ATTORNEY FOR APPELLANTS
Joni L. Grayson
ATTORNEYS FOR APPELLEES
Kyle P. Williams
Gary K. Kemper
SUPREME COURT OF INDIANA
ANNETTE GALLIGAN, )
CHARLES GALLIGAN, and )
JENNIFER GALLIGAN, )
Appellants (Plaintiffs Below), )
THOMAS GALLIGAN and ) Indiana Supreme Court
LARRY RICE, ) Cause No. 10S01-0004-CV-261
Appellees (Defendants Below), )
) Indiana Court of Appeals
IRISH PARK, INC. and ) Cause No. 10A01-9807-CV-256
THE MONEY STORE INVESTMENT )
Defendants Below, )
GOLDEN SHAMROCK, INC., )
Intervening Plaintiff Below. )
APPEAL FROM THE CLARK CIRCUIT COURT
The Honorable Daniel F. Donahue, Judge
Cause No. 10C01-9708-CT-324
ON PETITION FOR TRANSFER
February 2, 2001
This case deals with the effect of a corporation’s failure to follow
statutory requirements in a sale of substantially all of its assets.
Factual and Procedural Background
Irish Park, Inc. is an Indiana corporation operating a family-owned
construction business. It was founded by Thomas R. Galligan in 1983. From
its inception, Galligan has apparently owned fifty-two of the one hundred
issued shares and his four children, Annette, Charles, Jennifer, and
William, have owned twelve shares each. Galligan served as president and
director of Irish Park until January 1996, when he resigned both positions,
and Larry Rice, a long-time employee and member of the board, became
president. Galligan’s ex-wife, Jo Ann, apparently remained as the only
other director. In 1994, Rice and Galligan formed a second corporation,
Golden Shamrock, Inc., to engage in hauling aluminum. Galligan owned
eighty-five percent of the shares and Rice owned the remaining fifteen
By the end of 1996, Irish Park was struggling. It owed more than
$750,000 in bank debt and had assets estimated to be worth only
approximately $250,000. According to the minutes of a later meeting, this
balance sheet severely impaired the company’s ability to get new contracts.
In January 1997, Galligan sold his Golden Shamrock shares to Rice for one
dollar and the assumption by Golden Shamrock of some of Irish Park’s
obligations. At about the same time, Rice and Galligan started
negotiations directed towards a sale of all of Irish Park’s assets to
On May 23, 1997, Galligan and Golden Shamrock entered into an
agreement whereby Golden Shamrock would purchase all of Irish Park’s assets
and also real and personal property owned by Galligan individually. At
that time, Galligan remained the majority shareholder of Irish Park, but
was neither an officer nor a director of either Irish Park or Golden
Shamrock. The transaction was closed on May 30, 1997. None of the actions
required by the Indiana Business Corporation Law for a disposition of
substantially all of Irish Park’s assets were taken. There was no
recommendation by the Board, no notice to shareholders, and no shareholder
vote on the transaction. Indeed, it is not clear from the record who
comprised the Board of Irish Park at that point. On August 15, 1997, three
of the four minority shareholders, Annette, Charles, and Jennifer, filed
suit against Irish Park, Galligan, and Rice for fraud, breach of fiduciary
duty, conspiracy to misappropriate funds, and employment claims. The
complaint was later amended to add allegations of self-dealing and a claim
that the sale was ultra vires.
In response to the complaint, Galligan, as majority shareholder, sent
a notice to all the shareholders of a special shareholder meeting to be
held March 11, 1998. The purpose of this meeting was stated to be the
removal of the board, election of a new board, and ratification of the
asset sale. On March 10, the minority shareholders served a “Shareholders’
Notice Asserting Dissenters Right,” addressed to Galligan, Jo Ann, Rice,
and Irish Park, in which they objected to the asset sale and sought to
assert their dissenters’ rights pursuant to Indiana Code section 23-1-44-8.
Galligan was the only shareholder who attended the March 11 meeting.
