82 Cal.App.5th 748
Cal. Ct. App.2022Background
- R.R. Crane Investment Corp. was a family-owned holding company; Brian and Kevin Crane each owned 50% through trusts and were the only officers/directors.
- Brian filed an involuntary dissolution action on November 13, 2017, alleging deadlock and mismanagement.
- Kevin and the corporation invoked Corporations Code §2000 to buy out Brian’s shares; three appraisers were appointed and the valuation date remained November 13, 2017.
- The appraisers’ confirmed valuation (gross) was $6,182,918; the trial court confirmed the award on December 21, 2020 and denied Brian’s request for prejudgment interest; payment was made by January 15, 2021.
- Brian appealed solely arguing he was entitled to prejudgment interest (under Civ. Code §§3287(a) or 3288, or in equity) from the valuation date to the date of payment; the Court of Appeal affirmed the denial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prejudgment interest under Civ. Code §3287(a) applies to a §2000 buyout | Brian: §3287(a) awards interest on monetary recovery vested on a particular day (valuation date); he lost use/opportunity value and should get interest | R.R. Crane: §3287 applies to damages for an obligation to pay; §2000 buyout is optional and not an obligation | No — §3287(a) does not apply to §2000 buyouts |
| Whether prejudgment interest under Civ. Code §3288 applies (oppression/fraud/malice) | Brian: alternatively entitled to interest under §3288 | R.R. Crane: payment was a voluntary buyout, not a remedy for breach/oppression; no findings of oppression/fraud/malice | No — §3288 inapplicable absent breach or findings of oppression/fraud/malice |
| Whether court may award prejudgment interest as an equitable remedy | Brian: equity requires compensation for delay and lost investment opportunity | R.R. Crane: §2000 contains equitable mechanisms (e.g., deferred valuation date) and does not authorize general interest awards | No — equitable award of prejudgment interest was not warranted; remedy lies in §2000(f) motion for a different valuation date |
Key Cases Cited
- Flethez v. San Bernardino County Employees Retirement Assn., 2 Cal.5th 630 (2017) (sets elements for prejudgment interest under Civ. Code §3287(a))
- Abrams v. Abrams-Rubaloff & Associates, Inc., 114 Cal.App.3d 240 (1980) (prejudgment interest inapplicable to §2000 buyout; appraisal pendency does not alter shareholder rights)
- Trahan v. Trahan, 99 Cal.App.4th 62 (2002) (§2000(f) permits deferred valuation date for good cause; equitable limitations on buyout process)
- Go v. Pacific Health Services, Inc., 179 Cal.App.4th 522 (2009) (describes §2000 buyout mechanics and that purchasing parties may refuse to buy at fixed price)
- Mart v. Severson, 95 Cal.App.4th 521 (2002) (§2000 gives purchasing parties the right but not the obligation to buy shares)
- Levy-Zentner Co. v. Southern Pac. Transportation Co., 74 Cal.App.3d 762 (1977) (discusses scope of prejudgment interest statutes)
- Goles v. Sawhney, 5 Cal.App.5th 1014 (2016) (standard of review for factual aspects of fair value under §2000)
- Ontiveros v. Constable, 27 Cal.App.5th 259 (2018) (§2000 special proceeding supplants involuntary dissolution cause of action)