I argued in front of the Court of Appeal today.

Stoid · May 17, 2010, 1:27am

Care to cite it?

Stoid · May 17, 2010, 1:36am

And I have now clarified why. If you think her otherwise, you are entitled.

No conspiracy necessary. I’ve described what happened. Plaintiff’s counsel knew exactly what he was doing, and he definitely is an evil sonofabitch that doesn’t know how to open his mouth without a lie falling out.

The judge was careless and ego driven. Not really hard to believe in a judge.

And the receiver IS a thief - now that I’ve had the pleasure of experiencing one firsthand, I no longer wonder why most people familiar with them assume ALL receivers are thieves. They are professional foxes being invited into henhouses, it is a genuine travesty how the whole business of receivership is handled, which is to say, not at all.

But that’s down the road…

Not at all. I interpret it the way all the reviewing courts have, as well as the trial court in most the cases. It is the judge in this case who is going against the weight of authority and opinion about how it should be interpreted, not me.

Stoid · May 17, 2010, 1:39am

By the way, you realize the statute is here in this thread to read, right? Post #18.

BottledBlondJeanie · May 17, 2010, 2:03am

Honestly no as you scare the shit out of me. I believe that your zeal will cause you to lash out at anyone, and I don’t even want to come close to giving legal advice.

You are worse than a first year law student who just learned the basics of contract law. I certainly don’t want you to lose your house or business, but I think you should brace yourself for the very real possibility that you will lose the appeal.

Stoid · May 17, 2010, 2:04am

These are the parts I think can make it confusing, if you’re looking for it to be:

All that decreeing and time limiting and so forth.

It definitely could be better written. (See Dickson v. Rehmke for the struggles of the court to parse the meaning of exactly what and when appeals occur).

But if you parse it carefully, you have to tease apart the difference between the proceeding to seek the dissolution, and proceedings to dissolve. They are different. Courts have actually ruled against dissolution - it’s not automatic. Evidence, testimony… thumbs up or down. That’s the seeking. If it’s thumbs down, the actual dissolution and winding up, it’s proceedings to dissolve.

Look at the first paragraph quoted: the court stays the proceeding to either to dissolve or to seek, could be either. In the third paragraph, the addition of the word “winding up” indicates we are referring to actual dissolution, not a court action to get an order for it.

But nowhere in there is there any indication that one must act before a judge has considered all the evidence and decided whether or not a dissolution is warranted at all.
Also, absolutely no one has addressed the actual judgment, vs. the ruling on the hearing, vs. the conversation in the courtroom day 3.

Day 3 of trial: My lawyer is comparing again, using the election of a board of directors in a corporation. The judge says no, I will be making that call. Right there she’s acknowledging that buyout follows decree, or can at least.

Next Day Judge says at first: Stoid can buy out Plaintiff under the law…
Then Judge says: Oh okay, we’ll just skip that and sell the assets because you asked and it sounds good. So she says she is not going to permit me to elect to buy him out right after she says she will, and she doesn’t give any explanation. She certainly doesn’t explain it by saying I’m too late, nor does The Evil Lawyer suggest I’m too late. He argues that the law sucks, do it his way. Time is not a factor anywhere.

Then she enters the judgment (finally) in which she says that UNDER 17351 I can buy my own member interest. Which makes no sense of any kind, especially since she says that my ex can also bid on the assets. MUTUALLY EXCLUSIVE.

I make my election after a bunch of other stuff, and she rules I was supposed to make it before the point she was discussing it in open court and talking about how I could/would make it after the judgment she would make. And that was itself before her verdict where she was perfectly clear and ready to have me proceed on the buyout following judgment and only changed her mind because… well, for no apparent reason.

And by the way, I was asking to be allowed to buy him out in the motions filed before her judgment was entered. BEFORE THE JUDGMENT WAS ENTERED.

Seriously, how does anyone see any potential for affirmance in this? How does anyone see any logic, reason, justice or legitimacy in this? She was all over the map, there’s nothing to affirm!

If the judgment is to be affirmed, it’s going to be the words in the judgment itself, right? “Stoid can purchase her own member interest while her ex can also buy the assets” - is anyone going to take a shot at what that means? Because it doesn’t mean anything at all.

Which I think is why y’all are doing what the judge did: going with something that at least seems plausible: too late. But since that was five months after she decided to blow me off, I think it’s a pretty skanky way to go.

Stoid · May 17, 2010, 2:16am

Easy to say, impossible to prove. I have never lashed out at a soul. Defendant, remember?

So many folks keep telling me, and a few reasonable and decent souls have actually offered some reasons why it’s possible, but only by assuming in every single instance that there simply must be something Im missing.

Because now that it’s all out here…and if by some amazing chance I’m correct and this really is all the pertinent information…it’s pretty obvious that it really was a clusterfuck that’s pretty hard to believe.

But shit happens, ya know?

By the way… actually citing the case you claimed exists to prove that I have no idea what I’m talking about is “legal advice”? Damn. Who knew?

Stoid · May 17, 2010, 2:42am

You’re probably right. But here’s what I wrote to describe what i posted here about the verdict.

The court renders its verdict; Mr. E.Lawyer misstates the law and the judge denies Stoid’s statutory buyout right

On the fourth and final day of trial, the closing arguments were heard and the court rendered its verdict extensively afterwards, beginning on Page 439 of the reporter’s transcript of the proceedings.

In addressing the issue of the dissolution, the court begins with a perfectly sound understanding of the statute, and seems to fully expect that Stoid will be invoking her right under the statute 1RT445-449

Then Mr. E.Lawyer steps in to question and spin the meaning of the law, and to ultimately claim that, rather than a dissolution (which his client’s reply to opposition had embraced the previous summer) the fact is that the complaint itself really did request a partition of the business (which breached the operating agreement AA110), and seems to be arguing to the court that the prayer 1RT450 of the complaint should control the court’s actions.

At one point, Mr. E.Lawyer says to the court that the statute “doesn’t say” who can be the “purchasing party”, when of course it’s very specific about the who the purchasing party is: the non-moving party.

Against all reason, the court announced that the assets of the business would be put up for sale to the highest bidder.

It’s positively hysterical.

Stoid · May 17, 2010, 3:04am

Oh yeah, I almost forgot. The rules of appellate review and statutory interpretaion… it’s* de novo* (I love the Latin… favorite: sua sponte) For those in the gallery: it means when there is an issue of statutory interpretation, the reviewing court doesn’t consider what the trial court thought or said or reasoned at all. They look at the law itself and decide what it means, as though no one had ever ruled anything at all.

So that’s what they will do re 17351. They won’t discard prior appellate decisions, of course, just the rulings and reasoning of my particular judge.

So it’s conceivable they will come up with some brand new, previously unconsidered way to make it acceptable for the judge in my case to have denied me my right to buyout, even if it doesn’t seem to have the slightest thing to do with anything that occurred in my case. If that’s what they believe is right…

VarlosZ · May 17, 2010, 4:36am

Sorry if I missed it, but approximately when can you expect a result?

And good luck.

Merejane · May 17, 2010, 4:38am

I started to write a post to you earlier this evening that suggested you forget about the cases and just read the plain language of section 17351, which I do not find at all confusing.

Then I read your post that included the statements quoted here. What you have said about section 17351 is either totally wrong or completely nonsensical, or both.

This is why you need a lawyer.