Acting as a shareholder, he elected himself as the sole director. Then, as
director, he elected himself president and secretary of Irish Park.
Finally, as a shareholder, Galligan voted to ratify the asset sale.
After these corporate actions were taken, the defendants filed a
motion for partial summary judgment, contending that the plaintiffs were
limited to dissenters’ rights under the doctrine set forth in Fleming v.
International Pizza Supply Corp., 676 N.E.2d 1051, 1056-57 (Ind. 1997).
The plaintiffs responded with their own motion for partial summary judgment
asking the court to rule that: (1) Rice was an officer or director of
Irish Park at the time of the asset sale; (2) the asset sale was voidable
because of Rice’s conflict of interest; (3) Rice breached his fiduciary
duties as an officer and director of Irish Park and Galligan breached his
fiduciary duty as a majority shareholder; (4) Rice’s conduct was willful
and reckless; and (5) the asset sale was not in compliance with the
requirements for a major asset sale by an Indiana corporation. The trial
court granted the defendants’ motion for partial summary judgment and
denied the plaintiffs’. The Court of Appeals affirmed the denial of
plaintiffs’ motion for partial summary judgment, but reversed the trial
court’s grant of defendants’ motion for partial summary judgment. Galligan
v. Galligan, 712 N.E.2d 1028 (Ind. Ct. App. 1999).
Standard of Review
On appeal, the standard of review of a summary judgment motion is the
same as that used in the trial court: summary judgment is appropriate only
where the evidence shows there is no genuine issue of material fact and the
moving party is entitled to a judgment as a matter of law. Ind.Trial Rule
56(C); Shell Oil Co. v. Lovold Co., 705 N.E.2d 981, 983-84 (Ind. 1998).
All facts and reasonable inferences drawn from those facts are construed in
favor of the non-moving party. Id.; Colonial Penn Ins. Co. v. Guzorek, 690
N.E.2d 664, 667 (Ind. 1997). The review of a summary judgment motion is
limited to those materials designated to the trial court. T.R. 56(H); Rosi
v. Business Furniture Corp., 615 N.E.2d 431, 434 (Ind. 1993).
I. Defendant’s Motion for Partial Summary Judgment
The trial court granted defendants’ motion for partial summary
judgment on the grounds that “the plaintiffs’ claim in this case is for a
statutory appraisal proceeding under I.C. 23-1-44-8 to determine the fair
market value of plaintiffs’ shares in Irish Park” and that under Fleming v.
International Pizza Supply Corp., 676 N.E.2d 1051, 1056-57 (Ind. 1997),
“the statutory appraisal procedure is plaintiffs’ exclusive remedy.” The
Court of Appeals reversed, holding that because the initial asset sale did
not meet the statutory requirements for a sale of substantially all of the
assets of a corporation, the dissenters’ rights were not triggered, and,
therefore, the shareholders could assert the common law remedies pleaded in
the complaint. The court also held that the later attempt to ratify the
sale was ineffective because the defendants did not invoke the statutory
procedures to trigger the plaintiffs’ dissenters’ rights. As a result, the
Court of Appeals concluded that Fleming was inapplicable. Galligan, 712
N.E.2d at 1032.
A. Fleming v. International Pizza Supply Corp.
In Fleming, this Court held that, “in a merger or asset sale, the
exclusive remedy available to a shareholder seeking payment for the value
of the shareholder’s shares is the statutory appraisal procedure.” 676
N.E.2d at 1056. This was based on Indiana Code section 23-1-44-8(c), which
reads: “A shareholder: who is entitled to dissent . . . may not challenge
the corporate action creating . . . the shareholder’s entitlement.” The
Official Comments to section 23-1-44-8 note that the Indiana legislature
deleted the language from the Revised Model Business Corporation Act that
stated that dissenters’ rights are exclusive “unless the action is unlawful
and fraudulent.” Deletion of the exception for “unlawful and fraudulent”
actions reflected a legislative policy choice to limit shareholders to
dissenters’ rights, even in fraudulent situations. It was also consistent
with the policies of corporate majority rule, finality, and resolving
dissenters’ claims on a timely basis. Fleming, 676 N.E.2d at 1057.
