Pertuis v. Front Roe Restaurants

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.
THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Kyle Pertuis, Respondent,
v.
Front Roe Restaurants, Inc., Beachfront Foods, Inc., Lake
Point Restaurants, Inc., Mark Hammond and Larkin
Hammond, Appellants.
Appellate Case No. 2013-002257
Appeal From Greenville County
Edward W. Miller, Circuit Court Judge
Unpublished Opinion No. 2016-UP-091
Heard October 14, 2015 – Filed February 24, 2016
AFFIRMED
John S. Nichols, of Bluestein Nichols Thompson &
Delgado, of Columbia, and Curtis Warren Stodghill, of
Stodghill Law Firm, of Greenville, for Appellants.
Robert C. Wilson, Jr., of Greenville, for Respondent.
PER CURIAM: In this minority shareholder oppression case, Appellants, Front
Roe Restaurants, Inc. (FRR), Beachfront Foods, Inc. (BFI), Lake Point
Restaurants, Inc. (LPR), Mark Hammond (Hammond) and Larkin Hammond
(Mark and Larkin Hammond, collectively, the Hammonds) appeal from an order
making an award of monies to Kyle Pertuis (Pertuis) for his interests in the
corporations and for unpaid distributions from the corporate entities, contending
the trial court erred in (1) finding an amalgamation of the three corporate entities,
but basing an award on their separate values; (2) finding the locus of the
amalgamated business was Greenville, South Carolina; (3) awarding respondent a
7.2 % interest in FRR; (4) assigning a "zero" value to BFI instead of a negative
value; (5) finding Pertuis was oppressed by Appellants; and (6) ordering payment
of $99,117 to Pertuis for unpaid shareholder distributions. We affirm.
From the outset, we note the sole argument of the Appellants contained in the
record on appeal presented to the trial court is that from their directed verdict
motion following the presentation of Pertuis' case. Only after this court raised
concern at oral argument that many of the arguments made by the Appellants in
their brief did not appear in the record before us, and, therefore, may not be
preserved for our review, did the Appellants' counsel move to supplement the
record with over 100 additional pages. We decline to accept this late filing, which
would render some of the briefed arguments unpreserved.1 However, even if we
considered those arguments preserved, we would nonetheless affirm.
Because an action for stockholder oppression is one in equity, this court may find
facts according to our own view of the preponderance of the evidence. Ballard v.
Roberson, 399 S.C. 588, 593, 733 S.E.2d 107, 109 (2012). "However, this broad
scope does not relieve the appellant[s] of [their] burden to show that the trial court
erred in its findings." Id. "Furthermore, we are not required to disregard the
findings of the trial judge, who was in a better position to determine the credibility
of the witnesses." Id.
1. In its order, the trial court found the evidence showed there was a dearth of
respect for corporate governance among the three corporate entities, blurring the
distinction between them. It concluded, applying the standards articulated in
1
Although counsel for Pertuis stated at oral argument that he believed the issues
were properly preserved on appeal—i.e., they had been raised to and ruled upon by
the trial court—the record presented to this court fails to support such. "[Our
appellate courts] are not precluded from finding an issue unpreserved even when
the parties themselves do not argue error preservation to us." Atl. Coast Builders
& Contractors, LLC v. Lewis, 398 S.C. 323, 329, 730 S.E.2d 282, 285 (2012).
Magnolia N. Prop. Owners' Ass'n, Inc. v. Heritage Cmtys, Inc., 397 S.C. 348, 725
S.E.2d 112 (Ct. App. 2012), the Hammonds and Pertuis operated the three
corporate entities as a de facto partnership of the three corporate entities. On
appeal, the Appellants contend the trial court erred in finding an amalgamation of
the companies but then ordering an award to Pertuis based upon a separate
treatment of each company, arguing the facts supporting amalgamation in
Magnolia are not present here. They argue the trial court blended the companies
into one de facto entity, but awarded Pertuis an amount for his separate interest in
each company, but Pertuis "cannot have it both ways—either they are an
amalgamated entity that should be evaluated as one entity (thus pulling in the
negative value of [BFI] to reduce the overall value) in which [] Pertuis owns
something less than 10% of the whole, or they are indeed separate entities with
separate values and ownership interests and governed by separate state laws."
