State ex rel. KelCor, Inc. v. Nooney Realty Trust, Inc.

• Decision Date: 14 April 1998
• Docket Number: No. 73624,73624
• Parties: STATE of Missouri ex rel. KELCOR, INC., Respondent, v. NOONEY REALTY TRUST, INC., Appellant.
• Court: Missouri Court of Appeals

Page 399

966 S.W.2d 399

STATE of Missouri ex rel. KELCOR, INC., Respondent, v. NOONEY REALTY TRUST, INC., Appellant.

No. 73624.

Missouri Court of Appeals,

Eastern District,

Division Five.

April 14, 1998.

Douglas W. King, Jeffrey S. Russell, Thomas C. Burke, Bryan Cave LLP, St. Louis, for appellant.

Timothy E. Hayes, Thomas D. Brown, Lathrop & Gage, L.C., St. Louis, for respondent.

RICHARD B. TEITELMAN, Judge.

Nooney Realty Trust, Inc. (Nooney) appeals from the trial court's judgment granting a writ of mandamus to KelCor, Inc. (KelCor) in the Circuit Court for St. Louis County that compels Nooney to hold its annual shareholders meeting. The Honorable Patrick Clifford presided. Nooney argues the writ of mandamus was improper because another adequate remedy is available, because the relief the writ granted will be ineffective or unduly burdensome, and because KelCor was barred from that remedy by the doctrine of judicial estoppel and by unclean hands. We reverse and remand with directions to quash the writ.

The undisputed facts are as follows:

Nooney is a Missouri corporation that is publicly traded. It is chaired by Gregory J. Nooney, Jr. (Mr. Nooney). KelCor is a Missouri corporation that is owned by David L. Johnson and his wife. Both Mr. Johnson and KelCor own shares of Nooney.

In March, 1997, KelCor, a Nooney shareholder, contacted Nooney's board of directors claiming that a large block of Nooney stock was no longer valid. Under Nooney Bylaws Section 8.8, no shareholder may acquire more than 9.8% of Nooney's shares. However, a Nooney shareholder, Physicians Insurance Company of Ohio ("PICO") had acquired more than 9.8% of Nooney's outstanding shares. KelCor demanded that the board declare the "excess shares" to be treasury shares that were no longer voting shares, pursuant to the bylaws.

Nooney contacted PICO regarding the excess shares. About one week later, PICO sold the excess shares so that its holdings of Nooney stock were in compliance with Nooney's bylaws. PICO sold the excess shares to individual investors with accounts at the investment management firm Summit Global Management, Inc., a PICO subsidiary.

Prior to KelCor's discovery of the new owners' identity, KelCor took the position that the transfer of the excess shares did not make the shares valid and the shares could not be voted at the annual meeting. Upon learning the share purchasers' identity, KelCor took the position that the sale did not restore the shares to normal, validly outstanding stock that could be voted at meetings of Nooney's shareholders because PICO had sold the shares to its subsidiary.

Though Nooney had already set the date of its annual meeting for May 13, 1997, as per its bylaws, the Nooney board decided it was in the best interests of the Nooney shareholders to reset the annual meeting for July 3, 1997. The board intended to submit a bylaw amendment to the shareholders that would determine the validity of the excess shares. The amendment would have excused PICO's temporary ownership of the excess shares and the shares would be deemed valid going forward.

On June 5, 1997, KelCor filed an action in St. Louis County Circuit Court for injunctive relief and declaratory judgment regarding the voting rights of the excess shares. KelCor contended that a judicial determination of the validity of the excess shares was a necessary precondition to the holding of an annual meeting. On June 24, 1997, KelCor and Nooney entered into a settlement agreement before Judge Romines. Nooney agreed to again postpone the 1997 annual meeting. Instead, a special meeting of the shareholders was scheduled for August 8, 1997, at which the only issue to be voted upon would be the board's proposed bylaw amendment. If the amendment passed, Nooney would call an annual meeting. If the amendment did not pass, Nooney would postpone the annual meeting until judicial determination of the validity of the excess shares was reached.

KelCor opposed the proposed bylaw amendment. KelCor, Mr. Johnson, and some of Mr. Johnson's associates urged the shareholders to vote against the proposed amendment. This group desired to raise shareholder value through the elimination of the excess shares as voting stock. The proposed amendment was defeated.