Fleming noted that the legislature specifically intended to eliminate the
doctrine stemming from Gabhart v. Gabhart, 267 Ind. 370, 392, 370 N.E.2d
345, 358 (1977), namely, that an action for a claim of fraud was an
alternative remedy available to shareholders attacking a transaction that
triggers dissenters’ rights. Fleming, 676 N.E.2d at 1054-55. Fleming also
noted that any claims that the corporation had disposed of assets for less
than full value, or any other claim of injury to the corporation, could be
asserted in the dissenters’ rights valuation proceeding and be valued along
with the other assets of the corporation:
[W]e generally agree that the expression “corporate action to which
the dissenter objects” as used in Ind. Code § 23-1-44-3 includes not
only the merger or asset sale itself but genuine issues of breach of
fiduciary duty and fraud affecting the value of the shares at the time
of the transaction. While we acknowledge that the appraisal remedy
does not provide for the individual liability of majority shareholders
or the recovery of punitive damages, we believe that those are the
policy choices made by the legislature in adopting Ind. Code § 23-1-44-
8(c) and are clearly within the legislature’s prerogative.
Id. at 1058.
B. The Requirements for an Asset Sale
Fleming applies only to corporate transactions that trigger
dissenters’ rights. Among those is a sale of “substantially all” of the
corporate property “other than in the usual and regular course of
business.” Ind.Code § 23-1-44-8 (1998). Indiana Code section 23-1-41-2
requires that, in order for an asset sale to be authorized, “the board of
directors must recommend the proposed transaction to the shareholders . . .
and the shareholders entitled to vote must approve the transaction.” That
section also requires the corporation to notify the shareholders of the
meeting in which they will vote on the proposed transaction and provide a
description of the transaction. Id. § 23-1-41-2(d).
The May 30 sale of Irish Park’s assets to Golden Shamrock did not
comply with corporate law in several respects. Galligan did not have the
authority to sell the corporation’s assets. He was not an officer of the
corporation and the bylaws specifically required that “all . . . written
contracts and agreements to which the Corporation shall be a party shall be
executed in its name by the President or . . . Vice Presidents and
attested by the Secretary or an Assistant Secretary.” More importantly,
the requirements of Indiana Code section 23-1-41-2 for the sale, lease, or
disposition of “all, or substantially all, of its property . . . otherwise
than in the usual and regular course of business” were not met.
Specifically, there was no proposal by the board, no notice to the
shareholders, and no approval by the shareholders.
The defendants effectively concede that the initial sale did not
conform to the requirements of the Indiana Business Corporation Law. They
argue that the asset sale was ratified on March 11, 1998, and that the
plaintiffs are therefore limited to statutory dissenters’ rights. We agree
that the March 11 meeting ratified the earlier sale.
Any corporate action that is defectively undertaken may be ratified
by subsequent action. Cf. Indiana Trust Co. v. International Bldg. & Loan
Ass’n, 165 Ind. 597, 607, 76 N.E. 304, 307 (1905). In May 1998, Galligan,
as the majority shareholder, sent each shareholder a notice of a
“Special Meeting of Shareholders, Irish Park, Inc.” The notice listed as
one of the meeting’s purposes “[t]o consider the ratification of the sale
of Irish Park assets to Larry Rice d/b/a Golden Shamrock on May 30, 1997.”
This satisfied the statutory notice requirement for the meeting. Then, at
the meeting held on March 11, 1998, Galligan replaced the current board of
directors and officers with himself as the sole director and chairman.
Finally, the minutes state:
The Chairman stated that Golden Shamrock, Inc. had made an offer to
purchase the assets of Irish Park along with two buildings, six acres
of land and various pieces of heavy equipment which are the personal
property of Thomas R. Galligan. The sale of assets had become
necessary when the Internal Revenue Service stated that it would levy
upon Irish Park’s assets on June 2, unless over $76,000.00 of
delinquent withholding taxes were repaid on that date. In addition,
the Corporation had lost its ability to bond construction projects.