Stoid · May 17, 2010, 4:59am

Well, I don’t need a lawyer anymore, it’s submitted, so now it’s all academic.

I’m very willing to be enlightened, I honestly am. Forget what I said. What do you say? What is it in the statute that actually mandates, or rather restricts, the time in which the election can be made? Particularly in light of decisions ruling that the time limit to act is “any time prior to liquidation”. Because if it’s there, it’s good for me to see it now in case the appellate court sees it too and smacks me with it, I’ll be braced. And I’m being completely sincere in saying that.

Lots of folks here have said “you don’t get it” but it’s rare for anyone to endeavor to explain exactly how I have it wrong. I’m more than open to that, I welcome it.

So, if you will, parse it for me and show me what I’m missing. Again, in light of decisional law. It is a sincere request, respectfully made.

Stoid · May 17, 2010, 5:00am

Technically they can take up to three months, but I researched it and they are likely to have the opinion within three weeks.

And thank you, very much.

constantine · May 17, 2010, 5:47am

I think Brickerhas this exactly right. Look, it happens all the time that the judge gets it wrong. Judge’s are busy, and they frequently don’t have much time to spend on an issue. They have lots of discretion. They are human beings and they are subject to biases. Every litigator knows this and every litigator can tell you stories where the facts and the law were clearly on our side, but we lost anyway. And every litigator knows that is going to happen in a system that is made up of fallible human beings.

But here’s what every litigator does NOT do: what they do NOT do is say that the other lawyer was evil and spewed lies, and that the judge completely ignored the law and didn’t care and just did whatever she wanted.

Here’s how, in my experience anyway, a typical litigators account of an adverse ruling : “well, we wanted the names of several of the witnesses, and the other side refused, and made up some ridiculous argument about giving their names would violate the witnesses right to privacy. So, we briefed it, and we presented the judge with about 10 cases where exactly that argument was refused, and she issued a 10 line order denying the discovery.”
And then you move on. It’s a like a bad call in a basketball game. Is it possible that the ref was bribed, or has it in for you, and that the other side is like some kind of sindely whiplash character from a cartoon who is inherently evil?

Yeah, I guess, but you know what is more likely, like 10,000 times more likely? That, at worst, the ref just made a bad call. And so you protest the call. And if you lose the protest, then you get on with the game.

What sets off alarm bells about Stoid, in this thread and in previous threads I’ve read about this case, is that there are no close calls and there are no honest differences of opinion or even mistakes. There are just people against her who are liars or cheats or thieves or evil, and there is a judge how ignored every relevant legal authority and blatantly railroaded her.

When she asked a question about the law, it became very clear to all of us lawyers that her question was completely out of left field, and framed in a way
that suggested that she was completely missing the point. It was like someone coming up and asking an automechanic, “hey when your battery is dead, and you want to get it to restart and you decided to use explosives, do you know if anyone has ever inserted TNT into one of the cylinders to set off an explosion in the chamber?” And all the lawyers said, whoa whoa whoa, what are you talking about? And she just got really angrier and angrier and starting posting uber long post after uber long post.

And then we hear about the hearing before the Court of Appeal. Where the judges don’t ask a single question, and where the other side does not offer any argument.

And all of this adds up, for me, and for the other litigators who have been following this, to the conclusion that

Stoid honestly believes that she was railroaded
I, for one, am sympathetic to that feeling, because I have felt it myself many times in my life, and I don’t doubt her sincerity
At the same time, Stoid is mistaken about her legal position. From skimming this thread, it looks to me like she missed a deadline.
That this is a prime example of why we need to courts to be very strict about enforcing deadlines. That Stoid is like many other litigants that I’ve seen (usually but no always, pro se) who simply never yield a point. No matter what. And the courts MUST be strict with these folks, because otherwise no lawsuit would ever end because no matter what, the party will come back with a lengthy explanation of why everyone else has it wrong.

Elysian · May 17, 2010, 7:25am

She told you this in her post in page one.

You are now still trying to bring in section 2000 to make your point. I would say forget about section 2000, forget about the cases about section 2000, forget about the cases saying 2000 is a parallel provision. You can argue for days that the court should apply the case law interpretation of section 2000, and still lose because the plain language of statute 17351 will trump this case law. Which is why Merejean suggested go back and read the plain language of 17351 and forget about the case law.

This is why I was confused in my original posts about whether your case was under 17351 or 2000. You keep saying your judge went against the law, and what I think you mean is that she didn’t follow 2000. Well, of course she didn’t, she was ruling under 17351. And from what I glean from the very scattered nature of your posts and my brief review of 17351, she was correct under 17351.

And there is no call to go “Oy vey” at me. I really have expended some effort in trying to understand you and your situation. The only thing I haven’t done is go to Findlaw or similar and do my own research…so the only thing I have to go on is your posts. BlondJeanie said she didn’t want to say anything because you may lash out…you may wish to consider not lashing out at people who haven’t been lashing out at you.

Just a thought…when will you hear about the judgment?

Stoid · May 17, 2010, 7:34am

You shouldn’t skim. Skimming makes you guess from imperfect and incomplete facts. What you did was check what the (alleged) lawyers said and decided they were right, because they are (allegedly) lawyers.

And what did they say? Some thought that the timing issue might be right, because the language of the law refers to timing in the decree that follows valuation.

(And that’s actually a more specific description than most of them gave)

The only statutory law, case law, or information about what actually happened, in the form of transcripts of the evidence itself, has come from me. So why would the vague speculations with absolutely no analysis or support be more true? Well, I know why… because they are (allegedly) lawyers. Ipso facto.

How about skimming by font size? In response to the continued speculation that there’s something special about the post-judgment elections to buyout that I’m missing, there just has to be, I’m now posting the entire cases. I’m just putting the irrelevant parts in a tiny font but its there for anyone to read and identify those key things I’m missing.

Cuz ya know, just saying it over and over without ever once showing that it’s true is getting pretty meaningless.

Facts: Plaintiff filed a complaint containing four alleged causes of action, one for declaratory relief, the second for an accounting, the third for specific performance of a contract whereby defendant corporation agreed to sell a parcel of land known as Lot 1 to plaintiff, and the fourth for dissolution of defendant corporation.

After trial the court found (a) with reference to the first cause of action which sought to have the parties’ rights declared with reference to a lease and promissory note that an indebtedness which defendant Darden claimed against the defendant corporation had been paid and ordered cancellation of the note evidencing such indebtedness; (b) that the second cause of action seeking an accounting should be dismissed without prejudice; (c) that the third cause of action should be dismissed without prejudice because plaintiff “in open court, agreed not to enforce the specific performance of” his “contract if other proper relief were granted plaintiff in plaintiff’s fourth cause of action”; and (d) on the fourth cause of action judgment was given in favor of plaintiff ordering dissolution of defendant corporation and providing that in the event of the dissolution of the corporation there should “be distributed to” plaintiff “as a part of his share, the real property described in plaintiff’s third cause of action in plaintiff’s complaint,” to wit, the parcel of land known as Lot 1. This judgment has become final, plaintiff not having appealed therefrom and defendant’s appeal having been dismissed upon plaintiff’s motion.

Questions: First: Did the trial court in making its order of October 30, 1950, staying dissolution of defendant corporation, exceed its power in requiring, as a condition precedent to the granting of the stay of dissolution, that defendant Darden convey to plaintiff Lot 1

Yes. Section 4658 of the Corporations Code reads as follows:

"In any such suit the holders of 50 percent or more of the outstanding shares of the corporation may avoid the appointment of a receiver or the dissolution of the corporation by purchasing the shares of stock owned by the plaintiffs at their fair cash value.

