEA Capital Partners USA, L.P. triggered an obligation to offer them a first right of refusal.

Division II holds: Nothing in either of the contracts relied upon by the defendants required the Joneses to offer a first right of refusal. Although the defendants argue that the intent of the four independent telephone companies was to give each other such a right so as to protect themselves from the possibility that any one of their interests in the cellular telephone rights at issue could fall into the hands of an outsider, both the Settlement Agreement and the Limited Partner Agreement failed to state that intention. More importantly, while the parent companies were parties to the Settlement Agreement, they never actually entered into a limited partnership nor were they parties to the Limited Partnership Agreement. Thus, none of them owned a direct partnership interest in the limited partnership ultimately created by their subsidiary companies. Therefore, because the parent companies are entities unto themselves, legally separate from their subsidiaries, and generally not responsible for the acts of their subsidiaries, they cannot be bound to contracts simply because their subsidiaries are parties thereto.

And, while the Limited Partnership Agreement could not supercede the Settlement Agreement because the parties to each were different, the parent companies who were parties to the Settlement Agreement never did form the limited partnership. Rather, it was their subsidiary companies which through the Limited Partnership Agreement formed the limited partnership. Thus, a condition precedent to the right of first refusal to purchase another's interests in that contemplated partnership never accrued. In any event, even if the Settlement Agreement otherwise bound the parent companies to offer a right of first refusal, unlike in the Limited Partnership Agreement, an exception to that obligation existed in the Settlement Agreement which provided that the sale of any or all of the outstanding capital stock of any entity holding an ownership interest in a partner will not trigger that obligation.

Laura Denvir Stith, Presiding Judge

This appeal involves the question whether Plaintiffs-Respondents -- Mid-Missouri Telephone Company ("Mid-Mo Telephone"), its wholly-owned subsidiary Mid-Missouri Cellular, Inc. ("Mid-Mo Cellular"), and the Jones Family, as the sole shareholders in Mid-Mo Telephone -- were obligated by certain agreements they allegedly signed to offer Defendants-Appellants, who are three independent telephone companies and their three wholly-owned cellular telephone subsidiaries, a "right of first refusal" to buy the 25% partnership interest held by Mid-Mo Cellular in a limited partnership created by the four cellular telephone subsidiaries. The three independent telephone companies and their subsidiaries alleged that an offer of this right of first refusal was triggered by the fact that the Joneses planned to sell their 100% interest in Mid-Mo Telephone (the parent) to a third party, CEA Capital Partners USA, LP ("CEA").

Because we find that nothing in either of the contracts relied on by Defendants-Appellants required the Joneses to give those companies a right of first refusal before the Joneses sold their shares in Mid-Mo Telephone to CEA, we affirm the trial court's grant of summary judgment to Plaintiffs-Respondents in this declaratory judgment action.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1989, Plaintiff-Respondent Mid-Mo Telephone was an independent, privately held, Missouri corporation which provided local telephone service to certain counties in Missouri. At that time, the Federal Communications Commission ("FCC") was preparing to grant cellular telephone rights along Interstate 70 (I-70) east of Kansas City. Mid-Mo Telephone decided to bid on these rights, as did three other independent, privately owned telephone companies who are now Defendants-Appellants herein -- Alma Telephone Company, Inc. ("Alma"), Citizens Telephone Company of Higginsville ("Citizens") and Chariton Valley Telephone Company ("Chariton") (sometimes collectively referred to herein as "the independent telephone companies"). These four companies were among the eligible candidates vying to acquire these cellular rights. Also among the eligible candidates were four larger telephone companies that operated in Missouri but which were subsidiaries of publicly traded corporations (the "publicly traded companies").

It was FCC practice that, unless all eligible candidates for obtaining cellular rights agreed to share those rights, the FCC would conduct a lottery to determine which eligible candidate would receive these cellular rights. Mid-Missouri invited the other three independent companies (Alma, Citizens and Chariton), as well as the four publicly traded companies, to agree that should any one of eight of them be selected in the lottery, they would all share and own the rights together. It prepared a document it entitled "Settlement Agreement" which it provided to the other seven companies, and which contained the terms on which it proposed the eight companies bid for the cellular rights. The Settlement Agreement provided that the signatories to it agreed that, if one of them won the lottery, they would thereafter enter into a Limited Partnership Agreement for the purpose of providing cellular service within the allotted area. In addition, Section J of the Settlement Agreement contained a right of refusal clause which stated in relevant part that:

No Partner may sell, transfer, assign or exchange any part of its Partnership Interest to a non-affiliate of the Partner without first giving all of the other Partners the opportunity to acquire that interest for the value at which and under terms which any such non-affiliate has offered the selling Partner pursuant to a bona-fide offer in writing to pay for such interest. . . .

For purposes of this Section J, an assignment shall be deemed to have occurred if in a single transaction or in a series of transactions any interest in a Partner (whether stock, partnership, interest or otherwise) is transferred, diluted, reduced or otherwise affected. An assignment shall not be deemed to have occurred (i) due to the transfer of any or all of the outstanding capital stock of any corporate entity holding an ownership interest in a Partner, or (ii) due to the mortgage of all or any part of a Partnership Interest to a bank or trust company licensed pursuant to any state or federal banking laws.

On June 7, 1989, Mid-Mo Telephone, Alma, Chariton, and Citizens executed the Settlement Agreement, but the four publicly traded companies decided not to join. None of the four independent companies which signed the Settlement Agreement were, at that point, owned by a corporate holding company, nor did any of them own a cellular subsidiary.One of the four signatories to the Settlement Agreement, Chariton, did win the lottery. None of the four went on to sign a Limited Partnership Agreement, as contemplated by the Settlement Agreement, however. Rather, for business reasons, the four telephone companies decided that it would be better for each of them to create wholly owned cellular subsidiaries. Accordingly, they created Chariton Valley RSA #1Corp ("Chariton Cellular"), Mid-Missouri Cellular, Inc. ("Mid-Mo Cellular"), Alma Cellular Telephone Company, Inc. ("Alma Cellular"), and Citizens Service Center, Inc. ("Citizens Cellular"). Chariton obtained permission from the FCC to transfer its rights to its wholly owned subsidiary and, in September 1989, the four cellular subsidiaries executed a Limited Partnership Agreement with each other. Chariton Cellular, Alma Cellular and Citizens Cellular each became 25% limited partners, and Mid-Mo Cellular became a 24% limited partner and a 1% general partner.

The Limited Partnership Agreement contained a right of first refusal clause similar to that in the Settlement Agreement, with one major exception. It did not include a provision like the provision in the Settlement Agreement which had stated that "An assignment shall not be deemed to have occurred (i) due to the transfer of any or all of the outstanding capital stock of any corporate entity holding an ownership interest in a Partner." It did contain the other provisions set out in the Settlement Agreement regarding transfer of partnership interests.¹ In addition, the Limited Partnership Agreement contained a "merger clause" which provided that:

This Agreement constitutes the entire Limited Partnership Agreement between the Partners and their affiliates and (a) shall supercede all previous negotiations, commitments, representations and writings, and (b) to the extent...