RITCHIE v. RUPE
| Court | Court of Appeals of Texas |
| Parties | LEE C. RITCHIE, as Director of Rupe Investment Corporation and as Trustee for the Dallas Gordon Rupe Trust, PAULA RUPE DENNARD, as Director of Rupe Investment Corporation and as Trustee for the Dallas Gordon Rupe Trust and as Trustee for the Paula Dennard Management Trust, DENNIS LUTES as Director of Rupe Investment Corporation and as Trustee for the Paula Dennard Management Trust, and RUPE INVESTMENT CORPORATION, Appellants V. ANN CALDWELL RUPE, as Trustee for the Dallas Gordon Rupe, III 1995 Family Trust, Appellee |
| Docket Number | No. 05-08-00615-CV,05-08-00615-CV |
| Decision Date | 28 March 2011 |
LEE C. RITCHIE, as Director of Rupe Investment Corporation and
as Trustee for the Dallas Gordon Rupe Trust,
PAULA RUPE DENNARD, as Director of Rupe Investment Corporation and
as Trustee for the Dallas Gordon Rupe Trust and
as Trustee for the Paula Dennard Management Trust,
DENNIS LUTES as Director of Rupe Investment Corporation and
as Trustee for the Paula Dennard Management Trust, and
RUPE INVESTMENT CORPORATION, Appellants
V.
ANN CALDWELL RUPE,
as Trustee for the Dallas Gordon Rupe, III 1995 Family Trust, Appellee
No. 05-08-00615-CV
Court of Appeals
Fifth District of Texas at Dallas
DATED: March 28, 2011
Affirm in part; Reverse and Render in part; Reverse and Remand in part; Opinion Filed March 28, 2011.
This case involves claims for shareholder oppression filed by a minority shareholder in a closely held corporation, Rupe Investment Corporation ("RIC"). The trial court determined the plaintiff minority shareholder, Ann Caldwell Rupe as trustee for the Dallas Gordon Rupe, III, 1995 Family Trust ("Buddy's Trust"), had been subjected to shareholder oppression by RIC and some of
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its shareholders and directors ("appellants"). The trial court ordered appellants to cause RIC to redeem Buddy's Trust's stock in RIC (the "Stock") for $7.3 million, which the jury found to be the Stock's fair value. The trial court also awarded Ann1 attorney's fees in the event of an unsuccessful appeal by appellants.
The evidence is undisputed that appellants told Ann and her representative that they refused to meet with, and refused to allow any RIC management personnel to meet with, any prospective purchasers of the Stock. Based on the evidence and circumstances of this case, we conclude appellants' actions in connections with Ann's efforts to sell the Stock to third parties constituted oppressive conduct. We also conclude the trial court did not abuse its discretion in ordering appellants to cause RIC to buy out the Stock as an equitable remedy for this conduct. However, we conclude the trial court erred in ordering the Stock be purchased for a price that did not constitute fair market value. We also conclude the trial court erred in conditionally awarding Ann appellate attorney's fees. Accordingly, we affirm the trial court's judgment in part and reverse in part. We reverse the trial court's judgment as to Ann's appellate attorney's fees, and we render judgment that she take nothing on her claim for attorney's fees. We reverse the trial court's judgment as to the amount to be paid by RIC for the Stock, and we remand the case for further proceedings to determine the fair market value of the Stock. We affirm the rest of the trial court's judgment.
A. RIC
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RIC was founded by Dallas Gordon Rupe, Jr., a/k/a "Pops," and Robert Ritchie. By the time of the events in this case, all of RIC's common stock2 was held by their descendants or in trusts3 for the benefit of their descendants. In 2002, the principal players included: Pops's children, who were Paula Dennard ("Paula") (chairman of RIC's board of directors) and Dallas Gordon Rupe, III ("Buddy") (a director of RIC); Lee Ritchie ("Ritchie") (Robert Ritchie's son, RIC's president, and one of its directors); and Dennis Lutes ("Lutes") (one of RIC's directors and one of its attorneys). In 2002, the relevant voting shareholders4 of RIC were:
• Paula and Ritchie as co-trustees of the Dallas Gordon Rupe Trust ("Pops's Trust"), who owned 46.6 percent of RIC's voting stock;
• Paula and Ritchie as co-trustees of the Ruby L. Rupe Trust No. One for Grandchildren ("Ruby's Trust"),5 who owned 7.4 percent of the voting stock;
• Paula and Lutes as co-trustees of the Paula Dennard Management Trust ("Paula's Trust"), who owned 18 percent of the voting stock;
• Ritchie, who personally owned 1.7 percent of the voting stock; and
• Buddy as trustee of Buddy's Trust, who owned the Stock (which comprised 18 percent of the voting stock); Buddy was trustee until his death on September 22, 2002.