“If the holders of 50 percent or more of the outstanding shares of the corporation (a) elect to purchase the shares owned by the plaintiffs, and (b) are unable to agree with the plaintiffs upon the fair cash value of such shares, and (c) give bond with sufficient security to protect the interests and rights of the plaintiffs and to assure to the plaintiffs the payment of the value of their shares, the court shall stay the proceeding and shall proceed to ascertain and fix the value of the shares owned by the plaintiffs.”

Section 4659 of the Corporations Code provides for the appointment of commissioners to appraise the value of the shares of stock owned by the plaintiff and for the award, decree, enforcement, appeal, and payment for and transfer of the shares. In the present case defendant’s affidavit disclosed that he met the requirements of section 4658 of the Corporations Code, supra, in that he owned more than 50 per cent of the outstanding shares of stock of defendant corporation; that he elected to purchase plaintiff’s shares of stock and that he and plaintiff were unable to agree on the fair value of the shares.

Under such conditions it is mandatory for the court to issue a stay of proceedings and to proceed to ascertain and fix the value of the shares of stock to be purchased by defendant. ( Merlino v. Fresno Macaroni Mfg. Co., 64 Cal.App.2d 462, 463 et seq. [148 P.2d 884].) In addition, defendant filed the bond required by the court. The other condition prescribed by the order was erroneous because beyond the power of the court whose jurisdiction was limited by the cited sections of the Corporations Code.

Second: Were there equitable considerations which justified the condition prescribed relative to the transfer of Lot 1 in the order of October 30, 1950

No. The case of Richman v. Bank of Perris, 102 Cal.App. 71 [282 P. 801], relied on by plaintiff, is clearly distinguishable on its facts from those which obtain in the present case. In the Richman case the president of the bank had absconded with over $ 40,000 of the bank’s capital. At a special meeting of the board of directors an assessment was levied upon the stockholders, and the absconding president having failed to pay his assessment his stock was sold and enough money realized to replace the impaired capital of the bank. A third party, after the transaction had been completed and the stock transferred on the books of the bank, levied an attachment on the interest of the president in the stock and obtained a judgment against him. His interest in the stock was sold under an execution issued pursuant to the judgment. The purchaser of the stock then attacked the validity of the assessment claiming that under his execution sale he was the owner of the stock, but he made no offer to do equity by tendering to the purchasers who had purchased the stock at the assessment sale the amount they had paid.

The appellate court, after holding that the assessment as levied was invalid due to faulty proceedings, then decided that the absconding president could not have recovered his stock on account of the illegality of the assessment sale unless he did equity by paying to the persons who purchased the stock at the assessment sale the amount they had paid for it, and that the president’s execution creditor stood in no better position than he. Therefore, since no offer to do equity had been made, the plaintiff was not entitled to the relief prayed for.

Such case clearly is not applicable in the present situation. Here plaintiff voluntarily waived any right to specific performance which he could have obtained in the action that he had filed. **He permitted the trial court to determine that Lot 1 was part of the assets of the corporation and obtained a judgment for dissolution thereof. He was presumed to have known the law that defendant Darden, who was a majority stockholder in the corporation, could avail himself of the provisions of sections 4658 and 4659 of the Corporations Code. **He made no effort to correct any error in the judgment by moving for a new trial, appealing, or filing a counterappeal. On the contrary he moved for and obtained a dismissal of the appeal taken by defendants from the judgment. Therefore plaintiff is bound by the judgment and equitably so since the appraisers, in taking into consideration the value of plaintiff’s shares of stock, will undoubtedly include as an asset of the corporation Lot 1 and he will indirectly receive all the benefit that he is entitled to under the judgment as originally entered.

It is ordered:

(1) That the order entered November 21, 1950, dissolving the order entered October 30, 1950, be and it is hereby reversed;

(2) That Paragraph V of the order of October 30, 1950, with the exception of the words “Dated: October 30, 1950.” at the end thereof, be stricken, and as thus amended such order is affirmed.

Reese v. Darden, 106 Cal. App. 2d 699 (Cal. App. 1951)

Stoid · May 17, 2010, 7:35am

Stumpf!

C. E. Stumpf & Sons, Inc. appeals from a judgment decreeing its dissolution under Corporations Code section 4650. n1 The court found, on substantial evidence, that in 1969 appellant corporation was formed to conduct a masonry and general contracting business. The corporation was wholly owned in equal shares by C. G. Stumpf, Sr. and his two sons, who had previously operated the same business as partners. In 1972, as a result of a managerial dispute, plaintiff-respondent Donald Stumpf, one of the sons, ceased to be employed by the corporation. Thereafter, respondent was removed as an officer of the corporation; he has neither attempted to return nor has he been asked to return to any active status in the family business.

FOOTNOTES

n1 Corporations Code section 4650: "A complaint for involuntary winding up or dissolution of a corporation other than one subject to the Bank Act, the Public Utilities Act, the Building and Loan Association Act, or Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1 of the Insurance Code may be filed in the superior court of the county in which the principal office is located by the persons described in any of the following subdivisions:

"(a) One-half of the directors.

"(b) A shareholder or shareholders who have been record holders for a period of not less than six months and who hold not less than 33 1/3 percent of the number of outstanding shares, exclusive of shares owned by persons who are alleged in the complaint and subsequently found by the court to have personally participated in any of the transactions enumerated in subdivision (e) of Section 4651.

“© Any shareholder if the reason for dissolution is that the period for which the corporation was formed has terminated without extension thereof.”
The corporation has never paid dividends. Instead, profits have been invested in rental real properties held by the corporation. However, the court also found that, after termination of respondent’s active participation in the business, his father and brother had not committed any abuse of authority or displayed persistent unfairness toward respondent.

Appellant argues that Corporations Code section 4651, subdivision (f), as applied to these facts, does not justify involuntary dissolution. Previous dissolution judgments under section 4651, subdivision (f), have been, or could have been, based in the alternative upon other subdivisions of section 4651: n2 e.g., internal dissension resulting in deadlock (§ 4651, subd. (d): Reynolds v. Special Projects, Inc. (1968) 260 Cal.App.2d 496, 501 [67 Cal.Rptr. 374]); persistent mismanagement (§ 4651, subd. (e): Buss v. J. O. Martin Co. (1966) 241 Cal.App.2d 123, 134 [50 Cal.Rptr. 206]; Abalian v. Townsend Social Center (1952) 112 Cal.App.2d 441, 444, 449 [246 P.2d 965]). The judgment in the present case was based solely on section 4651, subdivision (f), and there were no findings or evidence which could support the judgment under any other subdivision of section 4651.

FOOTNOTES

n2 Corporations Code section 4651 provides: "The court, upon filing of a verified complaint, may entertain proceedings for the involuntary winding up or dissolution of such a corporation, when it is shown that any one or more of the following reasons exist:

"(a) The corporation has abandoned its business for more than one year.

"(b) The corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business cannot longer be conducted to advantage or so that there is danger that its property and business will be impaired and lost.

"© The holders of the voting shares of the corporation are so divided into factions that they cannot agree upon or elect a board of directors consisting of an uneven number.

"(d) There is internal dissension and two or more factions of shareholders in the corporation are so deadlocked that its business cannot longer be conducted with advantage to its shareholders.

