Peterson v. Continental Boiler Works, Inc.
| Decision Date | 13 February 1990 |
| Docket Number | No. 71589,71589 |
| Parties | Allen PETERSON and Ronald Peterson, Respondents, v. CONTINENTAL BOILER WORKS, INC., Appellant. |
| Court | Missouri Supreme Court |
Andrew Kasnetz, Warren W. Davis, Gregory H. Wolk, St. Louis, Mo., for appellant.
Jim J. Shoemake, Kenneth J. Barnhouse, Valerie G. Richardson, St. Louis, for respondents.
Appellant, Continental Boiler Works, Inc. (Continental), appeals from a jury verdict in favor of respondents, Allen Peterson and his son, Ronald Peterson (the Petersons), awarding actual and punitive damages in an action for breach of a stock restriction agreement. Continental alleges the trial court erred in overruling its motion for judgment notwithstanding the verdict or in the alternative motion for new trial in that: (1) the verdict was not supported by substantial evidence; (2) the verdict for punitive damages was not supported by substantial evidence; and (3) the punitive damage award did not bear a reasonable relationship to the injury. The Court of Appeals, Eastern District, affirmed and transferred the case to this Court because of general interest and importance. We have jurisdiction. Mo. Const. art. V, § 10. Reversed.
The record reveals the following facts which we view in the light most favorable to the verdict. Allen Peterson was employed at Nooter Corporation in St. Louis for 28 years, until approximately 1973, when Bob Fournie, executive vice president of Continental, hired Allen Peterson to manage Brooks Erection and Construction Corporation (Brooks), a recently acquired subsidiary of Continental. Brooks' primary business was equipment maintenance and overhaul for large plants. Allen Peterson accepted the position and in time was able to acquire 25 percent of Brooks stock. Later Allen Peterson hired his son, Ronald, to help manage Brooks and gave his son half of his stock.
Continental owned seventy-five percent of Brooks stock until the late seventies when Brooks International Corporation (BIC) was formed as a holding company for the subsidiaries of Continental. At that time, the Petersons and Continental transferred their Brooks stock for equivalent shares of BIC stock. The Petersons then each sold 2 1/2 percent of their stock to Continental. Thus, Continental held 80 percent of BIC stock; Allen and Ronald Peterson each held 10 percent of BIC stock.
On December 5, 1983, Allen and Ronald Peterson and Continental entered into a stock restriction agreement regarding the BIC stock. The agreement provided for Continental's purchase of the Petersons' stock in the event their employment was terminated.
That agreement provides in pertinent part:
6. Severance of Employment. If at any time, because of death, resignation, removal or for any other cause, neither member of the Peterson Group is employed by Brooks International or one of its subsidiary corporations, Continental shall purchase and the Peterson Group and its family members shall sell all shares of Brooks International they own at adjusted book value. The closing of such purchase and sale shall take place at the office of Continental on a mutually agreeable date which shall be not less than ten (10) or more than ninety (90) days after the date when neither of the members of the Peterson Group is employed by Brooks International or one of its subsidiaries. (Emphasis ours).
"Adjusted book value" is defined in the agreement.
B. The term "adjusted book value" as used in this Agreement shall mean book value (computed in accordance with sound accounting practices consistently applied) increased by an amount equal to the excess of the fair market value of the tools, furniture, vehicles, machinery, equipment, real property and improvements thereon, and other personal and real property of Brooks International and its subsidiaries on the valuation date over their respective book values, and decreased by [audit fees and related] expenses.... (Emphasis ours).
The agreement provides that the Petersons and Continental would choose a mutually agreeable certified public accounting firm to determine the "adjusted book value" of BIC's stock and that firm would be given "broad discretion to hire independent appraisers for the purpose of determining the fair market value" of the property identified in the stock restriction agreement. According to the contract, the decision of the CPA firm as to the appraisal firms would be final.
On February 7, 1984, Continental terminated both Allen and Ronald Peterson from employment with Brooks. Eventually, Arthur Young and Company (Arthur Young), a CPA firm, was chosen by Petersons and Continental to determine the adjusted book value of BIC stock. Subsequently, Arthur Young recommended National Industrial Service, Inc. (NISI) to perform the appraisal of BIC's assets, after Continental rejected other appraisal firms proffered by Arthur Young. NISI is a St. Louis-based auctioneering and appraisal firm.
On July 6, 1984, NISI submitted its written appraisal to Arthur Young showing a total value of all items appraised at $2,417,979.00. Thereafter, on September 11, 1984, Arthur Young submitted its calculated adjusted book value of BIC stock as of January 31, 1984, the relevant valuation date, at $3,341,787.00. However, Arthur Young set forth two conditions precedent to finalizing its audit report: (1) receipt of an audit financial statement of BIC for the year ended December 31, 1983; and (2) signed representation letters from the Petersons and the management of Continental.