Without its bonding capacity, the Corporation was unable to liquidate
its existing bank debt. All of the shareholders having personally
guaranteed corporate debt, it was believed that immediate liquidation
of the corporate bank debt was in the best interest of the Corporation
as well as the shareholders.
Because Galligan was the sole director, this satisfied the requirement of a
recommendation by the board. Finally, the motion was voted on and a
majority of the issued shares—Galligan’s fifty-two percent—voted in favor
of the transaction, thus satisfying the final requirement of the Code.
Generally, at this point, as Fleming held, the minority shareholders are
limited to dissenters’ rights and may not challenge the validity of the
D. Dissenters’ Rights
The analysis would normally end here because there has been a valid
asset sale and Indiana Code section 23-1-44-8 and Fleming limit a
shareholder’s remedies to dissenters’ rights. However, the Court of
Appeals held that because the corporation did not follow the procedures
detailed by the statute providing for dissenters’ rights, the shareholders
were not limited to the rights provided by that statute.
Indiana Code sections 23-1-44-1 to 20 govern dissenters’ rights.
First, Indiana Code section 23-1-44-8 identifies the transactions that may
trigger dissenters’ rights. Among these is an asset sale requiring a
shareholder vote. The transaction approved at the March 11 meeting plainly
falls within this description. The fact that Galligan as a director or
shareholder may have had an interest in the transaction by reason of his
concurrent sale of his own property to Golden Shamrock does not disable him
from voting as a shareholder in favor of the sale. As the Official
Comments to the Indiana Business Corporation Law make clear, the statute
explicitly intended to permit a majority shareholder to vote on a
transaction even if it is a “conflict of interest” transaction. Ind.Code
Ann. § 23-1-35-2 cmts. (d) (West 1998).
Indiana Code section 23-1-44-10(a) then requires a notice of the
meeting at which the proposed transaction is to be voted. The notice must
inform the shareholders that they “are or may be entitled to assert”
dissenters’ rights. At the shareholders’ meeting, any shareholder wishing
to assert dissenters’ rights must deliver a notice of intent to demand
payment before the vote and must not vote in favor of the proposed
transaction. Ind.Code § 23-1-44-11.
Within ten days after approval by the shareholders or within ten days
after the corporate transaction if no vote was taken, the corporation must
send those entitled to dissent a notice that must:
(1) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited; (2) inform
holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is received; (3) supply a
form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters’ rights certify whether or not the person acquired
beneficial ownership of the shares before that date; (4) set a date by
which the corporation must receive the payment demand, which date may
not be fewer than thirty (30) nor more than sixty (60) days after the
date the subsection (a) notice is delivered; and (5) be accompanied by
a copy of this chapter.
Id. § 23-1-44-12(b).
The dissenting shareholders must then demand payment, certify whether
they acquired beneficial ownership of the shares before the date the
transaction was first announced to the media or shareholders, and deposit
the certificates according to the terms set forth in the notice sent by the
corporation. Id. § 23-1-44-13(a). The shareholders retain all the rights
of a shareholder until these rights are changed by the proposed
transaction. Id. § 23-1-44-13(b). A shareholder’s failure to follow these
procedures ends the shareholder’s dissenters’ rights. Id. § 23-1-44-13(c).
As soon as the corporate action is taken, the corporation must pay
the corporation’s estimate of the “fair value” of the deposited shares to
every shareholder who complies with the above requirements. Id. § 23-1-44-
15(a). “Fair value” is defined to mean the value of the shares
“immediately before” the sale. Id. § 23-1-44-3. The payment must be
accompanied by the corporation’s balance sheet, income statement, a
statement of changes in shareholders’ equity, interim financial statements,
the corporation’s estimate of the fair value of the shares, and a statement
of the dissenters’ ability to demand payment. Id. § 23-1-44-15(b). If the
corporation does not take the proposed corporate action within sixty days,
the shares must be returned to the shareholders. Id. § 23-1-44-16(a). If,
at some later time, the corporation desires to take the proposed action, a
new dissenters’ notice must be sent. Id. § 23-1-44-16(b).