"(e) The directors or those in control of the corporation have been guilty of persistent fraud, mismanagement, or abuse of authority, or persistent unfairness toward minority shareholders, or its property is being misapplied, wasted, or lost by its directors or officers.

"(f) The liquidation is reasonably necessary for the protection of the rights or interests of any substantial number of the shareholders, or of the complaining shareholders.

“(g) The period for which the corporation was formed has terminated without extension of such period.”

Appellant contends that respondent’s rights and interests are not jeopardized and that dissolution was not justified. Implicit in this contention is the argument that section 4651, subdivision (f), is not applicable in the absence of some finding of deadlock, mismanagement of the corporation, or display of unfairness toward respondent. The court specifically found that there had been no mismanagement or unfairness; there was no evidence of corporate deadlock (see Corp. Code, § 816).

It can be inferred that the Legislature did not intend subdivision (f) to be read, as appellant urges, ejusdem generis; i.e., the subdivision is not limited in its scope to situations of the kind specified in the other subdivisions of section 4651. This inference can be drawn from the fact that subdivision (f) was added to section 4651 (formerly Civ. Code, § 404) in 1941 (Stats. 1941, ch. 610, § 2, pp. 2057-2058), while the other provisions of the section had already been in effect for a number of years (originally enacted in Stats. 1933, ch. 533, § 86, p. 1414, and in Stats. 1939, ch. 703, § 1, p. 2220). It would seem superfluous for the Legislature to enact in a separate amendment the broad language of subdivision (f) simply to cover the penumbral areas of the other subdivisions.

It is also indicative of legislative intent that the same enactment adopted section 4651, subdivision (f), and section 4658 n3 (Stats. 1941, ch. 610, p. 2058 [§ 4651, subd. (f)], pp. 2058-2059 [§ 4658]). The two provisions, read together, show an intention to empower the courts to order dissolution when required to assure fairness to minority shareholders and at the same time to lessen the danger of minority abuse. Under section 4658, a dissolution judgment does not necessarily entail a sacrifice; the majority may preserve the corporation by buying out the minority. (See Comments, Dissolution Under the California Corporations Code: A Remedy for Minority Shareholders (1975) 22 U.C.L.A. L.Rev. 595.)

FOOTNOTES

n3 Corporations Code section 4658 provides: "In any such suit the holders of 50 percent or more of the outstanding shares of the corporation may avoid the appointment of a receiver or the dissolution of the corporation by purchasing the shares of stock owned by the plaintiffs at their fair cash value.

“If the holders of 50 percent or more of the outstanding shares of the corporation (a) elect to purchase the shares owned by the plaintiffs, and (b) are unable to agree with the plaintiffs upon the fair cash value of such shares, and © give bond with sufficient security to protect the interests and rights of the plaintiffs and to assure to the plaintiffs the payment of the value of their shares, the court shall stay the proceeding and shall proceed to ascertain and fix the value of the shares owned by the plaintiffs.”
It is true that courts of some states have narrowly construed provisions similar to subdivision (f), requiring a showing of some kind of management misconduct or deadlock before relief will be granted (see Israels, The Sacred Cow of Corporate Existence: Problems of Deadlock and Dissolution, 19 U.Chi.L.Rev. 778 at p. 782 for a survey of the jurisdictions). In California, a narrow construction of the involuntary dissolution statute has been urged by Ballantine, who suggested that a broad construction of the statute “[makes] it too easy for an obstreperous minority to interfere with the legitimate control and management of the majority by creating a cash nuisance value.” (Ballantine & Sterling, Cal. Corporation Laws (1938 ed.) § 318, at p. 308.)

But the danger of minority abuse was evidently recognized and dealt with by the Legislature. The procedure created by the statute does not authorize dissolution at will. The minority must persuade the court that fairness requires drastic relief under section 4651, subdivision (f); involuntary dissolution is not an automatic remedy but, rather, a matter for the court’s discretion. “[A] minority stockholder suing under a statute, just as if he were suing in the absence of statute, must still convince the court that his application is meritorious. If the objection were that, because of the possibility of abuse, minority stockholders should not be permitted to ask a court to wind up a corporation, however meritorious the case, the solution would seem to lie in total abolition of the remedy. The reluctance to authorize winding-up a corporation even where such action would be just and equitable contrasts strangely with the arbitrary manner in which a ministerial state official terminates, at a stroke, the existence of great numbers of corporations for failure to comply with comparatively unimportant formalities, such as filing reports or paying a nominal annual tax.” (Hornstein, A Remedy for Corporate Abuse – Judicial Power to Wind Up a Corporation at the Suit of a Minority Stockholder, 40 Colum.L.Rev. 220, at p. 245.) Further, as we have seen, the threat of minority abuse of subdivision (f) is reduced by the existence of Corporations Code section 4658 (discussed, ante; see Israels, supra, at p. 791).

The court’s exercise of discretion to order dissolution under section 4651, subdivision (f), was consistent with the intent of the Legislature in adopting that provision.

Appellant next contends that the court’s conclusion that the case called for relief under section 4651, subdivision (f), was not supported by the evidence or by an appropriate finding of fact. There was, however, substantial evidence supporting the findings and judgment. (Cf. Abalian v. Townsend Social Center, supra, 112 Cal.App.2d 441, 448.) The hostility between the two brothers had grown so extreme that respondent severed contact with his family and was allowed no say in the operation of the business. After respondent’s withdrawal from the business, he received no salary, dividends, or other revenue from his investment in the corporation.

Quoting certain remarks by the judge, appellant contends: “The Court showed a certain lack of impartiality, objectivity, and judiciousness throughout the trial.” Seen in context, the court’s remarks did not show prejudice; the judge was merely discussing candidly with counsel the possible available dispositions of the present case.

The decree is affirmed.

Stumpf v. C. E. Stumpf & Sons, Inc., 47 Cal. App. 3d 230 (1975)

Stoid · May 17, 2010, 7:39am

This appeal is from a judgment that required Anwar Abdullah and Jamil Abdullah (Anwar, Jamil or appellants) to sell their stock in West Coast Laboratories, Inc., a family-owned corporation, back to the corporation pursuant to the provisions of Corporations Code section 2000. 1 Respondents are appellants’ brothers, Maurice Ovadia and Naim Abdullah (Maurice, Naim or respondents), who initiated proceedings under section 2000.

FOOTNOTES

1 Corporations Code section 2000 provides in relevant part:( cut for space we’ve read it already)
West Coast Laboratories, Inc., (West Coast) is a pharmaceutical manufacturing company begun in 1967 by the parties, each of whom held 25 percent of the corporation’s stock. Without here relating the various charges and countercharges that the parties have levied at each other, suffice it to say that relations between the brothers were not harmonious.

On September 12, 1991, respondents filed a petition to avoid voluntary dissolution of West Coast under section 2000. In the unverified petition, respondents alleged that “[a]t a series of meetings. . … Anwar Abdullah and Jamil Abdullah Shad stated that their shares were being voted either to sell the Corporation to a third person, and not to [respondents], or to dissolve the Corporation.” In support of this allegation, respondents submitted the declaration of their attorney and their own declarations. In his declaration, their attorney stated that he was asked by respondents “to consult with them concerning the decision of their brothers, . . ., to vote their 50% ownership interest in West Coast Laboratories, Inc. in favor of dissolving and winding up the corporation.” He also stated he discussed the matter with appellants’ attorney with respect to obtaining an appraisal of appellants’ stock.

