No. 32160 -
Richard F. Frye v. Richard L. Frye, and C.
E. Frye Farms, Inc.
Albright, Chief Justice, dissenting:
In affirming the circuit court's ruling,
the majority has overlooked the fact that many of the trial court's rulings centered
on issues that were heavily disputed below. For example, the evidence regarding
the issuance of stock certificate numbers 11 and 13 and the question of whether
there was valid consideration for such stock certificates conflicted greatly.
While the circuit court apparently chose to discredit Appellant's testimonial
accounts in favor of Appellee, the lower court never expressly indicated that
it found Appellant to be lacking in credibility. Upon inquiry, the rationales
upon which the circuit court relied to resolve these critical issues concerning
the stock issuance are easily dissected and less than convincing. Of further
concern is the fact that the trial court appears to have discarded any appreciation
for the motivations underlying the acts and testimony of both Appellee and his
mother (a disgruntled son and an ex-wife), who appear to have been acting in
concert for the purpose of advancing Appellee's interests.
Inexplicably, the trial court accepted the
testimony of Appellee and his mother as to the issuance of the disputed stock
certificates, numbers 11 and 13. With little explanation, the trial court completely
discounted the contradictory evidence offered by both
Appellant and his sister, Dorothy Novak, regarding the origin of these stock
certificates. Appellant testified that he recalled signing four stock certificates
in blank for the express purpose of replacing stock certificates that had been
lost by four shareholders who instigated the buyout proceedings in 1997.
(See
footnote 1) When those “lost” certificates were later
located, the stock certificates Appellant had signed in blank were no longer
needed. Since Appellant had no knowledge of signing certificates for the questioned
additional 120 shares of corporate stock in Appellee's name that are reflected
by stock certificate numbers 11 and 13, Appellant suggested that the stock
certificates signed in blank were wrongly used to issue the disputed additional
shares of stock.
In resolving this issue, the trial court
appears to have placed undue weight on the fact that Appellant saw the questioned
stock certificates and failed to take timely action to repudiate the issuance
of the stock certificates. To turn a consequential issue such as this on a party's
failure to institute formal legal proceedings in light of the trial court's recognition
of how this “closely-held family corporation” had not adhered to “the
formalities of law” “since its incorporation in 1961” is certainly
puzzling. Rather than implying that Appellant's inactivity constituted acquiescence
that effectively amounted to ratification, the
trial court should have looked to the historical nature of this corporation's
extremely
informal operation as a more logical explanation for Appellant's inaction.
Similarly questionable is the trial court's
conclusion with regard to the consideration offered for the issuance of stock
certificate numbers 11 and 13. Essentially, the circuit court decided that the
consideration given was for years of services offered to the corporation at little
or no pay plus personal moneys Appellant had invested in the corporation. Upon
examination, however, these bases fail to withstand scrutiny. After seven years
of working on the family farm, the corporation awarded Appellee 60 shares of
stock in the subject corporation in 1994. Then only four years later, the corporation
(with no knowledge of Appellant _ the corporation president) purportedly issued
another 120 shares of stock to Appellee upon the same theory _ remuneration for
unpaid work and contributions to the family farm. Whereas the record reflects
that the corporate officers all agreed as to the issuance of the first 60 stock
shares to Appellee for this purpose, there was no agreement among the officers
as to the second issuance of 120 shares to Appellee.
(See
footnote 2)
In looking for additional consideration offered
for these stock certificates, the trial court cited Appellee's investment of
certain moneys into the family corporation. In
calculating those investments, the circuit court determined that two checks
for the cumulative amount of $100,000 that each bore the memorandum line notation
of “Inv.” were outright gifts to Appellee. Incredibly, the trial
court concluded that the abbreviation, which certainly suggests that it stands
for investment and there was testimony to this effect from Dorothy Novak,
(See
footnote 3) was not significant, as the trial court found that
the amount was an outright gift to Appellee. Even more questionable is the
trial court's decision to place that so-called “gift” on the ledger
side of Appellee's investments in the corporation in considering the amount
of money that Appellee had invested in the corporation.
(See
footnote 4)
After reviewing the record of this case against
the findings of the trial court, Appellant's testimony does not appear to have
been accorded the proper weight that it deserved. While the trial court resolved
most of the credibility decisions in a manner unfavorable to Appellant, the record
suggests a pattern of collusive behavior on the part of Appellee and his mother
that certainly raised the need to carefully weigh the testimony offered by those
parties. Upon careful examination of the facts of this case, I simply cannot
reach the same conclusion as the trial court and the majority with regard to
the validity of the questioned stock certificates. Accordingly, I must respectfully
dissent.
I am authorized to state that Justice Starcher joins in this dissent
Footnote: 1 Of further note is the
fact that none of Appellee's personal or individual tax records reflect a reporting
of the alleged purchase of the stock by capital contribution or gift to the
Internal Revenue Service. Similarly, the corporate records do not reflect any
change in the corporation's capitalization or a reporting of such changes to
the Internal Revenue Service.