A dissenting shareholder who disagrees with the valuation placed on
the shares may notify the corporation of the shareholder’s estimate of the
fair value of the shares and demand payment. Id. § 23-1-44-18(a). This
action must be taken within thirty days after the corporation offers
payment. Id. § 23-1-44-18(b). If the corporation and dissenters cannot
agree on the fair value of the shares, Indiana Code section 23-1-44-19
requires the corporation to initiate a court proceeding to determine fair
value of the shares on pain of liability for the amount demanded by the
E. Irish Park’s Failure to Comply with the Dissenters’ Rights
Although the March 11, 1998 ratification of the asset sale complied
with the statutory requirements for a sale of substantially all of a
corporation’s assets, see Ind.Code § 23-1-41-2, it did not satisfy the
dissenters’ rights statute. The defendants partially complied with Indiana
Code section 23-1-44-10(a) when they included in the notice of the 1998
shareholder’s meeting a statement that one of the purposes was “[t]o
consider the ratification of the sale of Irish Park assets to Larry Rice
d/b/a Golden Shamrock on May 30, 1997.” They failed to meet the statutory
requirement that the notice advise the shareholders of their ability to
assert dissenters’ rights. However, this omission was harmless because the
plaintiffs clearly were aware of their dissenters’ rights and had served a
“Shareholders Notice Asserting Dissenters’ Right” the day before the
There was, however, a material flaw in the corporation’s performance
under the dissenters’ rights statute. Once the proposed sale was ratified
and the shareholders gave their notice of dissent, it then became the
corporation’s obligation to supply a dissenters’ notice in accordance with
section 23-1-44-12(b). The notice would have told the shareholders where
to deposit their certificates and fixed a date by which the surrender had
to be accomplished. This did not occur.
F. The Effect of Non-Compliance
As a result of the corporation’s failure to send the notice required
by section 12(b) of the dissenters’ rights statute, the clock prescribed by
Indiana Code section 23-1-44-12(b)(4) leading to a specific date for the
dissenting shareholders to demand payment did not start to tick.
Specifically, the plaintiffs were not told where and when to submit their
shares. This error was not harmless because the plaintiffs did not submit
their certificates or meet the other mechanical requirements of section 13
and the timetable for initiating an appraisal proceeding was not triggered.
In effect, the failure to send the notice put the chain of corporate
procedures into limbo. If the shareholders had not challenged this action,
the corporation’s obligation to pay for the shares would have been deferred
forever. The statute is designed to achieve quick payment and to minimize
litigation. But, the statute obviously contemplates that each party will
take the prescribed steps in the sequence dictated by the statute. The
corporation’s failure to take the required steps, if unredressed, would
frustrate that goal. Finally, the corporation did not meet the payment
requirements of section 15, unless the amount due was zero. Even if no
amount was due, the corporation did not comply with the mandate of
subsection 15(b) that the corporation supply the required documentation,
including a statement of its estimate of the share value.
The issue thus becomes the proper remedy for these failures. Although
the dissenters’ rights statute expressly provides a remedy when the
dissenters fail to follow its requirements, I.C. §§ 23-1-44-11(b), 13(c) &
18(b), it remains largely silent as to what happens if the corporation
fails to initiate the dissenters’ rights proceeding. Presumably this is
because most corporations scrupulously follow the dictates of the statute
to foreclose litigation, including the possibility of individual
shareholders seeking remedies against the corporation and its management in
addition to payment of the value of their shares.
The Court of Appeals held “that Galligan and Rice are not entitled to
hold Plaintiffs to the remedy provisions of Ind. Code § 23-1-44 while
exempting themselves from its notice provisions.” Galligan, 712 N.E.2d at
1032. The Court of Appeals concluded that a suit for breach of fiduciary
duty and fraud would be available to attack the underlying transaction.
