Polmer v. Spencer

• Decision Date: 20 December 1971
• Docket Number: 8649,Nos. 8648,s. 8648
• Citation: 256 So.2d 766
• Parties: Irvin F. POLMER v. Philip P. SPENCER et al. Mervin Joseph POLMER v. DUCROS PLANTATION, INC., et al.
• Court: Court of Appeal of Louisiana — District of US

Page 766

256 So.2d 766

Irvin F. POLMER v. Philip P. SPENCER et al.

Mervin Joseph POLMER v. DUCROS PLANTATION, INC., et al.

Nos. 8648, 8649.

Court of Appeal of Louisiana, First Circuit.

Dec. 20, 1971.

Rehearing Denied Jan. 31, 1972.

Writ Refused March 8, 1972.

Solomon S. Goldman, New Orleans, for defendants-appellants Philip P. Spencer and Ducros Plantation, Inc., and others.

Philip J. McMahon, of Borowski, Lofaso, McMahon & McCollam, Houma, for plaintiffs-appellees Irvin F. and Mervin J. Polmer.

Before LANDRY, BLANCHE and TUCKER, JJ.

BLANCHE, Judge.

Defendants, Philip P. Spencer and Ducros Plantation, Inc., perfected suspensive appeals from judgments rendered in two suits which were consolidated for trial. Both suits arise out of the same essential factual situation. This opinion will deal with all issues presented in both suits on appeal, although separate decrees in each appeal will be rendered. For convenience, the suit entitled 'Irvin F. Polmer v. Philip P. Spencer et al.,' Appeal No. 8648, will hereinafter be referred to as 'Irvin F. Polmer Suit,' whereas the suit entitled 'Mervin Joseph Polmer v. Ducros Plantation, Inc., et al.,' Appeal No. 8649, will hereinafter be referred to as 'Mervin Joseph Polmer Suit.'

The trial judge in his Written Reasons for Judgment ably summarized the factual situation giving rise to this litigation in the following manner:

'With the death of Leon Polmer in 1951 the ownership of Polmer Bros. partnership passed to Irvin and Mervin Polmer, each with a 24/70th interest; their only sister, Mrs. Estelle Polmer Rabin, 12/70ths; their nephew, Mrs. Rabin's only son, Philip Spencer 5/70ths; and their neice (sic), Louise Scheinberg, 5/70ths. Polmer Bros. consisted of 820 acres, the ancestral plantation home, and the Waubun Store, all located in Terrebonne Parish, and an additional 488 acres located in Lafourche Parish.

'Upon Leon Polmer's death the active management and control of Polmer Bros. was assumed solely by Mervin Polmer. This was necessitated by the poor health of his brother, Irvin, and the apparent disinterest of the other co-owners. In addition to managing the property of Polmer Bros., Mervin Polmer also managed a considerable amount of agricultural and mineral property owned jointly by his brother and himself, as well as agricultural and rental properties belonging solely to him. The management of these properties by Mervin Polmer continued until October 17, 1956 when he suffered a disabling paralytic stroke. This occurrence set in motion a succession of events leading to the formation of Ducros Plantation, Inc. to which the complete ownership, management, and control of these properties was ultimately transferred.

'These consolidated suits seek to avoid (sic) two conveyances of property by the co-owners to Ducros Plantation, Inc. on the ground that Philip Spencer utilized fraud and undue influence in bringing about these conveyances. It is alleged, in the alternative, that the stock option through which Philip Spencer and his mother secured the controlling interest in the corporation also is the result of fraud and should be invalidated. For the reasons that follow, judgment has been entered in favor of the plaintiffs on their alternative demands relating to the stock option allegedly approved on December 1, 1958 and ordering the return to the corporation of the thrity-two (sic) shares of stock purchased pursuant to the alleged option.

'In the months that followed Mervin Polmer's stroke the other co-owners learned that Mervin's administration of the business affairs of Polmer Bros. had not been the most businesslike. The Waubun Store had been continued by Mervin solely for the purpose of providing employment for persons who had been associated with the plantations, or their descendants, from the plantation's inception. Financially, the store was being operated at a loss. Additionally, it was later discovered that Mervin had borrowed sums from Polmer Bros. for personal reasons.

'In this moment of anxiety and frustration the co-owners, primarily through the influence of Philip Spencer, the only male descendent (sic) of the Polmers, were determined to restore the solvency of the family business. Spencer, an attorney, conceived the idea of forming a corporation to which all of the interests of the co-owners could be transferred in return for equal proportions of stock. The purpose of the corporation was ostensibly to centralize control of the properties in a single legal entity and thus eliminate the problems presented by ownership of the properties in indivision. In order to provide legal representation for Mervin, who was totally incapacitated physically from acting on his own behalf, Spencer succeeded in having Irvin Polmer qualified as curator ad hoc for his brother.