KelCor proceeded with its action before Judge Romines for declaratory judgment regarding the validity of the excess shares. On August 26, 1997, Mr. Johnson and a group of his business associates purchased the excess shares as well as PICO's remaining shares. The next day, less than two weeks before the trial date, KelCor voluntarily dismissed its declaratory judgment suit. On September 8, 1997, KelCor filed its current mandamus action to compel Nooney to hold an annual meeting. KelCor's petition stated that as a Nooney shareholder it has a right under the bylaws to participate in an annual meeting; that the Nooney Board had postponed and not rescheduled the May 13, 1997 meeting; and that KelCor is unable under the bylaws or any other means to compel the Board to reschedule the annual meeting and therefore KelCor has no adequate remedy at law. Nooney filed a declaratory judgment action in the Jackson County Circuit Court on September 18, 1997, for a final judicial resolution of the excess shares issue. Judge Clifford issued an ex parte preliminary order in mandamus directing Nooney either to schedule an annual meeting or to show cause why it should not be required to do so. Nooney answered KelCor's mandamus petition and opposed the issuance of mandamus on October 9, 1997.

On December 1, 1997, Judge Clifford conducted a trial to determine whether the preliminary writ of mandamus should be made permanent. KelCor entered Nooney's bylaws regarding an annual meeting into evidence and asserted Section 351.225 RSMo (1994), which controls the timing and place of corporate annual meetings. Nooney called Mr. Nooney, who testified that Nooney had not refused to hold an annual meeting and explained the history of the dispute between KelCor and Nooney regarding the excess shares. Mr. Nooney described the steps KelCor had taken to impede the annual meeting. Mr. Nooney testified that the excess shares issue must be resolved before an annual meeting can be held and that the declaratory judgment action was the only option for resolving that issue.

On the day of the trial, the court issued its order making its preliminary writ of mandamus permanent and requiring Nooney to hold an annual meeting on or before January 15, 1998. Nooney appeals. ¹

This Court reviews mandamus proceedings as it does other non-jury matters. State ex rel. Lupo v. Wentzville, 886 S.W.2d 727, 730 (Mo.App.1994). This Court must reverse the trial court's ruling if "no substantial evidence exists to support it, it is against the weight of the evidence, or it erroneously declares or applies the law." Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

I. Adequate Alternative Remedy

The elements of establishing a right to mandamus are straightforward. "The writ of mandamus ... issues only where there is a clear and specific right to be enforced, or a duty which ought to be and can be performed, and where there is no other specific and adequate legal remedy." State ex rel. Coffman v. Crain, 308 S.W.2d 451, 454 (Mo.App.1958). The Missouri Supreme Court has stated that "the remedial writ ought to be reserved for those cases in which no alternative measure will be effective." State ex rel. Kelley v. Mitchell, 595 S.W.2d 261, 266 (Mo.1980). A required element of proving a right to mandamus is that there is no alternative, adequate remedy other than issuance of the writ. Nooney argues that a declaratory judgment action, in conjunction with the settlement agreement, would constitute an alternative, adequate remedy. We agree.

KelCor had an alternative, adequate remedy in its declaratory judgment action. Under the terms of the settlement agreement, Nooney was required to hold an annual meeting within 45 days of judicial determination of the validity of the excess shares. KelCor could have proceeded more expeditiously in the declaratory judgment action than in a new action seeking a writ of mandamus. Even though KelCor had clearly changed its position when Mr. Johnson and his associates purchased the excess shares, nothing prevented KelCor from amending its pleadings in the declaratory judgment action to seek a declaration that the excess shares were valid before proceeding with the suit.

Nooney's declaratory judgment action also gives KelCor an adequate remedy. KelCor argues that because KelCor is not a party to the action, it does not have a remedy through Nooney's pursuit of declaratory judgment in Jackson County. We disagree. The terms of the settlement agreement provide that Nooney will hold a meeting within 45 days of judicial determination of the validity of the excess shares. Whether KelCor is a party to the suit or not, Nooney is bound by the agreement. Additionally, KelCor could intervene in the declaratory judgment action. By filing the action for declaratory judgment seeking a judicial determination of the validity of the excess shares, Nooney demonstrated its willingness to abide by the terms of the settlement agreement. KelCor ignored the settlement agreement by dismissing its declaratory judgment action and filing an action for a...