Spangler v. Spangler

451 F.Supp.3d 813 (2020)

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Nature of the Case

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Facts

In 1978, Ron (P) and Jim Spangler (D)started a tool and die business. D owned 51% of Spangler's real estate and shares, and P owned the remaining 49%. P and D were shoulder to shoulder on every move [they] made until 1991 or 1992. D knew that P was an alcoholic. P progressively declined and began showing up to work smelling of alcohol. In 2001, P was diagnosed with prostate cancer. After taking a leave of absence due to his illness, P came back to work 'worthless' and 'hooked on Vicodin.' P failed to show up for work every day he was supposed to and, when he did, he 'reeked' of alcohol. D fired P in 2006. D offered a buyout of P's interest but P refused. D resented the fact that P was not contributing to their jointly-owned business. In 2003, P incorporated his own business, Bridgewater Machine. Bridgewater was the 'same kind of business' as Spangler and operated out of the same shop. The only work Bridgewater did was work D sublet from Spangler's to Bridgewater. D also arranged for Spangler to lease Bridgewater-owned equipment. Spangler initially leased the equipment at a fifty-percent discount, but when Spangler became 'more capable of making the full payment' in 2012, Spangler began making the full payments. Spangler also issued a payment of $25,000 'to partially make up for the back rent on equipment.' With Spangler becoming more and more profitable under his direction, D was unhappy that P was profiting from his hard work and sought ownership of the entire company. D purchased P's ex-wife out of her 24.5% share of Spangler she received during the divorce. D made a one-time payment of $82,000 - $41,000 for the real estate and $41,000 for the shares. D offered P the same deal. P refused. Eventually, D cut off rent payments and dividends to P. In 2014, P was nearly a year into his battle with throat cancer that would eventually take his life. To ease this pain, P applied a 100mg Fentanyl patch every 72 hours, took Percocet, Vicodin, and Excedrin, and also used a morphine mouthwash. P also self-medicated with approximately half a gallon of whiskey every two to three days and a case of beer every five days. P needed help to perform daily activities, even though he was living alone. P would forget to pay bills, pay bills twice, and order things over the phone, forgetting he had done so by the time they arrived. D claimed ignorance of P's mental condition. P allegedly agreed to a buyout and they negotiated the terms of this buyout over the course of three to four weeks. D testified that P seemed to be especially cleaned up and 'stone sober' on the day of contracting, June 11, 2015. The purchase price was $79,950. P would forfeit his ownership rights on the day of contracting for the down payment price of $9,950 - $7,500 for his real estate interest and $2,450 for his shares at a rate of $100 per share. The remaining $70,000 would be paid to P in $1,000 monthly installments. The Promissory Note also stated the $70,000 balance would be considered paid in full at the time of P's death and no further unpaid balance would be paid to P's estate. P did not consult with his children or an attorney before signing the documents. P's daughter, Rhonda, eventually discovered the transaction. P said he had hidden the documents at D's request and advised that his understanding of the transaction was that 'he was merely authorizing an increase in rent that he would receive each month from $600 to $1,000' because of the profitability of the company. After Ronda's explained the true nature of the transaction, P became angry. D filed suit contesting the legality of the buyout agreement. P died on August 28, 2016. D paid only $22,950 for P's interest in Spangler. At the time of contracting, D's 24.5% interest in Spangler was worth at least $275,538.76 because: (1) Spangler's real estate was appraised for $360,000 prior to improvements made in 2012 and 2014; and (2) Spangler's shareholder's equity was $764,648 in 2014 and $1,044,811 in 2015. Because P would have been paid $7,800 in rent charges for the same period absent the buyout agreement, P profited only $15,150 from selling his interest in a company, which he refused to sell for years. P asserts the following eight causes of action: (1) incapacity to contract; (2) unconscionable contract; (3) silent fraud; (4) civil conspiracy; (5) usurpation of corporate opportunity; (6) breach of duty of loyalty and good faith; (7) voidable contract - patent ambiguity; and (8) fraud in the inducement. D moved for summary judgment.