Maurice’s declaration stated: “. . . Naim and I realized it was impossible to continue to work as before because our relationship [with appellants] had deteriorated considerably. Naim and I called a meeting for the four of us, and Naim and I offered Jamil and Anwar the following: Either they buy our shares from us after an appraisal or we buy their shares from them after an appraisal, or we sell the whole company to a third party. [P] Jamil and Anwar replied that they agree to sell the company to a third party providing that neither me nor Naim would remain working for the buyer, even if it was on a consulting basis and for a short time. Naim and I told Jamil and Anwar that it would be difficult to find a buyer who would accept these terms . . … [P] . . . Anwar and Jamil then said they want the assets of the company to be sold and money or left-over assets divided among the four of us and then everyone goes his own way.”

Naim’s declaration stated: “We, that is, Maurice and I, offered to buy out Jamil and Anwar at an appraised price. They refused. We offered to give them the option to buy us out or compel us to buy them out on terms that we would propose. They refused. We offered to sell to a third party, if a buyer could be found. They refused . . … Finally, Jamil and Anwar said they wanted to sell the assets of the company, divide the money and go.”

Along with the petition, appellants’ filed a motion for appointment of appraisers to ascertain the fair value of the corporate shares.

On March 9, 1992, appellants moved to strike the petition asserting that a suit for a voluntary or involuntary dissolution was not pending. They also filed an opposition to respondents’ motion for appointment of appraisers on the same ground.

In their reply, respondents submitted the further declaration of their attorney who stated that he had been negotiating with appellants’ counsel who had “assured” him that appellants “want to dissolve the corporation and take their one-half share of the proceeds . . …”

Appellants’ counsel promptly filed a declaration denying this statement and characterizing it as “false.” He submitted correspondence with respondents’ counsel to show that “there has never been a vote for dissolution of any kind.” (Fn. omitted.)

At the hearing on the petition and the motion, appellants’ counsel, in response to the court’s asking why it should not appoint an appraiser, said, "Because there is no proceeding for a voluntary dissolution made by the [appellants]. . … [P] Under 601A and under 601F there has to be a written notice of the meeting, and under 601F, if there is no such meeting, if there is no such written notice, your Honor–

"The Court: So, are you tell me–

"Mr. Grunfeld:–or written waiver, it invalidates the shareholders meeting.

"The Court: Are you telling me, counsel, that everything’s fine with this corporation?

"Mr. Grunfeld: No, your Honor, I am not.

"The Court: And that there’s no possible dissolution of this corporation, and that everything, and nobody’s attempting to buy out the other side?

“Mr. Grunfeld: Your Honor, there are clearly negotiations going on, or which have gone on, between and among the brothers. That is not tantamount to a voluntary dissolution proceeding being filed by these respondents. [P] As I started to say, your Honor, under 601A, under 601F, a failure to have a written notice or the failure to have a written waiver specifically invalidates any action taken at a meeting of the shareholders; even if there were one that ever took place. We contend that there is not.”

At a later point in the hearing, the court asked appellants’ counsel: “So there is a dispute, then?”

"Mr. Grunfeld: Disputes are not tantamount to a voluntary proceeding for dissolution which is the issue here as to whether there is a proceeding under 2000.

“The Court: Well, let’s see what the Court of Appeals [sic] says, if you feel it’s necessary.”

The court granted the petition and appointed the appraisers. Respondents were instructed to prepare the order.

On March 23, 1992, respondents filed their opposition to appellants’ motion to strike the petition. They argued that a voluntary proceeding for dissolution had been proven by their declarations regarding appellants’ statements that they wanted to sell the company, divide the assets and each go his separate way. Further, respondents asserted that West Coast was a small company, “run informally,” and thus the meetings referred to in their declarations were sufficient to satisfy the procedural requirements.

On March 26, 1992, appellants filed a motion for reconsideration of the order granting the petition and appointing appraisers, or, in the alternative, for a new trial. In connection with this motion, both appellants filed declarations. Regarding respondents’ claim that at an informal meeting appellants had voted to dissolve the corporation, Jamil declared: “While there were discussions between the brothers, there were never any formal meetings. I never received notice of any such meetings, never signed a unanimous written consent to any conduct of action at those meetings, and never attended a meeting where either my brother Anwar or myself requested or demanded that the corporation be voluntarily dissolved. The accusation that Anwar and I decided to dissolve the company is absolutely false.”

Anwar’s declaration made the same point: “. . . I was never accorded any notice of any meetings of shareholders or directors in 1990 and 1991 where Jamil or myself requested a corporate dissolution. Similarly, I never signed any written consent to such action by shareholders. Finally, neither my brother Jamil nor myself ever requested or demanded that the corporation be voluntarily dissolved.”

On March 30, 1992, appellants’ motion to strike the petition was denied by a different judge than the judge who had granted the petition. On April 16, 1992, the first judge denied appellants’ motion for reconsideration. The court also granted respondents’ motion authorizing payment to the appraisers. Appellants then filed a petition for writ of mandate in this court. It was summarily denied. 2

FOOTNOTES

2 We take judicial notice of the file in the writ proceeding, Abdullah v. Superior Court (June 11, 1992) B067265 (nonpub. opn.).
The three court-appointed appraisers concluded that West Coast was worth $1.6 million. On July 30, 1992, respondents filed a petition to confirm the award. On August 4, 1992, appellants responded by filing an at-issue memorandum for a trial on the issue of whether dissolution proceedings were pending. On August 19, 1992, they filed their opposition to the petition to confirm the award in which they demanded an evidentiary hearing on whether a voluntary dissolution had occurred.

The petition was set for August 26, 1992. The hearing was continued to September 18, 1992, because the parties had apparently reached an agreement to settle the case. The following day, however, respondents withdrew from the agreement.

On September 18, 1992, the court granted the petition to confirm the award permitting respondents 30 days within which to purchase appellants’ stock for $800,000. The court denied appellants’ request for an evidentiary hearing. Appellants’ counsel raised the issue of whether a dissolution had occurred. Ultimately, the court stated: “It says to me that no matter what happens, there’s no settlement, no agreement, and there never will be. [P] Therefore, this court is being forced into a situation where it must rule, and it is willing to do so, and it has ruled. Tentative stands.”

On September 28, 1992, appellants filed a motion for reconsideration. On October 7, 1992, judgment was entered. After unsuccessfully attempting to get appellants to comply with the judgment, and being informed that they would not comply until their motion for reconsideration was heard, respondents moved to enforce the judgment. Appellants then filed a motion seeking a brief stay under Code of Civil Procedure section 918 pending a hearing on the motion to reconsider or, alternatively, a stay pending appeal, allowing them to post an undertaking and for an order to deposit their stock with the clerk of the court. On October 14, 1992, the court denied appellants’ motion, and ordered payment of $800,000 to be held by the clerk of the court for appellants’ stock pending further order. It also ordered the clerk to transfer appellants’ shares of the corporation to the corporation.

On October 16, 1992, appellants filed their notice of appeal. We reverse.

I

Respondents, citing Finnie v. Town of Tiburon (1988) 199 Cal.App.3d 1 [244 Cal.Rptr. 581], contend that the appeal should be dismissed as moot because it would “be impossible to return the parties to their respective positions if the judgment were reversed on appeal.” The argument is devoid of merit.