Subsequently, the representation letters were provided by the Petersons and Continental. Continental did not submit its 1983 audit financial statement of BIC to Arthur Young. Thus, a final report has not been issued and the stock purchase has not been completed. However, Arthur Young did submit a draft balance sheet as a result of its audit and a letter setting out the adjusted book value of BIC as of January 31, 1984, including NISI's appraisal.
The Petersons filed an action against Continental and subsequently filed a five-count, second amended petition against Continental alleging breach of contract, breach of fiduciary duty by Continental, breach of fiduciary duty by the officers of Continental, intentional interference with the business expectations of the Petersons by the officers of Continental and seeking specific performance of the contract. Continental counterclaimed, requesting a declaration of rights under the agreement and alleging that the appraisal was not made on a fair market value basis as required by the stock restriction agreement. The case was submitted to the jury on the breach of contract claim. The jury returned a verdict in favor of Petersons in a total amount of $811,757.40; $668,357.40 of this amount represents 20 percent of BIC's adjusted book value as of January 31, 1984, and Petersons were awarded 9 percent interest per year from October 22, 1983, on this amount. The remaining $143,400.00 represents 20 percent of other assets, i.e., litigation claims, settled in favor of BIC. Additionally, Petersons were awarded punitive damages in the sum of $250,000.00.
In its first point on appeal, Continental alleges that the trial court erred in overruling its motion for JNOV or the alternative motion for a new trial. Continental claims that the verdict is not supported by sufficient, substantial or competent evidence from which a jury could find that the assets of BIC were to be appraised under an ongoing business valuation. Essentially, Continental argues that there was not sufficient evidence to support the submission of Instruction Number 6, the verdict director. Further, Continental argues that the Petersons did not plead or prove an oral modification of the stock restriction agreement and thus should not have been allowed to submit the instruction to the jury.
Instruction 6 reads as follows:
Your verdict must be for Plaintiffs Allen and Ronald A. Peterson if you believe:
First, plaintiffs and defendant agreed that National Industrial Services, Inc. would be allowed to appraise the fair market value of the assets of Brooks International Corporation under the Stock Restriction Agreement utilizing an ongoing business valuation methodology, and
Second, plaintiffs performed their obligations under the Stock Restriction Agreement, and
Third, Arthur Young was prevented from completing this valuation process as required under the Stock Restriction Agreement by the conduct of defendant, and
Fourth, defendant failed to perform its obligations under the Stock Restriction Agreement, and
Fifth, plaintiffs were thereby damaged.
In Count I of their second amended petition, the Petersons alleged that Continental breached its contractual obligation under the terms of the stock restriction agreement by, among other things, its refusal to accept Arthur Young's adjusted book value of BIC stock which was based on NISI's valuation of the assets of BIC. Further, the Petersons pleaded that NISI appraised the assets at a fair market value pursuant to the stock restriction agreement.
At trial, the Petersons contended that "fair market value" was not defined in the agreement but, prior to the acceptance of NISI as the appraiser of the assets, Petersons and Continental agreed that NISI would determine the fair market value on an ongoing business basis.
Following the Petersons' termination in February, 1984, negotiations began between the Petersons and Continental to choose a mutually agreeable CPA firm to begin the process of appraising BIC's assets. Arthur Young was chosen by both Petersons and Continental and recommended NISI as an independent appraisal firm after Continental rejected other recommendations.
Stuart Millner, president of NISI, testified that Arthur Young arranged meetings held in March, 1984, with the Petersons and Continental to familiarize them with NISI and the method it would be using for appraising BIC's assets. He testified that what...
To continue reading
Request your trial
-
In re Inc.
...loyalty generally imposes an obligation on officers and directors to avoid conflict of interest transactions. Peterson v. Continental Boiler Works, Inc., 783 S.W.2d 896 (Mo. 1990). The Missouri Supreme Court, quoting Ruder, Duty of Loyalty- a Law Professor's Status Report, 40 Bus. Law 1383,......
-
In re Gen. Motors LLC Ignition Switch Litig.
...to do so, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing"); Peterson v. Cont'l Boiler Works, Inc. , 783 S.W.2d 896, 900 (Mo. 1990) ("Fair market value is not determined by value to the owner alone; it is measured also by the price that one w......
-
Reed v. Linehan (In re Soporex, Inc.)
...loyalty generally imposes an obligation on officers and directors to avoid conflict of interest transactions. Peterson v. Continental Boiler Works, Inc., 783 S.W.2d 896 (Mo.1990). The Missouri Supreme Court, quoting Ruder, Duty of Loyaltya Law Professor's Status Report, 40 Bus. Law 1383, 13......
-
Jake C. Byers, Inc. v. J.B.C. Investments
...Supreme Court prohibits the use of extrinsic evidence to interpret an otherwise unambiguous contract. Thus, in Peterson v. Continental Boiler Works, Inc., 783 S.W.2d 896, 901 (Mo. banc 1990), the Court quoted and applied the following proposition to an unambiguous phrase in a written Where ......