Presumably, the remedies for such a claim include rescission and, under
some circumstances, punitive damages. We do not agree that these claims
are available. As Fleming pointed out, the statutory scheme strongly
favors majority rule and finality of corporate transactions. 676 N.E.2d at
1057. The 1986 Indiana Business Corporation Law sought to eliminate the
opportunity created by prior decisional law to invoke broader remedies than
a fair valuation of the shares. For that reason, we think the consequence
of disregarding the statute is not to vitiate the dissenters’ rights
provisions altogether. Moreover, we do not believe the corporation should
be able to eliminate dissenters’ rights by its own inaction. Here, the
plaintiffs, as shareholders, had attempted to assert dissenters’ rights at
the time of the ratified corporate action. They cannot be held to have
forfeited their rights by reason of the corporation’s ineptitude.
Accordingly, the notice of intent to dissent remained valid as to the
ratified transaction and the dissenters are entitled to their rights under
The defendants contend that despite the corporation’s disregard for
statutory requirements the dissenters are limited to their dissenters’
rights as articulated in Fleming. This result is also unsatisfactory
because it provides little incentive for corporations and their managers to
comply with the statute. If a failure to send the dissenters’ notice as
required by Indiana Code section 23-1-44-12 has only the effect of tolling
the dissenters’ statutory time periods for invoking the procedure,
dissenters’ sole remedy would be to petition the court to force the
corporation to obey the statute. But some shareholders may be ignorant of
their remedies or have little incentive to move promptly and at potentially
significant expense. If this is the sole remedy, disregard of the statute
with a consequent relegation of the minority shareholders to a legal limbo
will go unredressed.
We conclude that the proper resolution of these conflicting
considerations is to restrict the shareholders to their dissenting
shareholder rights as to the underlying transaction, but also to recognize
that they may proceed with a separate claim against the persons responsible
for a breach of statutory duty with respect to the dissenters’ rights
proceeding. Otherwise stated, dissenters’ rights are the exclusive remedy
afforded for actions or omissions in a merger or asset sale, but failure to
afford the dissenters’ rights remedy is an independent wrong that is not
itself subject to the dissenters’ rights provisions.
Damages for a breach of the statutory duty to provide dissenters’
rights would presumably include any loss incurred from delay in
consummating the dissenting shareholders’ proceeding or otherwise
occasioned by the failure to comply with the statute. If the corporation
is solvent there will normally be no damages in addition to the amount
recoverable by the exercise of dissenters’ rights. However, if the
corporation’s financial capacity to make full payment of the fair value has
been impaired by reason of the delay, the shortfall may be a component of
those damages. Here, the plaintiffs requested dissenting shareholder
rights despite the corporation’s failure to comply with the notice
requirements. If the corporation’s minutes are to be believed, the value
of the shares may ultimately prove to have been zero at all relevant times.
Thus, in this case, there may be no consequences of the failure to comply
with corporate law, but that is an issue for the trial court.
The 1986 wholesale revision of Indiana corporate law included a number
of provisions that were intended to limit the liability of directors of
Indiana corporations. We find nothing, however, in that statute that
abrogates the basic principle that directors who breach duties to the
corporation or to shareholders may be held accountable. Nor do we believe
that this recognizes a “new” cause of action for breach of the statutory
duties imposed by the Indiana Business Corporation Law. Rather, we simply
apply the commonly accepted principle that the directors may be liable for
disregarding a statutory mandate to these unusual facts, where the
directors failed to take the steps necessary to enjoy the safe harbor
provided by the dissenters’ rights statute.
No party has raised the issue of the requisite scienter for director
liability, but we note that the Indiana Business Corporation Law has
explicitly addressed that issue in Indiana Code section 23-1-35-1. More
particularly, subsection (e) of that section provides that a director “is
not liable” for an act or omission unless “[t]he breach or failure to
perform constitutes willful misconduct or recklessness.” This section
seems rather clearly to recognize that a claim can exist for breach of
statutory duty of a director. See also Ind.Code Ann. § 23-1-36-2 & cmts.
