Virgil Kirchoff Revocable Trust dated 06/19/2009 Benjamin Kirchoff and Michael Wenzel, Co-Trustees of the Virgil Kirchoff Revocable Trust dated 06/19/2009 Fairlyn Forsyth Kirchoff Mooradian and The Kirchoff Limited Partnership v. Moto, Inc., Defendant/Respondent. , 2016 Mo. App. LEXIS 209 ( 2016 )

In the Missouri Court of Appeals
Eastern District
DIVISION FOUR
VIRGIL KIRCHOFF REVOCABLE )
TRUST DATED 06/19/2009; ) No. ED102900
BENJAMIN KIRCHOFF and MICHAEL )
WENZEL, Co-Trustees of the VIRGIL )
KIRCHOFF REVOCABLE TRUST )
DATED 06/19/2009; FAIRLYN )
FORSYTH KIRCHOFF ) Appeal from the Circuit Court
MOORADIAN; and THE KIRCHOFF ) of St. Louis County
LIMITED PARTNERSHIP, )
)
Plaintiffs/Appellants, )
) Honorable Colleen Dolan
v. )
)
MOTO, INC., )
)
Defendant/Respondent. ) Filed: March 8, 2016
Introduction
The Virgil Kirchoff Revocable Trust Dated 06/19/2009 (Trust); Benjamin
Kirchoff and Michael Wenzel, Co-Trustees of the Trust; Fairlyn Forsyth Kirchoff
Mooradian (Mooradian); and the Kirchoff Limited Partnership (collectively Appellants)1
1
Moto asserts in its brief that this Court lacks jurisdiction to consider the appeal of Mooradian and the
Kirchoff Limited Partnership because they failed to file a notice of appeal, in that they were not included as
parties on appeal in the notice of appeal timely filed by Appellants’ counsel on behalf of the Trust.
Approximately two months after Benjamin Kirchoff filed his notice of appeal on behalf of the Trust,
Appellants filed a “Notice Regarding Clarification of Parties” with this Court asserting Benjamin Kirchoff
was listed as the only appellant due to a clerical error and seeking to add the additional parties as
appellants. Moto did not challenge this Court’s jurisdiction of the parties prior to filing its brief.
The notice of appeal shall specify the parties taking the appeal. Rule 81.08(a). However,
“‘[t]echnical adherence to the formal averments of a notice of appeal is not jurisdictional, and the
appeal from the trial court’s grant of summary judgment in favor of Moto, Inc. (Moto) on
Appellants’ claim seeking dissolution of Moto due to shareholder oppression. We affirm.
Factual and Procedural Background
Moto, doing business as MotoMart, is a Missouri closely-held corporation that
owns and operates gasoline convenience stores in Illinois, Missouri, Indiana, Ohio,
Wisconsin, and Minnesota.
Virgil Kirchoff served as Moto’s Chief Executive Officer and Chairman of
Moto’s Board of Directors (Board) for many years before stepping down in 2005, and
was a shareholder prior to his death. The Trust is a shareholder of Moto. Mooradian,
Virgil Kirchoff’s ex-wife, is a shareholder and served on Moto’s Board from 1963 to
2012. Benjamin Kirchoff and Mooradian are the two general partners of the Kirchoff
Limited Partnership, which is a Missouri limited partnership and a shareholder of Moto.
In July 2010, Benjamin Kirchoff, the Trust, and the Partnership collectively held at least
20 percent of the issued and outstanding shares of Moto.
In June 2011, Appellants filed suit against Moto and the Board. The trial court
dismissed all but Count I against Moto seeking dissolution of the corporation based on
minority shareholder oppression. Appellants alleged Moto engaged in oppressive
conduct by arbitrarily valuing Moto’s stock and failing to disclose to the minority
averments are to be liberally construed to permit appellate review so long as the opposing party is not
misled to his or her irreparable harm.’” McCrainey v. Kansas City Missouri Sch. Dist., 337 S.W.3d 746,
751 (Mo. App. W.D. 2011), quoting L.J.B. v. L.W.B., 908 S.W.2d 349, 351 (Mo. banc 1995). Here, the
Appellants are similarly situated, are bringing identical claims, and are seeking identical relief. Moto was
not misled in any way and will not suffer any irreparable harm by allowing Mooradian and the Kirchoff
Limited Partnership to proceed as parties on appeal. See also Tillis v. City of Branson, 945 S.W.2d 447,
448 (Mo. banc 1997) (finding no jurisdictional defect and treating the appellant’s suggestions in opposition
to the respondent’s motion to dismiss the appeal based on an untimely notice of appeal, as a timely filed
motion seeking a special order permitting a late filing of the notice of appeal pursuant to Rule 81.07(a)).
