COURT OF APPEALS DECISION DATED AND FILED June 16, 2009 David
R. Schanker Clerk of Court of Appeals |
|
NOTICE |
|
|
This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
|
APPEAL
from an order of the circuit court for
Before
¶1
BACKGROUND
¶2 Family
Corp. is one of two corporations Helene Altergott established before she
died. Family Corp. owned and controlled
various properties, including Helene’s home and a parcel of land with a
plumbing shop on it. The other
corporation, Altergott, Inc. operated the plumbing shop. Helene’s daughter-in-law, Evelyn Altergott,
is now the majority shareholder of Family Corp.
She is also the sole owner of Altergott, Inc.[1] Family Corp. and Altergott, Inc. are run by
Evelyn’s son, Harry Altergott, who serves as president of both.
¶3
Harvey Altergott is one of Family Corp.’s minority shareholders. None of the minority shareholders have any
control over Family Corp.’s management or hold a stake in Altergott, Inc.
¶4 The first concerned various arrangements between Family Corp.
and Altergott, Inc. for the use of the plumbing property that Family Corp.
owned. Until recently, Altergott, Inc.
did not pay rent, utilities, taxes or maintenance to use the property. Ostensibly, this was justified by a system in
which Altergott, Inc. performed services for Family Corp. in exchange for use
of the property. In 2000 Altergott, Inc.
also began charging Family Corp. $2,000 per month for its services.
¶5 The second pertained to an agreement Harry made on behalf of
both corporations in December 2006. The
agreement stated Altergott, Inc. owed Family Corp. $12,000 for rent from
January 2005 to December 2006.[3]
The agreement then satisfied this
obligation by reducing the amount of a loan from Altergott, Inc. to Family
Corp. by $12,000. It then raised the
interest rate for the remaining loan balance.
¶6
¶7 The circuit court agreed with
DISCUSSION
¶8 This appeal requires us to determine whether the circuit
court’s dissolution of Family Corp. was an erroneous exercise of its
discretion. See Wis.
¶9 Family Corp. contends
the court’s findings do not support the conclusion that its board engaged in
oppressive conduct because it did not find Harry directly inflicted an injury
on
¶10 Our case law defines oppressive conduct in terms of the
controlling directors’ actions vis-à-vis minority shareholders, not the
directors’ actions toward the corporation as a whole. We clarified this in Reget v. Paige, 2001 WI
App 73, 242 Wis. 2d 278, 626 N.W.2d 302, where we explained that our definition
of oppressive conduct “requires that those in control of a corporation
willfully treated some of the
shareholders in a wrongful manner to which other shareholders were not subjected.”
¶11 Therefore, to show the directors acted oppressively, a
shareholder must show any injury was primarily inflicted on the shareholder,
not the corporation. See Read v. Read, 205
¶12 The injuries
1. Self-dealing
¶13
¶14 Notz, a minority shareholder in ATS who held no stake in the
Smith Group, alleged ATS’s directors engaged in self-dealing by rejecting the
opportunity to purchase Dickten and Masch for ATS, and instead purchasing it
for the Smith Group and then selling ATS’s plastics division to Dickten and
Masch.
¶15 The same is true here.
Although Harry may have benefited from arranging transactions that favored
his own interests, a director’s self-dealing alone does not transform the
injury from one that is primarily to the corporation to one that is primarily
to minority shareholders. Rather, the Notz
court observed that “it is clear from Read v. Read, 205
¶16
2. Failure to provide corporate documents
¶17 We agree with Harvey that his claim he was injured by Family Corp.’s board’s failures to respond to
his requests for meeting minutes and other corporate information alleges a
direct injury. But we conclude there was
no actionable claim because
CONCLUSION
¶18 Because
Harvey did not show Family Corp.’s board inflicted a direct injury upon him, he
was not entitled to the remedy of judicial dissolution on the grounds the board
acted oppressively. Rather, the injuries
By
the Court.—Order reversed.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] An employee of Altergott, Inc. also holds a token share of each company.
[2]
Although
[3] Although there was no lease in effect between the corporations during this time, Harry testified that the reason rent was deemed owed was because his father’s death resulted in a loss of service hours provided to Family Corp. in lieu of rent.
[4] In May 2007, Harry executed a lease on behalf of Family Corp. to himself to rent the property for $900 per month.
[5] References to the Wisconsin Statutes are to the 2007-08 version.
[6]
We need not reach Family Corp.’s argument that the court erred by not
determining whether the board’s actions were willful, because we conclude any
injury
[7]
The circuit court also discussed Harry’s failure to plan for the future.
[8]
The self-dealing Harvey alleges Harry engaged in contrasts with the oppressive
conduct we found in Jorgensen v. Water Works, Inc., 2001 WI App 135, 246 Wis. 2d
614, 630 N.W.2d 230. There, the
Jorgensens started a corporation with two other couples, the Barbers and the
Tesches. Initially, the Jorgensens participated
in the management of the corporation and all six individuals received equal,
weekly payments from its profits. When
disagreements arose, the Barbers and Tesches froze the Jorgensens out of the
control of the corporation. They then
ceased making weekly payments to the Jorgensens despite continuing payments to
themselves. Unlike the injuries
[9] We agree with Family Corp. that the court’s language strongly indicated it treated dissolution as mandatory, rather than discretionary, upon a finding of oppression. The court stated, “If the actions of the Board of Directors … particularly its President, Harry Jr., are oppressive under Wis. Stat. § 180.1430, then the Court is required to dissolve the Family Corp.” (Emphasis added.) However, because we conclude the court’s findings do not support a conclusion that Family Corp.’s management acted oppressively, we need not reach this issue.