(West 1998) (discussing the duties and potential liabilities of officers).
In sum, the shareholders accept the risk of loss from various causes,
including competition, natural disasters, and a variety of business
judgments. But the risk that the corporate law will be ignored is not one
of them. A shareholder has a right to assume that the corporation will be
operated in conformity with the statute. The statute is quite clear that
directors who recklessly or willfully disregard statutory directives may be
liable. Those provisions, like the dissenters’ rights provisions, are
built into the structure the shareholder accepts by buying a share in an
G. Attorney’s Fees
We also note that the statute itself provides an additional deterrent
to disregarding its procedures. Although the statute does not specifically
address what happens when the corporation fails to comply with the
requirements of notice and other steps set forth in sections 10 through 18,
Indiana Code section 23-1-44-20(b) provides that:
The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1)
against the corporation and in favor of any and all dissenters if the
court finds the corporation did not substantially comply with the
requirements of sections 10 through 18 of this chapter; or (2) against
either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
This provides an incentive to obey the statute in the initial transaction,
because in addition to having to pay the fair value of dissenters’ shares,
the corporation may be liable for fees and expenses of counsel and experts
for both sides.
Because the corporation caused the delay in the dissenters’ rights
proceedings, the response time for dissenters has been delayed until the
corporation abides by the statute. The statute also provides for interest
on the unpaid balance of fair value from the date of tender of the shares
to the corporation to judicial resolution of a valuation dispute. Ind.Code
§ 23-1-44-19(e). It does not provide for interest if the corporation pays
voluntarily. Ind.Code Ann. § 23-1-44-18(a) & cmts. (West 1998). Given
that the corporation did not comply with the statute, interest from the
date of the sale should follow. If the value of the shares was zero, this
is an academic point.
In this case, the plaintiffs can proceed in court to force Irish Park
to comply with the dissenters’ rights statute. As Fleming held,
shareholders’ claims for fraud in the underlying transaction, including the
breach of fiduciary duty claims, may be evaluated as part of the
dissenters’ rights proceeding to the extent any fraud or breach caused a
decline in the value of their shares. 676 N.E.2d at 1058. But, as Fleming
held, these claims may not be pursued as independent actions. Id. at 1056.
The plaintiffs can also seek to recover attorney’s fees and any other
expenses, if they can show that these fees and costs were caused by Irish
Park’s failure to follow the mandate of the dissenters’ rights statute, and
interest. Finally, if damages can be shown to have been caused by a breach
of a statutory duty with respect to the dissenters’ rights proceedings, the
plaintiffs may bring a separate claim against the persons responsible.
II. Plaintiffs’ Motion for Partial Summary Judgment
The Court of Appeals affirmed the trial court’s denial of the
plaintiffs’ motion for partial summary judgment on five issues including:
(1) whether Rice was an officer and director of Irish Park at the time of
the asset sale, (2) whether the asset sale between Irish Park and Golden
Shamrock was voidable for conflict of interest, (3) whether Galligan and
Rice breached their fiduciary duties as majority shareholder and officer
and director, respectively, (4) whether Rice’s conduct was reckless and
willful giving rise to personal liability under the Indiana Code, and (5)
whether the asset sale was in accordance with the Indiana Code.
First, the issue of whether Rice was an officer and director at the
time of the asset sale is not appropriate for summary judgment. Summary
judgment is proper when there are no genuine issues of any material fact
and the moving party is entitled to judgment as a matter of law. Ind.Trial
Rule 56. On a summary judgment motion, the court cannot weigh evidence to
determine its credibility. National City Bank v. Shortridge, 689 N.E.2d
1248, 1251 (Ind. 1997). In this case, although the plaintiffs designated
evidence that Rice was an officer and director, namely, Rice’s signature on
the Irish Park corporate tax return and the lack of records indicating
Rice’s resignation, Rice designated deposition testimony that he resigned
as an officer and director of Irish Park in January of 1997. This raises a
genuine issue of fact. To the extent Rice’s status is material to any
issue in the case, it remains for trial.