In Finnie, the appellant brought an action to prevent a municipal election scheduled for March 3, 1987. His request for preliminary injunction was denied and he appealed, inter alia, the order of denial. By the time the case reached the reviewing court, the election had taken place. The court dismissed that portion of the appeal as moot. The court stated: “It is well settled that an appellate court will decide only actual controversies. Consistent therewith, it has been said that an action which originally was based upon a justiciable controversy cannot be maintained on appeal if the questions raised therein have become moot by subsequent acts or events.” ( 199 Cal.App.3d at p. 10.)

The instant case is not remotely similar to Finnie. Respondents’ conclusory and unsupported assertion that the parties cannot be restored to the status quo ante does not equate with mootness because, whatever difficulty may exist in undoing the judgment upon reversal, the legal issues presented by the appeal are still justiciable.

In any event, respondents exaggerate the “impossibility” of restoring the parties to the status quo ante. Nothing has changed with respect to the corporation but percentages of ownership. The money paid to appellants for their interest was deposited with the superior court and is presumably still there to be repaid to the corporation once appellants’ ownership interests are restored to them.

cont. next post

Koxinga · May 17, 2010, 7:52am

Do you want to touch my monkey? Textures fascinate me.

Stoid · May 17, 2010, 7:56am

II

In our review of the record in this case, it is clear that the trial judge, faced with the seemingly intractable conflict between the parties, attempted to fashion a fair and workable solution. While we commend him for his efforts, we must reverse the judgment on the grounds that the purported voluntary dissolution of West Coast, which set these proceedings in motion, was procedurally invalid and not supported by the evidence.

“There is no independent right on the part of one or more stockholders in a corporation to compel the sale to them of the shares of stock of another.” ( Cubalevic v. Superior Court (1966) 240 Cal.App.2d 557, 562 [49 Cal.Rptr. 698].) Cubalevic was decided under the predecessor statute to section 2000. The reviewing court issued a writ to prohibit the superior court from proceeding with a hearing to determine the fair cash value of stock in a corporation on a cross-complaint to stay the involuntary dissolution of the corporation where the complaint to dissolve it had been dismissed. “There being no such independent right [to compel the sale of stock] it must follow that there could be no cause of action stated to compel such a sale whether by way of cross-complaint or counterclaim which would survive after dismissal of the action for involuntary dissolution of the corporation in which the remedy of purchase is given.” ( Cubalevic v. Superior Court, supra, at p. 562.)

By parity of reasoning, there can be no action under section 2000 to avoid the voluntary dissolution of a corporation through purchase of the initiating shareholders’ stock unless they have, in fact, initiated a voluntary dissolution. Whether this has happened is both a question of procedure and a question of fact.

Section 1900, subdivision (a) provides: “Any corporation may elect voluntarily to wind up and dissolve by the vote of shareholders holding shares representing 50 percent or more of the voting power.” (§ 1900, subd. (a).) Under section 1903, subdivision (a), “Voluntary proceedings for winding up the corporation commenced upon the adoption of the resolution of shareholders or directors of the corporation electing to wind up and dissolve, or upon the filing with the corporation of a written consent of shareholders thereto.” (§ 1903, subd. (a).)

Furthermore, section 601, subdivision (f), in the chapter of the code that discusses shareholder meetings and consents, states, in relevant part: “Any shareholder approval at a meeting, other than unanimous approval by those entitled to vote, pursuant to Section . . . 1900 . . . shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.” (§ 601, subd. (f), italics added.)

Appellants argue that the failure of West Coast to have followed the motion/waiver requirement set out in section 601, subdivision (f) renders that alleged dissolution invalid. Based on the plain language of the statute, we must agree.

The word “shall” expresses a mandatory intent unless the legislative history of the statute where it occurs shows otherwise. ( Utah Property & Casualty Ins. etc. Assn. v. United Services Auto. Assn. (1991) 230 Cal.App.3d 1010, 1017-1018 [281 Cal.Rptr. 917].) The legislative history of section 601, subdivision (f) is set forth in the Legislative Committee Comment to the statute: “Certain matters presented for action to shareholders are of such fundamental importance that specific notice of their proposed consideration at any meeting, including the annual meeting, is required by this subdivision.” (West’s Ann. Corp. Code, § 601, subd. (f), p. 304.)

Respondents do not contend either that the required notice was given or that a written waiver was signed but instead advance the following arguments: the waiver by attendance provision of section 601, subdivision (e) applies; compliance with the subdivision (f) was excused because West Coast is a small, family-held corporation that has always been informally run; and the notice, if any was due, should have been given by appellants since they were the ones who wanted to dissolve the corporation and thus they are estopped from objecting to the noncompliance with subdivision (f). None of these arguments has any merit.

Section 601, subdivision (e) provides in relevant part: “. . . Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this division to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).” (§ 601, subd. (e), italics added.)

Respondents maintain that by attending the meeting at which they voted to dissolve the corporation without objecting to lack of notice, appellants waived their right to make such objection under section 601, subdivision (e). This argument ignores the exception in subdivision (e) that limits its application by reference to subdivision (f), which, as we have seen, requires a notice of meeting or a written waiver. As a matter of statutory construction, moreover, a specific statute takes precedence over a general statute on the same subject. ( Spilman v. California Highway Patrol (1989) 212 Cal.App.3d 59, 63 [260 Cal.Rptr. 400].) Section 601, subdivision (f), because it deals specifically with notice and waiver with respect to voluntary dissolution under section 1900, takes precedence over the more general waiver provisions of section 601, subdivision (e).

Nor are respondents assisted by the two cases on which they rely for the proposition that formalities need not be observed in voluntary dissolutions under section 1900, ABC Brewing Corporation v. Commissioner of Int. Rev. (9th Cir. 1955) 224 F.2d 483, and Herschfelt v. Knowles-Raymond etc. Co. (1955) 130 Cal.App.2d 347 [279 P.2d 104]. Neither case involves the issue of notice and waiver and since both predate enactment of section 601, subdivision (f), they are of no value in interpreting that statute.

Equally unpersuasive is respondents’ argument that small, family-owned corporations need not comply with corporate formalities such as section 601, subdivision (f). None of the cases they cite support the proposition that such corporations are excused from the provisions of that section by virtue of their size or ownership. To the contrary, as the legislative committee note to that section makes clear, the voluntary dissolution of a corporation is a matter of “such fundamental importance” that the Legislature enacted subdivision (f) to provide specific notice/waiver requirements for that transaction.

Finally, respondents contend that appellants are, in effect, estopped from raising the notice issue because it was up to them to provide appropriate notice since it was they who wanted to dissolve the corporation. There is no support for this argument. The elements of estoppel require proof that (1) the party to be estopped was apprised of the facts giving rise to the estoppel; (2) the party intended that his or her conduct would be acted upon, or acted so that the party claiming estoppel had a right to believe it was intended; (3) the party claiming estoppel was ignorant of the true state of facts; and (4) the party claiming estoppel relied upon the conduct of the other to his or her detriment. ( Robinson v. Fair Employment & Housing Com. (1992) 2 Cal.4th 226, 244-245 [5 Cal.Rptr.2d 782, 825 P.2d 767].) There was no showing of any kind that would support application of the doctrine of estoppel in this case.

In short, there was a total and inexcusable failure to comply with the notice/waiver requirements that are a prerequisite to a valid voluntary dissolution of a corporation and, therefore, the judgment must be reversed.