'Ducros Plantation was legally incorporated in New Orleans on August 22, 1957 in the law office of Philip Spencer. All of the property to be held by the corporation, however, was located in Terrebonne and Lafourche Parishes. One hundred shares of common stock valued at $1,000.00 per share were authorized by the Articles of Incorporation of Ducros Plantation. On August 22, 1957 Louise Scheinberg's 5/70ths interest was purchased by the other co-owners and redistributed in equal proportions, resulting in total interests of 65/65ths. The property interests of the four remaining co-owners were transferred to the corporation in return for stock in equal proportion to their ownership interests; a total of 65 shares of the authorized 100 shares was therefore issued to the shareholders since 65 units of ownership were involved. The transfers of property were achieved in the form of two conveyances, one in 1957 and the other in 1958. Approval was duly petitioned for and obtained in the interdiction proceedingfor the authority of Irvin to act on behalf of his brother, Mervin. Philip Spencer, from the inception of the corporation, headed it as president. The position of vice-president was held from time to time by either his mother or by Irvin Polmer. Irvin was retained by the corporation to act as General Manager for the properties of the corporation with the primary duty of collecting rental.

'A meeting of shareholders and directors was scheduled for December 1, 1958. At that time Spencer was President, Irvin Polmer Vice-President, and Mrs. Estelle Rabin, Secretary-Treasurer. A stock option resolution was purportedly offered at the Board of Directors meeting by Irvin Polmer and approved. This granted Philip Spencer the option to purchase up to 35 shares of the remaining 35 authorized but unissued shares of stock at $1,000.00 per share. Spencer exercised this option by purchasing 32 shares, and, together with his mother became a majority shareholder in the corporation, owning 49 of the outstanding shares to the 48 owned by his uncles.

'Following this development Irvin Polmer was discharged as general manager of Ducros Plantation for his alleged refusal to collect rent . The position of General Manager was thereafter assumed by Spencer who also continued to hold the presidency of the corporation. Spencer and his mother, by virtue of their majority control, approved a salary increase for Spencer from $2,250.00 per year to $12,000.00 per year. A 'General Manager's home' was constructed near the Ducros home at a cost of approximately $30,500.00. The home was lavishly furnished with radio equipment for the alleged purpose of Spencer communicating from his New Orleans office to the properties at Schriever. The record reveals that Spencer, from adolesence (sic), has been a 'ham' radio enthusiast. Checks purporting to be dividend payments to Irvin and Mervn Polmer were later sent to Irvin but were not cashed.

'Suit was filed by Irvin Polmer on January 25, 1961 and by Mervin Polmer, who had recovered from the dibilitating (sic) effects of his stroke, on January 30, 1961. The suits both sought to set aside the two conveyances of property to the corporation and the stock option through which Spencer acquired control of the properties of the co-owners and the revenues being produced therefrom. They pray that these conveyances and the stock option be invalidated and that the shares purchased by Spencer pursuant to the option be returned to the corporation. They further pray for an accounting of the fruits and renenues (sic) (of) the property produced subsequent to Spencer's purchase of the stock and ascendance to control of Ducros.' (Written Reasons for Judgment, Record, pp. 57--61)

Various declinatory, dilatory and peremptory exceptions were filed to both original petitions in each suit and to the amended petitions in each suit, all of which exceptions were overruled by the trial court. Judgment was rendered on the merits in favor of each of the respective plaintiffs on the alternative demand, setting aside the stock option allegedly approved by the Board of Directors of Ducros Plantation, Inc., on December 1, 1958, ordering defendant, Philip P. Spencer, to surrender and return to the defendant corporation the stock certificates representing the 32 shares of stock he purchased pursuant to the stock option plus any and all dividends received by him attributable thereto, and ordering Ducros Plantation, Inc., to return to defendant, Philip P. Spencer, whatever consideration, if any, he paid to the corporation for the purchase of the stock pursuant to the option. This judgment was based on the determination by the trial judge that the stock option was fraudulently obtained.

Defendants' appeals are directed first to the alleged error committed by the trial court in overruling the various exceptions and secondly, to the alleged error committed by the trial court in granting the respective plaintiffs' judgments on their respective alternative demands, essentially for the reason that the original allegations of the petitions constitute a judicial confession of the validity of the resolution granting the stock option,...