First, we question whether this issue is preserved on appeal. "[I]t is a litigant's
duty to bring to the [trial] court's attention any perceived error, and the failure to do
so amounts to a waiver of the alleged error." S.C. Dep't of Transp. v. First
Carolina Corp. of S.C., 372 S.C. 295, 301, 641 S.E.2d 903, 907 (2007). To be
preserved for appellate review, an issue must have been "(1) raised to and ruled
upon by the trial court, (2) raised by the appellant, (3) raised in a timely manner,
and (4) raised to the trial court with sufficient specificity." Id. at 301–02, 641
S.E.2d at 907 (quoting Jean Hoefer Toal et al., Appellate Practice in South
Carolina 57 (2d ed. 2002)). "A point not specifically raised to and ruled upon by
the trial court will not be considered on appeal." Sanderson v. Sanderson, 391 S.C.
249, 255, 705 S.E.2d 65, 67 (Ct. App. 2010). Appellant has the burden of
providing this court with an adequate record for review. Harkins v. Greenville
Cty., 340 S.C. 606, 616, 533 S.E.2d 886, 891 (2000). There is no indication in the
record presented to this court the Appellants ever argued to the trial court, as they
do on appeal, that the trial court erred in finding amalgamation of the corporate
entities, but then ordering an award to Pertuis based upon a separate treatment of
each company.
However, even assuming the matter was specifically raised in the Appellants'
motion to alter or amend, we find no merit to the argument. Though the trial court
did cite the Magnolia2 case in its order, which involved amalgamation, the order
itself never specifically found the separate entities were amalgamated. Rather, it
found Hammond and Pertuis "operated the three corporate [Appellants] as a de
facto partnership of the corporate entities." Further, the preponderance of evidence
supports this finding by the trial court.3 Thus, even if the facts of this case do not
fit the mold of the Magnolia case in regard to amalgamation, we discern no
reversible error in the trial court's ultimate conclusion that the three corporate
entities were operated as a de facto partnership. See McCall v. Finley, 294 S.C. 1,
4, 362 S.E.2d 26, 28 (Ct. App. 1987) (noting our appellate courts recognize an
overriding rule which says: "whatever doesn't make any difference, doesn't
matter"). Although they attack the finding of the trial court as not fitting within the
parameters of amalgamation in Magnolia, the Appellants do not argue why the trial
court's finding that the separate entities were operated as a de facto partnership
would be erroneous. In regard to the Appellants' argument that the trial court erred
in inconsistently considering the entities as one, but then considering their separate
valuations, the Appellants fail to cite any support for their assertion that such is
improper. Rather, they simply summarily argue that Pertuis should not be allowed
to "have it both ways." See State v. Crocker, 366 S.C. 394, 399 n.1, 621 S.E.2d
890, 893 n.1 (Ct. App. 2005) (holding "conclusory statements unaccompanied by
argument and citation to authority are insufficient to preserve an issue for appellate
review," and noting failure to provide such argument and citation renders an issue
abandoned). Further, there is substantial evidence to support the valuation of the
entities separately, instead of as a whole, based on Dr. Alford's testimony.
Additionally, we note the Appellants' own expert valued the entities separately.
2
397 S.C. at 358-59, 725 S.E.2d at 118 (discussing whether the trial court erred in
determining the appellants' entities were amalgamated so as to blur the legal
distinction between the corporations for purposes of liability).
3
In particular, there is evidence Pertuis was given the title "Managing Partner." An
e-mail from Hammond referred to the parties' partnership. Pertuis referred to them
as partners in an e-mail, and in response, Hammond thanked Pertuis for working
on their "partnership agreement." In another e-mail, Pertuis discussed the
anticipated completion of the "partnership and employment agreements." In his
final days of employment, Pertuis discussed his concern of feeling "boxed in" in
regard to where he was going with "this partnership" and stated he felt that the
"partnership" was only on the surface.
2. In its order finding the Hammonds and Pertuis operated the three corporate
entities as a de facto partnership, the trial court further stated, "From [Pertuis'] title,
'Managing General Partner,' from the joint and unified internet web site for the
three corporate [Appellants], and from the parties' email, the Court further finds
that the locus of the partnership is Greenville, SC." The Appellants assert error in
the trial court's finding the locus of the amalgamated business was in Greenville,
South Carolina, maintaining the trial court's factual ruling in this regard is without
evidentiary support.