III

In addition to the procedural ground for reversal, the judgment must also be reversed because substantial evidence does not support the conclusion that appellants voted their stock to voluntarily dissolve the corporation.

Upon review of the evidence, all conflicts are resolved in favor of the judgment and all legitimate and reasonable inferences are indulged to support it. ( Earl of Loveless, Inc. v. Gabele (1991) 2 Cal.App.4th 27, 32 [2 Cal.Rptr.2d 829].) Moreover, we discard conflicting evidence and view only that evidence that would support the judgment. ( Hinson v. Clairemont Community Hospital (1990) 218 Cal.App.3d 1110, 1125 [267 Cal.Rptr. 503].)

The pivotal claim in this proceeding of which proof by respondents was required was that appellants had voted to voluntarily dissolve West Coast under the provisions of sections 1900 and 601, subdivision (f). As is already clear, there was no evidence that the notice requirement was either observed or properly waived. Moreover, the declarations by respondents do not unequivocally establish that appellants voted to dissolve the corporation. Rather, those declarations show that an impasse had been reached between the brothers, that various methods of resolving the impasse had been suggested and rejected, and that it was the preference of appellants to sell the assets of the company, divide the money and go. What is missing from the declarations the link between appellants’ preference for this course of action and evidence that the preference was translated into formal action. Without this evidence, all that was established is that the parties were in negotiation. This was not evidence sufficient to base a finding that a voluntary dissolution had actually been voted by the appellants, a point the trial judge may have recognized when he referred to a “possible dissolution” having taken place. Before the provisions of section 2000 apply, however, an actual, not a possible, dissolution must be shown.

The judgment is reversed and remanded for further proceeding consistent with this opinion. Appellants to have their costs on appeal. 3

FOOTNOTES

3 In view of our disposition, it is not necessary to address appellants’ further arguments regarding the deficiencies of the proceedings below. Their claim for restitution under Code of Civil Procedure section 908 should be addressed to the trial court on remand.

Ovadia v. Abdullah, 24 Cal. App. 4th 1100

Voluntary election, judicial decree: both lead to dissolution itself, not merely the possibility.

So, since 2000 and 17351 have been determined to be analogous by the courts, what is the argument that LLCs have a special requirement that corporations do not, making buyout elections available only before judgment, when in corporations law there is no such restriction?

I’m all ears. But only if you make some attempt to argue as I have done, as the court itself will do, with legal authorities, not merely your own naked opinion of how someone might interpret something, pulled out of your pocket. (Remember, the only judicial opinion that the election must be made before judgment came from MY judge. ALl other opinions that in any manner whatsoever address the question even peripherally or incidentally say otherwise.)

Because after all, that’s not how the appellate court arrives at their decisions. They don’t just come up with brand new ways to interpret laws out thin air after they discuss it among themselves. They look to other courts’ decisions about the same or simliar laws in this or other jurisdictions, as well as treatises and published analysis by legal scholars, in a descending hierarchy of value.

I think it’s only fair for anyone who wants to tell me I’m clueless to do the same.

Stoid · May 17, 2010, 8:21am

Well, we could, but that’s just masturbation. Fun, but meaningless… See my prior post.

And now see CASE LAW!

ON 17351!

YAY! (Not directly onthe timing issue. I’m responding to you telling me (it appears) that it’s more valid to forget all about that silly comparison stuff and just battle our personal opinions.

Weak! Very weak. Especially since I’m not qualified, remember. MUCH better to listen to EXPERTS…

We therefore proceed directly to our examination of the statute.

Discussion

I

“Pursuant to an action filed by … any member … , a court … may decree the dissolution of a limited liability company whenever … [¶] … [¶] (4) [its] management … is deadlocked or subject to internal dissention.” (§ 17351, subd. (a)(4).) The other members “may avoid the dissolution … by purchasing for cash the membership interests owned by the members so initiating the [dissolution] proceeding (the ‘moving parties’) at their fair market value.” (§ 17351, subd. (b)(1).)

If the “purchasing parties” seek to pursue this option but are unable to come to an agreement with the moving parties on the value of the latter’s interest, they may post a bond and apply to the court “either in the pending [dissolution] action or in a[n independent] proceeding initiated in the superior court” for a stay of the dissolution proceeding, at which point the court “shall proceed to ascertain and fix” the fair market value of the interest of the moving parties. (§ 17351, subd. (b)(2).) The court must appoint three appraisers, and “make an order referring the matter to the[se] appraisers … for the purpose of ascertaining that value,” which order shall also “prescribe the time and manner of producing evidence … .” (Id., subd. (b)(3).) The unanimous or majority award of the appraisers is “final and conclusive” on all parties upon its confirmation by the court. (Ibid.) The court must thereafter enter a decree that alternately directs the winding up and dissolution to proceed unless payment for the membership interests is tendered “within the time specified by the decree.” (Ibid.) If the purchasing parties do not tender payment by the deadline, the court must enter judgment on their bond for the moving parties’ expenses (including legal fees). (Ibid.) “Any member aggrieved by the action of the court may appeal therefrom.” (Ibid.)

If the purchasing parties tender payment to the moving parties of “the value of their membership interests ascertained and decreed within the time specified pursuant to this section, or, in the case of an appeal, as fixed on appeal,” the moving parties “shall transfer their membership interests to the purchasing parties.” (§ 17351, subd. (b)(4).)

**Neither the briefing nor our independent research has identified any cases involving these procedures in the context of limited liability companies. However, parallel provisions exist for avoiding the dissolution of a corporation by purchasing the appraised interests of minority shareholders who initiated the corporate dissolution proceedings. (§ 2000.) 2
**
FOOTNOTES

2 This statute derives from former sections 4658 and 4659, which in turn derive from Civil Code former section 404 (Stats. 1931, ch. 862, § 2, pp. 1763, 1829) as amended in 1941 to add, among other language, subdivision (E),** the pertinent language of which continues in Corporations Code section 17351 almost unchanged.** (See Stats. 1941, ch. 610, § 2, pp. 2057, 2059 [“the court shall stay the [dissolution] proceeding and shall proceed to ascertain and fix the value of the shares … . For such purpose the court shall appoint three … commissioners to appraise the fair value … and shall make an order referring the matter to [them] for the purpose of ascertaining such value and such order shall prescribe the time and manner of producing evidence … . The award of such commissioners or of a majority of them, when confirmed … , shall be final and conclusive … and the court shall enter a decree for the amount of [the] award [against the purchasing shareholders and the sureties on their bond] … . Such decree may be in the alternative and provide for winding up and dissolution … unless payment is made for the shares within the time specified by the decree. Any shareholder feeling aggrieved by such action of the court shall have the right of appeal. The [majority shareholders] electing to purchase shall pay … the value of [the] shares ascertained and decreed as aforesaid or, in case of an appeal, as fixed on such appeal …”].)
II

As a prefatory matter, we note that the absence of either a unanimous or majority appraisers’ award does not render section 17351’s procedures inapplicable. It is, after all, “the court, upon application of the purchasing parties” which “shall proceed to ascertain and fix the fair market value of the membership interests … .” (Id., subd. (b)(2), italics added.) The award of the appraisers does not bind the trial court; the court is free to select among conflicting opinions or decide the matter de novo. (Venables v. Credential Ins. Agency, Inc. (1956) 140 Cal.App.2d 724, 727 [295 P.2d 547] [parallel valuation procedure for minority shareholder interest; if convinced unanimous award wrong, “it was clearly the duty of the trial court to examine the matter de novo and to fix a proper value …”]; see Brown v. Allied Corrugated Box Co. (1979) 91 Cal.App.3d 477, 491 [154 Cal. Rptr. 170] (Brown) [same context; noting de novo power, but court also may choose between conflicting awards without redeciding matter]; 2 Finkle et al., Marsh’s Cal. Corporation Law (4th ed. 2008 supp.) § 21.08**, pp. 21-43 to 21-44 (Marsh treatise).)