All Rule references are to Mo. R. Civ. P. 2014.
2
shareholders interest expressed by Casey’s General Stores, Inc. (Casey) in acquiring
Moto.
On February 6, 2013, Moto moved for summary judgment. In response,
Appellants asked the trial court for a continuance to pursue written discovery and depose
various directors and officers of Moto, which the court granted. On November 25, 2014,
Moto filed its Amended Motion for Summary Judgment. On January 14, 2015,
Appellants filed their Response to Moto’s Amended Motion for Summary Judgment. On
February 4, 2015, Moto filed its Reply Memorandum.
The following relevant facts are set forth in the summary judgment record:2
Moto’s Amended and Restated By-Laws do not obligate the Board to buy back
shareholder stock. Nor is there any written agreement requiring Moto to repurchase a
shareholder’s stock. In the past, however, Moto has bought back shares to provide some
liquidity to its shareholders.
The Board annually determines the price Moto will pay for each share of stock the
company repurchases from its shareholders. When valuing the stock for purposes of
redeeming a shareholder’s stock, the Board considers, among other things, the
corporation’s Earnings Before Interest, Taxes, Depreciation, and Amortization
2
The non-movant may not rest upon mere allegations and denials of the pleadings, but must use affidavits,
depositions, answers to interrogatories, or admissions on file to show the existence of a genuine issue for
trial. Crow v. Crawford & Co., 259 S.W.3d 104, 113 (Mo. App. E.D. 2008). “Facts contained in
affidavits or otherwise in support of a party’s motion are accepted as true unless contradicted by the non-
moving party’s response to the summary judgment motion.” Premier Golf Missouri, LLC v. Staley Land
Co., LLC, 282 S.W.3d 866, 871 (Mo. App. W.D. 2009). Appellants’ Response contained several denials
of Moto’s uncontroverted statement of facts and additional statements of uncontroverted material facts
which were not adequately supported by evidence establishing such denials or statements of fact. In the
interest of brevity, this Court will not specifically address these deficiencies because Moto addressed the
deficiencies at length in its Reply to Appellants’ Response to Moto’s Statement of Uncontroverted Material
Facts and Response to Appellants’ Additional Statement of Uncontroverted Facts.
3
(EBITDA) and cash flow, the stock price of comparable publicly-traded c-store chains,
and recent mergers and acquisitions of c-store chains.
Beginning in 1997, the Board used a three-year six times cash flow method to
determine share value for purposes of redeeming a shareholder’s stock. Benjamin
Kirchoff was part of the committee that recommended this valuation method to the
Board. The Board subsequently realized other companies routinely valued shares of
stock based on the EBITDA generated and believed utilizing the EBITDA method would
move Moto to a more standardized and recognized formula.
In February 2003, the Board unanimously approved the 5.5 times three-year
average of EBITDA method as a guide to determine share value when buying back a
shareholder’s stock. The Board arrived at the 5.5 multiplier by taking the six times cash
flow multiple used prior to 2003 and multiplying it by 90 percent since 2001 and 2002
indicated that cash earnings calculated to 90 percent of EBITDA, resulting in a multiplier
of 5.4 which the Board rounded up to 5.5. This multiplier was checked against the
Trefethen Advisors, LLC (an independent financial advisory and investment management
firm) statistics which showed it was in the range of what other closely held corporations
were selling for at that time. The Board elected not to specifically reduce the multiple for
either a minority discount or lack of marketability discount. At times, the Board used a
one- or two-year average of EBITDA instead of a three-year average because of the
Board’s concern about Moto’s stock price decreasing, and the Board opted to keep the
share price the same or increase it.