Plaintiffs next claim that the asset sale to Golden Shamrock was
voidable because Rice was an officer and director of Irish Park and also
owned Golden Shamrock. Indiana Code section 23-1-35-2 defines a conflict
of interest transaction as “a transaction with the corporation in which a
director of the corporation has a direct or indirect interest.” It is not
clear that Rice was a director of Irish Park at the time of the asset sale.
Even if he was a director, there is a factual issue raised as to whether
the transaction was valid. This issue is also not appropriate for summary
Similarly, the issues of whether Rice breached his fiduciary duties
to the shareholders as an officer and director and whether his conduct was
willful and reckless as described in Indiana Code section 23-1-35-1 require
resolution of his role in Irish Park at the time of the asset sale, as well
as a determination of the other factual issues these claims raise.
The plaintiffs also contend that as a matter of law Galligan breached
his fiduciary duty to them as minority shareholders. Although it is true
that the majority shareholder owes fiduciary duties to the minority
shareholders under Indiana law, Barth v. Barth, 659 N.E.2d 559, 561 (Ind.
1995), the facts in this case do not establish as a matter of law that
Galligan breached his duties as a fiduciary by failing to act in the best
interests of the shareholders and the corporation. He may have caused the
corporation to take action that did not comply with statutory requirements,
but there is no showing by undisputed facts that he failed to act in the
interests of the corporation and its shareholders. We affirm the trial
court’s denial of summary judgment on this issue. Moreover, if, as
Galligan apparently claims, the shares were worthless by the time of the
transaction, there may well be no damages even if there were breaches of
Finally, plaintiffs seek summary judgment on whether the sale of
assets was in accordance with the Indiana Code. Indiana Code section 23-1-
41-2 allows a corporation to sell all or substantially all of its assets,
not in the regular course of business, if the board of directors recommends
and its shareholders approve the proposed transaction. In this case, it is
clear that the original sale on May 30, 1997 did not comply with the
requirements of the statute. However, for the reasons given above, the
corporation’s subsequent acts satisfied the requirements of the asset sale
statute. Therefore, the plaintiffs’ motion for summary judgment was
The trial court’s grant of defendants’ motion for summary judgment is
affirmed as to the corporation, but vacated as to the other defendants.
The trial court’s denial of plaintiffs’ motion for summary judgment is
affirmed. This case is remanded for proceedings consistent with this
SHEPARD, C.J., and DICKSON and RUCKER, JJ., concur.
SULLIVAN, J., concurs in part with separate opinion.
Attorney for Appellants
Joni L. Grayson
Attorneys for Appellees
Kyle P. Williams
Gary K. Kemper
INDIANA SUPREME COURT
CHARLES GALLIGAN, and
Appellants (Plaintiffs below),
THOMAS GALLIGAN, and
Appellees (Defendants below).
IRISH PARK, INC. and
THE MONEY STORE INVESTMENT
GOLDEN SHAMROCK, INC.,
(Intervening Plaintiff below).
) Supreme Court No.
) Court of Appeals No.
APPEAL FROM THE CLARK CIRCUIT COURT
The Honorable Daniel F. Donahue, Judge
Cause No. 10C01-9708-CT-324
ON PETITION FOR TRANSFER
February 2, 2001
SULLIVAN, Justice, concurring in part.
I concur in the majority’s opinion except for its recognition of a
private cause of action for breach of a statutory duty with respect to
dissenters’ rights proceedings. I believe that under common law principles
of agency and contract, shareholders have sufficient protection in such
situations. See Official Comments to Indiana Code § 23-1-36-2.
 The bylaws authorized the President, any Vice President, the Board of
Directors, or shareholders holding no less than one-fourth of the
outstanding shares to call a special shareholder’s meeting. Pursuant to
Indiana Code section 23-1-29-2(a), this was a valid provision.