As with the "amalgamation" issue, there is nothing to indicate this issue was ever
raised to the trial court, thus it is questionable whether this issue is properly before
us on appeal. See Sanderson, 391 at 255, 705 S.E.2d at 67 ("A point not
specifically raised to and ruled upon by the trial court will not be considered on
appeal."). Further, it is not clear from the Appellants' brief how this finding of the
"locus" of the operation prejudices the Appellants. See McCall, 294 S.C. at 4, 362
S.E.2d at 28 ("[W]hatever doesn't make any difference, doesn't matter."). On the
merits, we note the only law cited in support of the Appellants' argument on this
issue is that a trial court errs in making findings of fact which have no evidentiary
support. However, there is evidence to support the trial court's finding in this
regard. In particular, as noted by Pertuis, there is evidence that the three entities
shared personnel, Pertuis served as the General Managing Partner of each, he
relocated to Greenville from where he managed all three, and he travelled to the
various locations four to six days a week from Greenville. Accordingly, we find
no error.
3. The Appellants argue the trial court erred in awarding Pertuis a 7.2 %
interest in FRR. They contend the trial court rejected Pertuis' claim to a 10%
interest in FRR, finding he never attained the required profit threshold to achieve
such an interest, but then awarded him 7.2 % based upon equitably treating his
ownership on a graduated vesting schedule, erroneously relying on Wilkie v.
Philadelphia Life Ins. Co., 187 S.C. 382, 197 S.E. 375 (1938) for the proposition
that "[e]quity regards and treats as done that which in good conscience ought to be
done." While it is clear the parties contested Pertuis' percentage ownership of
FRR, as with the previous two issues, it is not clear the Appellants raised these
particular arguments to the trial court. Accordingly, we likewise question whether
these arguments are properly preserved. See In re Timmerman, 331 S.C. 455, 460,
502 S.E.2d 920, 922 (Ct. App. 1998) ("When a party receives an order that grants
certain relief not previously contemplated or presented to the trial court, the
aggrieved party must move, pursuant to Rule 59(e), SCRCP, to alter or amend the
judgment in order to preserve the issue for appeal."); see also Harkins, 340 S.C. at
616, 533 S.E.2d at 891 (holding an appellant has the burden of providing this court
with an adequate record for review). However, even assuming the arguments were
raised to the trial court, we would find no error.
First, we disagree with the Appellants' assertion that "[t]he [trial] court rejected []
Pertuis' claim to a 10% interest in [FRR], finding that [FRR] never attained the
required profit threshold for the 10% ownership interest." Rather, the trial court
recounted the evidence Pertuis presented in support of his claim of a 10% interest
and recognized Hammond's contradictory testimony that Pertuis had not achieved
10% interest pursuant to the "missing" vesting schedule. The trial court
specifically noted "the strength of [Pertuis'] argument for 10% ownership from the
exchange of emails," and further laid blame for the "missing" vesting schedule on
the Hammonds, but ultimately determined it was appropriate to award Pertuis a
7.2% interest in FRR under equitable principles. Thus, the trial court did not reject
Pertuis' 10% claim by finding he had never attained such. Rather, it found
"strength" in Pertuis' claim for 10% ownership in FRR. It appears the trial court
did not give credence to Hammond's testimony that Pertuis had not reached the
level necessary under the missing vesting agreement, but did not consider it proper
to award Pertuis the full 10% since Pertuis acknowledged his 10% acquisition in
the company was tied to profits and Pertuis could not, himself, testify to the
specific provisions in the missing vesting schedule.
As to the Appellants' argument concerning application of Wilkie, we do not believe
the trial court intended to analogize this case to the specific facts in Wilkie. Rather,
it simply cited Wilkie for the equitable maxim. Further, though the Appellants
argue such maxim is "generally applied in cases involving constructive trusts
imposed due to fraud," they cite no law in support of this proposition.
Additionally, the facts of this case do not suffer the same deficiency as those in
Wilkie, which prevented application of the maxim. The Wilkie case noted, in order
to apply the maxim, the party seeking to invoke it must establish "a clear
obligation based upon a valuable consideration that another do some act which he
has failed to perform." 187 S.C. at 393-94, 197 S.E. at 380. In Wilkie, there was
no such obligation. Here, the Hammonds, arguably, owed a duty to Pertuis to
document his greater ownership in FRR based upon his continued management of
the various entities.
4. The Appellants contend the trial court erred in assigning a "zero" value to
BFI because the undisputed evidence shows it had a negative value. They argue
Pertuis' expert, Dr. Alford, testified BFI had a negative equity of $410,271, and
their expert, Mr. Manios, valued it at negative $620,000. Thus, they maintain the
trial court's finding lacks evidentiary support.