4
The Board does not set the price at which a Moto shareholder may sell his shares
to any other person. Shareholders are free to market and sell their shares of Moto stock
to an outside third party for a mutually agreeable price.
Moto presented a document to its shareholders at the annual meetings labeled
“Theoretical Market Value Per Share” that listed the share price set by the Board. Gary
Arnold, Moto’s CFO and a corporate representative, testified “Theoretical Market Value
Per Share” was intended to establish a fair price for purposes of Moto buying back shares
from stockholders or allowing for the reinvestment of dividends. Appellants concede it
was understood that “Theoretical Market Value Per Share” was the price at which Moto
agreed to buy back its shares. Appellants admit there is more than one way to value the
shares of Moto’s stock and are not claiming any actual damages.
On March 13, 2015, the trial court granted Moto’s Amended Motion for Summary
Judgment. The trial court found Moto did not have a duty to inform Appellants of
Casey’s interest in acquiring Moto and that Appellants knew of Casey’s interest because
they were the parties who initiated discussion with Casey. The court held Moto did not
have a duty to buy back shareholder stock or, if it did so, to value the shares in any
particular manner. The court further found the valuation method used by Moto’s Board
was protected by the business judgment rule. This appeal follows.
Points Relied On
In their first point on appeal, Appellants argue the trial court erred in granting
summary judgment to Moto because genuine disputes of material fact exist on the record,
in that it is disputed whether Moto acted with reasonable care in its valuation.
5
In their second point on appeal, Appellants argue the trial court erred in granting
summary judgment to Moto because the law does not permit Moto to value its shares in
any manner it wishes, in that Moto voluntarily undertook the valuation and is a close
corporation with a higher duty to shareholders than a public corporation.
In their third point on appeal, Appellants argue the trial court erred in granting
summary judgment to Moto because applicability of the business judgment rule should
have been decided at trial, in that it involves questions of fact such as whether the
valuation was done in good faith.
Standard of Review
We review the circuit court’s grant of summary judgment de novo. ITT Comm.
Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993).
Whether to grant summary judgment is purely an issue of law. Ashford Condo., Inc. v.
Horner & Shifrin, Inc., 328 S.W.3d 714, 717 (Mo. App. E.D. 2010). We will uphold
summary judgment on appeal only where there is no genuine issue of material fact and
the movant is entitled to judgment as a matter of law. ITT Comm. Fin. Corp., 854
S.W.2d at 376; Rule 74.04(c). The record is viewed in the light most favorable to the
party against whom judgment was entered. Robinson v. Lagenbach, 439 S.W.3d 853,
856 (Mo. App. E.D. 2014).
A defendant, as the movant, can establish a prima facie case for summary
judgment by showing any of the following: (1) facts that negate any one of the elements
of a claimant’s cause of action; (2) that the non-movant, after an adequate period of
discovery, has not been able to produce, and will not be able to produce, evidence
sufficient to allow the trier of fact to find the existence of any one of the claimant’s
6
elements; or (3) that there is no genuine dispute as to the existence of each of the facts
necessary to support movant’s properly pleaded affirmative defense. Sloss v. Gerstner,
98 S.W.3d 893, 896 (Mo. App. W.D. 2003).
Once the movant has established a right to judgment as a matter of law, the non-
movant must demonstrate that one or more of the material facts asserted by the movant as
not in dispute is, in fact, genuinely disputed. Crow v. Crawford & Co., 259 S.W.3d 104,
113 (Mo. App. E.D. 2008). We will affirm the trial court’s judgment if it is sustainable
on any theory. Citibrook II, L.L.C. v. Morgan’s Foods of Missouri, Inc., 239 S.W.3d
631, 634 (Mo. App. E.D. 2007).
Discussion
Points I and II – Shareholder Oppression
Dissolution of a corporation is an equitable action in which jurisdiction is granted
by statute. Struckhoff v. Echo Ridge Farm, Inc., 833 S.W.2d 463, 466 (Mo. App. E.D.
