Francis v. Stinson

760 A.2d 209 (2000)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Stinson Canning was a closely held company. In the fall of 1979, Calvin Jr. (D) called his sister Lou Ann (P) and suggested that her family sell its stock to the corporation. P received another phone call, this time from Charles (D), inquiring as to whether P had decided to sell her family's stock. D told P that her family's stock was worth $300,000. P and her husband met with Charles (D) who told her that he was not getting along with Calvin Jr. (D) and that the company was having a 'financial problem.' Charles (D) advised P to sell her stock now because if the company got a good buyer, it would probably be sold. Charles (D) also informed her that if she died, her inheritance taxes might ruin her husband's business and that if the company filed for bankruptcy protection, her family would be responsible for one-sixth of the company's debts. P was not aware that the company had implemented a stock repurchase program to handle estate taxes. P then visited Calvin Jr. (D), who acknowledged that he was not getting along well with Charles (D), and confirmed that 'the company was rocky financially.' Calvin Jr. (D) said that Charles (D) 'and the rest of them wanted to sell the company,' and that if he was in P's position, he would sell his stock. P never participated in the management of the company and had no representation on its board of directors. P was considering the $300,000 offer, when a J.C. Strout, disclosed that he knew a third party who might be interested in purchasing the stock. Strout made an offer on behalf of Shaw Mudge of $10,000 per share of common stock and $100 per share of preferred stock for a total of approximately $ 2,170,000). P wrote a letter to the company, signed by her entire family, which detailed the terms of Mudge's offer. Charles (D) told P and told her that her letter was a joke' and that he 'didn't have to pay [her] a goddamn thing.' Charles (D) then offered P $700,000 for all of the stock. P accepted his offer. When asked why she would turn down a $ 2,170,000 offer to accept a $ 700,000 offer, P responded that she believed in her brothers and that they would not 'have allowed an outsider to buy [her] stock.' P also relied on a statement made by Charles (D), in which he allegedly promised that, 'if they sold [the company] and made a good profit out of it, then . . . they would make up the difference' if P accepted the company's offer. She further alleges that Charles (D) also stated that if other family members sold their stock to the company at a higher price, the company would give P the same amount. P did not read the agreement because 'my brothers and I had discussed this sale; and they're honorable people, so we just believed what they said. They wouldn't have me sign something I shouldn't be signing.' The disclosure statement indicated the price of offers Stinson had received for the purchase of all the company stock. The statement also represented that P was given full opportunity to ask any and all questions about offers from third parties to purchase the company. The attachments to the agreement contained the company's financial statements for the years 1976-79. The financial statements contained information regarding the company's assets, gross profits, and net earnings per share during those years. Gross profits and assets more than doubled in less than 4 years and earnings per share rose by more than 200% in the same time. Eva Wight was also aware of the estate tax problem. She was told that the estate taxes could 'wipe out' her family, and she was advised to consider selling the stock back to the company for a minimal' amount. Unlike P, Eva became suspicious that her brothers were trying to 'grab' her stock in the corporation. At about the same time, her husband, Carl, told Eva that he had spoken with Calvin Jr. (D), who did not appear to approve of the 'pressure tactics' being applied by the company. Eva's attorney determined that the company was in excellent financial condition. He advised Eva that 'if he were in their place and could get $ 1 million for the family's stock, he 'would take it and run.'' Eva rejected that offer of $700,000 and made a counteroffer of $ 2 million. The company rejected that offer and made three additional offers to Eva. She consulted her accountant regarding each offer from the company. She did accept, an offer of $ 1.9 million. In 1990, the company, comprising substantially the same assets as in 1980, was sold for $ 24 million. None of that money was paid to either the Francis family or the Wight family. The fair market value of the P family stock was $2,254,591. The Wight family stock was valued at between $ 2,500,000 and $ 3,333,000 as of the date that stock was bought by the company. Sometime after the company was sold, at a meeting attended by P, Eva, Calvin Jr. (D) and Charles (D), P mentioned the poor financial condition of the company at the time she sold her stock. When 'Charles (D) laughed back at [her] and [said] there wasn't a year that we didn't make money and a hell of a lot of it,' P became aware for the first time that some of the representations made by Ds might be false. P and Eva filed a complaint alleging breach of fiduciary duty by (1) misrepresenting the value of the company, the estate tax implications of holding stock, and the liability for the debts of the company; (2) promising to pay the P family the difference between the price they received and the price they would have received if the company was ever sold to a third party (the 'fair share' claim); and (3) seizing corporate opportunities for their own benefit. The court allowed the 'fair share' claim of the P family in Count I to proceed against Calvin Jr.(D) and Charles (D), but dismissed the remainder of Count I as time-barred. Counts II, III, and IV were also dismissed as barred by the statute of limitations. After discovery, everybody made cross-motions for summary judgments with respect to the outstanding claims. The Superior Court addressed the 'fair share' claim and concluded that the stock purchase agreement was clear, comprehensive, and unambiguous, and that the parol evidence rule operated to bar the admission of extrinsic evidence 'to explain the contract.' Because the agreement contained no 'fair share' promise, the court entered summary judgment in favor of Ds. Ps appealed.