It is clear the parties disputed the values of the individual entities and presented
evidence on the same to the trial court for consideration. Thus, this issue is
preserved for our review. On the merits, however, we find the preponderance of
evidence supports the trial court's determination that BFI had no value. Dr. Alford
placed a fair value of $0—or no value—on BFI. In evaluating BFI, Dr. Alford
noted the business was not making money and had negative equity. However, he
observed the financial records showed loans to the business from shareholders, but
no accrual of interest from those loans. He testified, if there was no payment of
interest, they would be construed as capital investments by the shareholders instead
of loans. If this was the case, it would increase the valuation of BFI from $0 to
$46,000. This testimony is also supported by Dr. Alford's report, which lists
negative owners' equity of $410,271 in BFI, places a figure of $456,052 on loans
from shareholders, and concludes "[e]xcluding loans to and from shareholders,
[BFI] would have a small positive adjusted net asset value." His report also
indicates, "[u]pon sale of each entity, amounts due from shareholders would be
collected and amounts due to shareholders would be distributed prior to
distributions of net proceeds of the sale," and "[t]he resulting transactions would
yield net proceeds of . . . $0 for 100% equity ownership of [BFI]." The trial court
specifically accepted the testimony of Dr. Alford in establishing the values of the
separate entities, including that "BFI had no value." In so doing, it found Dr.
Alford "presented an entirely believable and competent analysis for the [trial]
[c]ourt's use, based on his credentials and based on his demonstrated application of
methodology." On the other hand, in regard to the testimony of Dr. Manios, the
trial court observed he conceded some matters and was not credible in others. This
court is "not required to disregard the findings of the trial judge, who was in a
better position to determine the credibility of the witnesses." Ballard, 339 S.C. at
593, 733 S.E.2d at 109. Therefore, there is evidentiary support for the trial court's
finding in this regard.
5. On appeal, the Appellants contend the trial court erred in finding oppression
of Pertuis. They argue the evidence in this case does not demonstrate that Pertuis
was in imminent danger of being excluded from returns, his exclusion from
management in the companies was self-imposed, and he was offered payment for
the value of his ownership. Therefore, they assert the evidence does not justify the
extreme remedy of judicial buyout under a finding of minority stockholder
oppression. The Appellants maintain the indicia of oppression focused on by the
court either lacked support in the record or did not rise to the level described in
Kiriakides v. Atlas Food Sys. & Servs., Inc., 343 S.C. 587, 541 S.E.2d 257 (2001)
and Ballard. They note the trial court mentioned the North Carolina case of
Meiselman v. Meiselman, 307 S.E.2d 551 (N.C. 1983), and they make the
additional argument that North Carolina follows a different standard and the trial
court should have applied North Carolina law regarding minority shareholder
oppression to the two North Carolina companies, and the application of South
Carolina law in this regard was error.
First, we note the issue of whether the trial court erred in finding the Hammonds
engaged in oppression of Pertuis as a minority shareholder was clearly raised to
and ruled upon by the trial court and is therefore proper for consideration on
appeal. On the merits, we find no error. Applying the case law on minority
shareholder oppression, in particular Kiriakides and Ballard, to the facts of this
case, we find the preponderance of the evidence supports the court-ordered buyout
for minority oppression. In particular, there is evidence of the following
oppressive conduct: (a) Hammond failed to provide formal documentation of
Pertuis' ownership interest in FRR despite repeated requests by Pertuis and in spite
of the fact that the parties began operating under the terms of Pertuis'
counterproposal, which had been accepted by the Hammonds and included
acknowledgment of Pertuis' increased interest in the entity. (b) The majority failed
to offer Pertuis the opportunity to participate in the ownership of real estate leased
to LPR. While Pertuis was informed of the acquisition and voiced no objection at
the time, it is nonetheless undisputed that the majority did not specifically afford
him the opportunity. Further, even assuming their failure to specifically offer
Pertuis the opportunity is, alone, insufficient to conclude they misappropriated this
corporate opportunity, there is also evidence the majority failed to offer Pertuis the
opportunity to participate in the new "Grill Marks" restaurant. Though the
Appellants argue Pertuis' employment had ended by that time, we fail to see how
this fact precludes him from participation, as he still held an ownership interest in
the entities at that time. (c) The majority helped finance the "Grill Marks"
restaurant by borrowing $275,000 from FRR and LPR, thus they used corporate
assets to aid them in their unilateral acquisition. (d) Because Pertuis is no longer
employed by the entities, he no longer derives a salary, bonus, and other benefits
he was receiving from the entities. While the Appellants contend Pertuis
voluntarily left the business, Pertuis' testimony shows he parted ways only after he
tried in vain to have his agreement with the majority formally documented so as to
clarify his position and ensure he was receiving his appropriate ownership interest.