1992).
Section 351.4943 provides in relevant part as follows:
The circuit court may dissolve a corporation:
…
(2) In a proceeding by a shareholder if it is established that:
…
(b) The directors or those in control of the corporation have acted, are
acting, or will act in a manner that is illegal, oppressive, or fraudulent;
…
“Dissolution of a corporation is a drastic remedy and courts should resort to this
procedure only to prevent irreparable injury, imminent danger of loss or a miscarriage of
justice.” Struckhoff, 833 S.W.2d at 466. Before exercising its discretion, the trial court
should consider the effect the dissolution would have on the public as well as the
3
All statutory references are RSMo. 2006.
7
shareholders. Id. Once the requisite showing is made, a court of equity can take
jurisdiction of the cause and then exercise its discretion in granting or refusing equitable
relief. Id.
A successful claim of shareholder oppression requires a showing of (1)
burdensome, harsh, and wrongful conduct; (2) a lack of probity and fair dealing in the
affairs of the company to the prejudice of some of its members; or (3) a visible departure
from the standards of fair dealing and a violation of fair play on which every shareholder
is entitled to rely when entrusting her money to a company. Robinson, 439 S.W.3d 859.
The existence of shareholder oppression is determined on a case-by-case basis. Id.
“Allegations of oppressive conduct are analyzed in terms of fiduciary duties owed by
directors or controlling shareholders to minority shareholders.” Whale Art Co., Inc. v.
Docter, 743 S.W.2d 511, 514 (Mo. App. E.D. 1987), citing Fix v. Fix Material Co., Inc.,
538 S.W.2d 351, 358 (Mo. App. 1976). “Although controlling shareholders are not
fiduciaries in the strict sense, the general concepts of fiduciary law are useful in
measuring the conduct of those in control, particularly in the context of a small closely-
held corporation.” Whale Art Co., Inc., 743 S.W.2d at 514. “The complaining
shareholder has the burden of proof to establish grounds for dissolution.” Churchman v.
Kehr, 836 S.W.2d 473, 482 (Mo. App. S.D. 1992).
Under Count I of their Second Amended Petition, Appellants sought dissolution
of Moto based on shareholder oppression. On appeal, Appellants have abandoned their
claim regarding the Board’s alleged failure to inform them of Casey’s interest in
acquiring Moto and now claim dissolution of Moto is appropriate based solely on the
allegation that the Board arbitrarily valued Moto’s stock. Appellants assert such act was
8
burdensome, harsh and wrongful conduct and a visible departure from the standards of
fair dealing and a violation of fair play.
In their Points I and II on appeal, Appellants argue summary judgment is
improper because Moto, as a closely held corporation, has a fiduciary duty to use
reasonable care in valuing its stock and genuine disputes of material fact exist as to
whether Moto’s Board acted with reasonable care. Appellants assert the Board should
have used a different method of valuation and that they were induced to sell their shares
at “lower than their true worth,” yet acknowledge they are not claiming any actual
damages. In challenging Moto’s selected form of valuation, Appellants repeatedly speak
in terms of negligence, reasonable care and due diligence. Appellants also contend the
Board’s use of the “vague” term “theoretical market value” was a confusing
misrepresentation and a violation of its fiduciary duty.
Appellants’ claim, however, is one of shareholder oppression not negligence,
negligent or fraudulent misrepresentation, or breach of fiduciary duty.4 While alleged
oppressive conduct is analyzed in terms of fiduciary duties, a claim of shareholder
oppression is more than mere negligence or lack of reasonable care; it is burdensome,
harsh, and wrongful conduct; it is a lack of probity and fair dealing resulting in prejudice;
it is a visible departure from the standards of fair dealing and a violation of fair play.
Robinson, 439 S.W.3d at 859.
Appellants do not dispute that Moto had no independent obligation to appraise its
stock or to repurchase its stock from them. See Section 351.455 (providing minority
shareholder entitled to an appraisal of his shares when he dissents from a merger or
4
Appellants’ claims of breach of fiduciary duty of loyalty and good faith and fair dealing against individual
officers and shareholders were dismissed in the trial court. Appellants have not appealed those dismissals.