After Buddy died, his wife, appellee Ann Caldwell Rupe, succeeded him as trustee of Buddy's Trust.
B. Disputes Among the Parties
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The record reflects that several disputes among the individuals in their various capacities came to a head in the months following Buddy's death. For purposes of our discussion, the overriding dispute here concerns Ann's efforts to sell the Stock to third parties. There is no shareholders' or buy-sell agreement, right of first offer, or other restriction on the sale of the Stock to third parties. Although not required to do so, Ann contacted Ritchie about RIC buying the Stock. After some attempts, they were unable to reach an agreement for the sale of the Stock to RIC.6 Ann then sought to market the Stock to third parties.
C. Ann's Efforts to Sell the Stock to Others
In 2004, Ann hired a retired capital fund manager, George Stasen, to help sell the Stock to third parties. Stasen met with Ritchie, Paula, and her children and sought their cooperation with his efforts to sell the Stock. Stasen testified that Ritchie told him that neither Ritchie nor any member of RIC's management would meet with any prospective purchasers of the Stock. In addition to Ritchie's own testimony confirming this, the record contains a fax from Ritchie to Ann dated February 1, 2006, stating that "it would be inappropriate for me or any other officer or director of [RIC] to meet with your prospects or otherwise participate in any activities relating to your proposed sale of stock."
Stasen testified that after the meeting, he felt it would be extraordinarily difficult to market the Stock to a third party because any investor would want to meet with RIC's management and RIC's management had made it clear they did not want to meet anyone. He said that interviewing corporate management was a regular part of a prospective investor's due-diligence process for determining whether to invest in a closely held corporation, and that management's refusal to meet
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with prospective investors made the Stock impossible to sell. Stasen testified that he "got laughed at" by prospective investors when he told them they could not meet with management. Stasen estimated the book value of the Stock at $3.9 million, but he discounted the Stock, pricing it at $3.4 million "[b]ecause I knew it would be incredibly difficult to sell this without offering a discount" because RIC's management refused to meet with prospective buyers. Stasen testified the chance of selling stock in a closely held corporation without affording the prospective purchaser an opportunity to meet with management was "zero." Ultimately, Stasen was unable to sell any of the Stock, "[b]ecause you cannot make a decision on an investment from this limited information without meeting the executives of [RIC] and without meeting the executives of the principal holdings."
D. Ann's Lawsuit
On July 21, 2006, Ann sued Ritchie, Paula, and Lutes in their individual capacities. Ann later added RIC as a defendant. Ann's causes of action included shareholder oppression and breach of fiduciary duty, as well as a demand for access to RIC's books and records. Ann sought an order requiring the defendants to purchase the Stock "at a fair market value" or an order appointing a receiver to liquidate RIC. Ann also sought attorney's fees for efforts involved in obtaining access to RIC's books and records.
The case was heard by a jury in a trial lasting over two weeks. During the trial, and over appellants' objection, the trial court granted Ann's motion for leave to amend her petition to change the capacity in which Ritchie, Paula, and Lutes were sued from their individual capacities to their capacities as the directors of RIC and as the trustees of the various shareholder trusts.
The jury returned a verdict on the issues submitted to it. After conducting a post-trial hearing, the trial court signed a judgment ordering appellants to cause RIC to buy out the Stock for $7.3 million, the "fair value" of the Stock as found by the jury. The judgment conditionally awarded
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Ann appellate attorney's fees, but did not award her attorney's fees for trial.7
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The trial court also signed and filed findings of fact and conclusions of law, containing forty-three numbered findings of fact and twelve numbered conclusions of law.8 The trial court concluded, as a matter of law, that appellants had acted oppressively towards Ann in several respects, including their refusal to cooperate with Ann's attempts to sell the Stock to a third party.9 Appellants timely filed their appeal.
In their third issue, appellants assert that "[t]he trial court's findings of fact and conclusions of law are erroneous and should be vacated because they are not limited to the issues decided solely by the trial court and they are not supported by legally or factually sufficient evidence." In the argument portion of their brief most closely relevant to this contention, appellants identify five matters or issues that they assert were tried to, and decided by, the trial court. They then assert:
All other issues should have been presented to the jury by Ann and should not have been made by the trial court. . . . Yet the trial court's findings address the whole case, including claims and parties that were not at issue and/or were not presented to the jury, and fact questions that were answered by the jury. For these reasons, Findings 1-43 and Conclusions 1-4 are wholly inappropriate and unnecessary and should be disregarded. . . . [S]ee also arguments at 16 CR 3297-3322.
(Case citations omitted.)
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Appellants' general attack on the trial court's findings and conclusions is not persuasive. Generally, failure to submit or request a jury question on a ground of recovery or...
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