188 So. 3d 324
La. Ct. App.2016Background
- P.K. Smith Motors, a family-owned dealership, was controlled by brothers Mike and Perry Smith (50/50) after their mother’s death; a 1984 shareholder agreement restricted transfers on death and provided for sale back to the corporation or to remaining shareholders but left per‑share price blank.
- Perry died in 2009; Bradley Kyle Smith (his son) as executor sought involuntary dissolution under former La. R.S. 12:143(C) and filed a plan to liquidate if necessary; defendants (Mike and the corporation) countered, seeking specific performance of the 1984 buy‑sell agreement and asserting Perry owed the corporation money.
- Trial evidence included competing appraisals/valuations: experts for the corporation (Graham, Sikes) produced a going‑concern valuation yielding a $1,000,000 company value; estate’s appraisal (Brewer, Gagnet) was higher but the court found Brewer unreliable.
- Office manager O’Neal testified Perry had an ‘‘open account’’/advances and personal charges totaling around $163,469.65 at death; trial court found her credible.
- The trial court enforced the shareholder agreement (ordering sale of estate’s 50% interest), set fair value at $500,000 (50% of $1,000,000), offset Perry’s $163,469.65 debt, and ordered the corporation to pay $336,530.35 to the estate.
- On appeal, the court affirmed: it deferred to trial‑court credibility findings, held the agreement was a valid transfer restriction (requiring a reasonable price), and found no manifest error in valuation or in offsetting the debt against the buyout price.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court should order involuntary dissolution under La. R.S. 12:143(C) or enforce the 1984 shareholder agreement | Bradley: agreement is unenforceable as a contract to sell because it lacks a price; therefore dissolution is appropriate | Mike/P.K. Smith: agreement is a valid transfer restriction; parties intended a fair value to be determined when needed; court may refuse dissolution | Court enforced the shareholder agreement (denied dissolution) — agreement viewed as valid transfer restriction requiring a reasonable price |
| Whether a reasonable/fair price could be judicially determined despite blank price term | Bradley: blank price makes agreement unenforceable; valuation is improper | Mike/P.K. Smith: both sides sought fair value at trial and experts testified; court may set fair value | Court held trial court rightly determined fair value using expert testimony ($1,000,000 company; $500,000 for 50%) |
| Admissibility/weight of expert valuation evidence | Bradley: estate’s expert evidence should control or show large discrepancies; challenges to reliability of defendants’ experts implicitly argued | Mike/P.K. Smith: defendant experts (Graham, Sikes) reliable; estate’s appraiser (Brewer) flawed | Court deferred to trial court’s credibility (Brewer unreliable); accepted Graham/Sikes valuations — no manifest error |
| Claim for money lent / ‘‘open account’’: prescription and offset against purchase price | Bradley: claim prescribed and lis pendens barred consideration; amount awarded exceeded reconventional demand | Mike/P.K. Smith: advances constituted loans (not open account), timely or otherwise usable as an offset; lis pendens properly denied | Court classified indebtedness as loans, allowed use of prescribed claim as offset under La. C.C.P. art. 424, denied exceptions, and affirmed offset of $163,469.65 against buyout |
Key Cases Cited
- Foley v. Entergy La., Inc., 946 So.2d 144 (La. 2006) (standard of review for manifest error and deference to trial‑court credibility findings)
- Stobart v. State through DOTD, 617 So.2d 880 (La. 1993) (appellate review of factual findings; manifest error standard)
- Rosell v. ESCO, 549 So.2d 840 (La. 1989) (where two permissible views of evidence exist, appellate court must not overturn factfinder)
- Louisiana Weekly Pub. Co. v. First Nat. Bank of Commerce, 483 So.2d 929 (La. 1986) (validity of transfer restrictions on corporate stock)
- La‑Haye Bros., Inc. v. American Sec. Bank of Ville Platte, Inc., 614 So.2d 1381 (La. App. 3d Cir. 1993) (strict construction and enforcement of unambiguous transfer restrictions)
- Lasyone v. Kansas City Southern R.R., 786 So.2d 682 (La. 2001) (evaluation and deference to resolution of conflicts in expert testimony)