Further, there is evidence to support the trial court's finding that the majority
continued to frustrate Pertuis' efforts to achieve a 10% interest in FRR "by
changing the threshold."4 (e) The majority shareholders continued to receive
substantial benefits from the corporations, using the corporate assets to help
finance another venture. (f) There were sufficient funds in LPR and FRR to afford
a buyout, as evidenced by the fact that LPR loaned approximately $75,000 and
FRR loaned approximately $200,000 toward acquisition of the new "Grill Marks"
restaurant. (g) There is a total estrangement between the majority shareholders,
who are in total control of the company, and the minority shareholder. (h) The
majority offered the minority shareholder an extremely low buyout offer, in spite
of testimony showing substantial value in two of the entities. Hammond
effectively offered Pertuis nothing for his interest in the entities when he offered to
pay him only the value of the boat for his shares on the condition that Pertuis
would return the boat. (i) There is no public trading in stock of these closely-held
entities. (j) Pertuis was excluded from management, as evidenced by the fact that
he was no longer employed with the companies and had not received any notice of
a shareholder's meeting since that time. (k) The majority either refused to declare
dividends or withheld Pertuis' dividends after his employment ended, as evidenced
by his testimony he had not received any distributions since parting ways with the
Hammonds. (l) The majority withheld information from the minority. Pertuis was
not kept informed or allowed to participate in the businesses in any way after his
termination from employment. Hammond acknowledged shareholders' meetings
were held at least once a year for the three corporate entities, but there were no
notices of shareholders' meetings, no agendas sent out, and nothing to show Pertuis
was ever afforded a chance to participate in the election of board members or
4
The record shows Hammond accepted Pertuis' counterproposal in his e-mail of
June 30, 2009, which provided if Pertuis did not achieve a 10% ownership interest
in 2008, the parties would "extend [the] current program through 2009 in order to
equalize current ownership at 10% across the board," and "[d]istributions going
forward after the close of 2009 [would] be based on 10% ownership." This is
some evidence that they anticipated treating his ownership of FRR as ten percent at
that time and, at least certainly going forward, Pertuis was to acquire a ten percent
interest in FRR by the close of 2009. Hammond agreed to, and the parties began
implementing certain changes to operate under the counterproposal, yet Pertuis
was unsuccessful in obtaining formal documentation of his ownership from the
Hammonds, and at the time of this action, the Hammonds maintained Pertuis had
only acquired a one percent interest in FRR.
directors. (m) The majority used the corporate assets for their personal benefit and
at the expense of the corporations, failing to enforce the rights of the corporations,
as Hammond acknowledged they failed to pay interest on their loans from the
corporations. (n) The Hammonds resisted Pertuis' request for financial records.
(o) The Hammonds used corporate funds to contest Pertuis' shareholder rights,
using the same counsel as the corporations to represent them in this action. (p) The
Hammonds commingled the bonus and distribution compensation due Pertuis. As
in Ballard and Kiriakides, we find Pertuis "similarly faces prospects of exclusion
from the business, a slim chance of seeing a return any time soon, and no market in
which to otherwise unload his investment." Ballard, 399 S.C. at 595, 733 S.E.2d
at 110.
It is questionable whether the Appellants' argument that the trial court was required
to apply North Carolina law to Pertuis' claims relating to exclusion from the North
Carolina companies is preserved for review, as there is no indication in the record
on appeal that this specific argument was ever raised to the trial court. See
Noisette v. Ismail, 304 S.C. 56, 58, 403 S.E.2d 122, 124 (1991) (holding the Court
of Appeals should not address an issue which was not explicitly ruled on by the
trial court or brought to the trial court's attention in a motion to alter or amend); see
also Harkins, 340 S.C. at 616, 533 S.E.2d at 891 (holding an appellant has the
burden of providing this court with an adequate record for review). Nonetheless,
we note the trial court not only considered South Carolina law, but additionally
stated it had "also considered legal authority from North Carolina, submitted by
[the Appellants], which provides additional support for the foregoing analysis:
Meiselman." Thus, the trial court clearly considered Meiselman, and the
Appellants fail to argue on appeal how the trial court erroneously applied South
Carolina law instead of North Carolina law to the North Carolina companies.