The riddle in this appeal arises from the imprecise use of language in section 17351, subdivision (b)(3). It provides for any number of juristic activities: the court’s appointment of appraisers, the order of reference to them for the purpose of ascertaining the dissenting share and setting the procedures for producing necessary evidence, the court’s confirmation of the unanimous or majority appraisal award (or determination de novo of the matter), the alternative decree that directs the winding up and dissolution of the company unless the purchasing parties tender their payment in a timely manner, and a judgment on their bond for costs if they fail to act. Yet the concluding provision for appellate review employs an entirely different term with a specific determinative: “Any member aggrieved by the action of the court may appeal therefrom.” (Ibid., italics added.) Considering that all the other juristic activities in section 17351, subdivision (b)(3) are preliminary to the issuance of the alternative decree (cf. Abrams v. Abrams-Rubaloff & Associates, Inc. (1980) 114 Cal.App.3d 240, 247–248 [170 Cal. Rptr. 656] (Abrams) [parallel valuation process for corporations]), it is logical to conclude that the issuance of the decree is “the” action to which the provision for appeal refers. 3 This interpretation finds support in the text of the next subdivision, which separately focuses on the exercise of the purchase option. It requires the tender within the specified time period of the value “ascertained and decreed,” or “in the case of an appeal, as fixed on appeal.” (§ 17351, subd. (b)(4).) If “as fixed on appeal” is to have any meaning, the phrase must presuppose an appeal lies from the alternative decree, as none of the other juristic activities in the previous subdivision finally determine the value of the interest and the time period in which to tender it to the moving parties. 4

FOOTNOTES

3 The judgment for costs on the purchasing parties’ bond would not, at least until 1989, have needed any express designation of appealability, being a collateral matter involving a species of monetary sanction. (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 63, p. 118.) For this reason, it would not make any sense to apply the “ ‘last antecedent’ ” rule of interpretation (People v. Le (2006) 137 Cal.App.4th 54, 62 [39 Cal. Rptr. 3d 741]), which would limit the reach of this provision for appeal to the immediately preceding action of entering judgment for costs on the bond.

4 Once again, we do not believe the “last antecedent” rule would apply here to limit “as fixed on appeal” to the time for tender, as the 1941 statute made clear it was the amount of the award that was subject to adjustment on appeal without even mention of the time for tender.
That a judgment will follow the alternative decree upon a tender does not mean the party making or accepting the tender who is dissatisfied with the valuation may await its entry to appeal that issue. This later-entered judgment is on the underlying dissolution complaint for the purpose of terminating that proceeding through denying the requested relief. This judgment is not a vehicle for raising the issues of valuation on appeal, because the dissolution proceeding itself never embraced them.

This conclusion finds support in the purchase-option cases in the context of corporations, which assume (albeit without any analysis) that an appeal from the decree is proper where tender of payment is made. (Trahan v. Trahan (2002) 99 Cal.App.4th 62, 70 [120 Cal. Rptr. 2d 814] (Trahan); Mart v. Severson (2002) 95 Cal.App.4th 521, 529–530 & fn. 5, 536 [115 Cal. Rptr. 2d 717] (Mart); Esparza v. Kadam, Inc. (1959) 170 Cal.App.2d 303, 304–305 [338 P.2d 492] (Esparza).) As for situations in which there is not a tender, the alternative decree in the section 17351 special proceeding provides for the start of winding up and dissolution; in the underlying dissolution action, such a decree is appealable even though it has the characteristics of an interlocutory order because it could lead to irremediable harm by the time of the final judgment in the dissolution action. (Cf. Reynolds v. Special Projects, Inc. (1968) 260 Cal.App.2d 496, 499–501 [67 Cal. Rptr. 374] **[involving parallel process for corporations]; see Rosner v. Benedict Heights, Inc. (1963) 219 Cal.App.2d 1, 7–8 [32 Cal. Rptr. 764] [describing various stages of corporate dissolution proceedings].)**The alternative decree should be appealable for the same reason in the absence of a tender because it has the same effect.

In short, both a reasonable reading of section 17351 and analogous case authority lead to the conclusion that the alternative decree is the pertinent action from which a party dissatisfied with the valuation process should take an appeal. However, the riddle of this appeal is wrapped in the enigmatic language of section 17351, subdivision (b)(3) that describes the confirmed award as “final and conclusive.” This language would seem to preclude any appellate review of the only issues that would aggrieve a party to the special proceeding.

Curiously, cases involving this procedure in the context of corporations have accepted as a settled matter that the standard of review of substantial evidence applies to the confirmed value in the alternative decree of the minority interest. (Trahan, supra, 99 Cal.App.4th at p. 70 [citing, inter alia, Marsh treatise]; Mart, supra, 95 Cal.App.4th at pp. 530, 536; Abrams, supra, 114 Cal.App.3d at p. 250; Brown, supra, 91 Cal.App.3d at p. 485 [citing Marsh treatise].) It is troublesome that this authority simply fails to consider the express statutory designation of the confirmed award as final and binding. However, we have not found any criticism of this accepted practice.** Whatever the initial legislative purpose in 1941 **in using the phrase **in the ancestor statute, **5 there has been at least legislative acquiescence to its elimination as an accepted practice. **Therefore, we will accept this result in the context of limited liability companies, **and leave it to the Legislature to determine if this comports with its intent on the manner in which these valuation proceedings should take place.

FOOTNOTES

5 If we were to hazard a guess in order to harmonize otherwise irreconcilable provisions, we would suggest that the intent was to prevent the parties from resorting to any of the ordinary procedures for direct attack in the trial court on the confirmed award.
III

The court’s May 9 alternative decree was appealable; the subsequent judgment did not embrace the special proceeding or its valuation issues. As a result, the present purported appeal is not timely, even if we deem it to be from the alternative decree rather than the judgment. We will therefore dismiss the appeal. 6

FOOTNOTES

6 In any event, **the analogous authority in the context of corporations should demonstrate to the present parties **that plaintiff did not waive his right to appeal (as defendant contends) when he accepted the tendered money for his interest in the company (Esparza, supra, 170 Cal.App.2d at pp. 305–306), and plaintiff’s issue on appeal (a claim of a right to a full hearing on valuation) was without merit in any event (Abrams, supra, 114 Cal.App.3d at pp. 247–248, 249 [provisions of Code of Civil Procedure not applicable to this special proceeding; it is intended to be summary in nature without any provisions for discovery or evidentiary hearings involving testimony and cross-examination]).

Dickson v. Rehmke, 164 Cal. App. 4th 469

So. Would you like to argue to me some more that it’s just silly and pointless for me to imagine that the court will look to corporations decisions for the answers to the questions, and that it is somehow more meaningful and legitimate to discuss our personal opinions of what 17351 means?

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I argued in front of the Court of Appeal today.

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