9
consolidation of corporation) and Delahoussaye v. Newhard, 785 S.W.2d 609, 611 (Mo.
App. E.D. 1990)(no statute or case law holding minority shareholders are entitled to
ratable redemption where directors redeem some outstanding shares). Here, neither
Moto’s corporate by-laws nor any other written agreement requires Moto to repurchase
its stock or to do so at a specific price.
Furthermore, in the absence of actual fraud, the judgment of a board of directors
as to the value of the consideration received for stock will not be interfered with. See
Saigh v. Busch, 403 S.W.2d 559, 564-65 (Mo. 1966) (rejecting minority shareholder
argument that corporate board had no discretion to sell corporate shares pursuant to a
stock option for anything other than market price) and Section 351.185(3) (“When
payment of the consideration for which shares are to be issued shall have been received
by the corporation, the shares are full-paid and nonassessable. In the absence of actual
fraud in the transaction, the judgment of the board of directors or the shareholders, as the
case may be, as to the value of the consideration received for shares shall be
conclusive.”).
Here, Appellants do not allege Moto’s actions in valuing the stock were
fraudulent, only that the Board failed to take reasonable care. Although Appellants
contend reasonable care was required because Moto assumed a duty by voluntarily
valuing its shares, this assertion is not legally supported. Appellants’ criticisms of the
valuation method chosen by the Board do not amount to a showing of oppressive conduct
and Appellants have not produced any evidence demonstrating the valuation method was
oppressive.
10
The Board’s alleged failure to take reasonable care in choosing a valuation
method and in using “vague” terminology to describe the resulting value is not sufficient
evidence of “oppressive” conduct. The trial court did not err in finding Moto did not
have a duty to value its shares for the purposes of repurchasing its stock or to use an
alternative method of valuation when doing so. The trial court did not err in granting
Moto’s amended motion for summary judgment. Appellants’ Points I and II are denied.
Point III − Business Judgment Rule
In their final point, Appellants argue the trial court erred in granting summary
judgment in favor of Moto based on the business judgment rule because application of
the rule involves questions of fact and is incompatible with entry of summary judgment.
The business judgment rule protects the directors and officers of a corporation
from liability for intra vires decisions within their authority and made in good faith,
uninfluenced by any consideration other than an honest belief that the action promotes
the corporation’s best interest. Robinson, 439 S.W.3d at 860. “‘The [] rule vests the
directors and shareholders with wide latitude in making judgments that affect the running
of the corporation.’” Ironite Products Co., Inc. v. Samuels, 17 S.W.3d 566, 573 (Mo.
App. E.D. 2000), quoting Herbik v. Rand, 732 S.W.2d 232, 235 (Mo. App. 1987). “The
rule precludes courts from interfering with the decisions of corporate officers and
directors absent a showing of fraud, illegal conduct, an ultra vires act, or an irrational
business judgment.” Robinson, 439 S.W.3d at 860.
On appeal, Appellants argue the trial court’s application of the business judgment
rule was inappropriate because it required factual determinations regarding the Board’s
motivations in valuing the stock and an assessment of the propriety of Moto’s actions.
11
Appeellants, howeever, have faailed to set fo
orth facts or argument thhat would suupport a
findin
ng that Moto
o’s actions violated
v the business
b judggment rule. Appellants acknowledgge
there are multiplee ways for a close corporration to vallue its stock and Appellaants’ bald
asserttion that Mo
oto should haave used an alternative
a m
method to doo so does nott suggest
fraud
d, illegal conduct, an ultrra vires act, or
o an irrationnal business judgment. The trial
courtt did not err in
i finding th
he Board’s method
m of valluation was protected byy the businesss
judgm
ment rule. Appellants’
A Point
P III is deenied.
Conclusion
C
The trial court’s
c judgm
ment grantin
ng Moto’s A
Amended Mootion for Sum
mmary
Judgm
ment is affirm
med.
SHERR
RI B. SULLIV
VAN, J.
Lisa S. Van Amb
burg, C.J., annd
Kurt S. Odenwald
d, J., concurr.
12