Finally, the Appellants fail to cite any authority to support their conclusory
assertion that the trial court was required to apply North Carolina law to the
entities incorporated in North Carolina and that it would be error to apply South
Carolina law to the same. See Crocker, 366 S.C. at 399 n.1, 621 S.E.2d at 893 n.1
(holding "conclusory statements unaccompanied by argument and citation to
authority are insufficient to preserve an issue for appellate review," and noting
failure to provide such argument and citation renders an issue abandoned).
6. The Appellants challenge the award of $99,117 to Pertuis for unpaid
shareholder distributions. First, they argue Pertuis did not seek this relief in his
pleadings nor specifically testify he was entitled to any amount for unpaid
distributions, and the trial court, therefore, exceeded its authority in awarding the
same. They additionally maintain, while the court relied on the corporate tax
returns in making its determination on this matter, there was no finding Pertuis did
not receive the amounts listed on the K-1 forms or a finding that justifies the
amount ordered to be paid to Pertuis. Thus, they argue the record does not support
the award of $99,117 for unpaid distributions.
In regard to the Appellants' argument that the trial court exceeded its authority, it is
again questionable whether this argument is preserved for our review. See
Timmerman, 331 S.C. at 460, 502 S.E.2d at 922 (holding, when a party receives an
order that grants certain relief not previously contemplated or presented to the trial
court, the aggrieved party must move, pursuant to Rule 59(e), SCRCP, to alter or
amend the judgment in order to preserve the issue for appeal); see also Harkins,
340 S.C. at 616, 533 S.E.2d at 891 (holding appellant has the burden of providing
this court with an adequate record for review). Nonetheless, we find no error. In
his complaint, Pertuis complained about the impropriety surrounding the
distributions, alleging the Appellants "grant[ed] dividends and distributions to the
Majority without granting the same benefits to [him]." Further, Pertuis alleged he
had suffered damages and asked the court to "fashion relief for [him]" and, in
addition to his request for an ordered buyout of his shares, "pray[ed] for such other
and further relief as this Court may deem just and proper." Therefore, the award of
unpaid shareholder distributions is generally encompassed within the pleadings.
At any rate, we would find the issue was tried by consent. See Rule 15(b), SCRCP
("When issues not raised by the pleadings are tried by express or implied consent
of the parties, they shall be treated in all respects as if they had been raised in the
pleadings."); Fraternal Order of Police v. S.C. Dep't of Revenue, 352 S.C. 420,
435, 574 S.E.2d 717, 725 (2002) ("In order to be tried by implied consent, the issue
must have been discussed extensively at trial."). The record clearly reflects the
issue concerning shareholder distributions was extensively discussed at trial and
was tried before the court without objection.
In regard to the amount awarded, as with the Appellants' argument that the trial
court exceeded its authority, the record before us does not reflect this argument
was raised to the trial court and, therefore, it may not be preserved for appellate
review. Nonetheless, the trial court specifically stated it relied on "the corporate
[Appellants'] tax returns" in determining the amounts of distributions not paid to
Pertuis,5 and we find some evidence in the record to support such an award.6
5
The testimony is clear that the bonuses due Pertuis were disguised as
distributions. Dr. Alford's testimony reveals, if a shareholder distribution was
AFFIRMED.
HUFF, A.C.J., and WILLIAMS and THOMAS, JJ., concur.
made to one shareholder (Pertuis), then the other shareholders (the Hammonds)
would have also received a distribution proportionate to their share. Pertuis would
have then been entitled to the amount of that distribution as a shareholder, and any
bonus he would have been entitled to would have to be on top of that amount.
Thus, amounts he received for bonuses disguised as shareholder distributions
meant he was not receiving his proportionate share of distributions to which he
would have been entitled.
6
Specifically, the trial court found Pertuis was entitled to a 7.2% shareholder
interest in FRR, and the trial court received in evidence the tax records for FRR. A
review of these tax returns for FRR from 2008 through 2012 shows the cumulative
ordinary business income, or profit, for those years totals $1,376,481. This figure,
multiplied by 7.2%, comes to $99,106.63, which is very close to the award made
by the trial court.