Po-Boy Land Co. v. Mullins
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Cite as 2011 Ark. App. 381
ARKANSAS COURT OF APPEALS
DIVISION II
CA10-1249
No.
PO-BOY LAND COMPANY, INC., ET
AL.
APPELLANTS
V.
KENNETH MULLINS, JAMES
STINSON, AND SAM TYSON
APPELLEES
Opinion Delivered
May 25, 2011
APPEAL FROM THE HEMPSTEAD
COUNTY CIRCUIT COURT
[NO. CV-06-74-1]
HONORABLE JOHN S.
PATTERSON, JUDGE
REVERSED AND REMANDED
JOHN B. ROBBINS, Judge
Appellant Po-Boy Land Company, which is a Hempstead County hunting club (“the
Club”) appeals from a partial summary judgment in favor of appellees Kenneth Mullins, James
Stinson, and Sam Tyson.1 Appellees are former members of the Club who filed suit in 2006
for wrongful expulsion, seeking dissolution of the Club due to the directors’ oppressive
conduct. The court granted their requested relief, and the Club filed this appeal. Based on our
review of the affidavits, corporate papers, and other matters considered by the circuit court,
we conclude that summary judgment was inappropriate due to the existence of numerous
issues of material fact. We therefore reverse and remand the court’s order.
1
We dismissed a prior appeal because the partial-summary-judgment order did not
contain a proper Ark. R. Civ. P. 54(b) certificate to permit an immediate appeal. Po-Boy Land
Co. v. Mullins, 2010 Ark. App. 709. The circuit court subsequently entered an amended order
and certificate with specific factual findings as to why there was no just reason to delay the
appeal. This certificate complies with Rule 54(b), and we now have jurisdiction to address the
merits of the case.
Cite as 2011 Ark. App. 381
The Club was formed in 1993 with the sole asset of 2000-plus acres in Hempstead
County. It established itself as a closely held corporation, offering just fifteen shares of stock
at $103,060 per share. Appellees Mullins and Stinson were original shareholders, and appellee
Tyson later purchased his share in 1994. Stinson also acquired two additional shares during
the 1990s.
The events leading to this lawsuit began in the fall of 2004 when the Club received
information that Stinson wanted to sell one of his shares to a Mr. McQueen for $212,000, and
that Tyson wanted to sell his share to a Mr. Clay for the same price. Neither McQueen nor
Clay were current shareholders with the Club. Mullins, who attended the meeting with
Tyson’s and Stinson’s proxies, provided the membership with details of the transactions and,
according to Club president John Hearnsberger, stated that he had advised Stinson and Tyson
on the sales price. During the meeting, Hearnsberger reminded his fellow members that the
Club’s by-laws gave it the right of first refusal to buy the shares.2 The members expressed
interest in this possibility, and the matter was referred to the Club’s board of directors.
On October 9, 2004, the board voted to acquire Tyson’s and Stinson’s shares at the
$212,000 price. Mullins, who was a board member, voted against the purchases. The board
also decided (with Mullins abstaining) to finance each purchase by assessing a percentage of
2
The by-laws provided that, if any member received a bona-fide offer to purchase his
share in the Club, he must send the Club a copy of the proposed sales agreement and notify
the Club of his intent to accept it. The Club would then have thirty days to accept the terms
of the agreement and purchase the share itself. If the Club declined to exercise its right of first
refusal, it still retained the right to approve of the outside buyer.
2
Cite as 2011 Ark. App. 381
the price against the remaining shares. This resulted in Mullins being assessed $31,450.55 on
his single share and Stinson (who owned two shares in addition to the one he was selling)
being assessed $78,043.96. The Board sent assessment requests to all its members and notified
Stinson and Tyson that it had voted to purchase their shares.
Not long thereafter, controversy arose on two fronts. First, Tyson emailed a board
member stating, “This is not what I wanted to happen.” Tyson explained that he desired to
sell his share to Clay and continue hunting at the Club as Clay’s guest. He also stated that he
was unaware of certain Club rules and regulations, and he asked the Club to forward copies
of its articles and bylaws to him. Despite Tyson’s misgivings, the Club informed him that it
had purchased his share and that he no longer had Club privileges. Secondly, Mullins and
Stinson refused to pay the assessments against their shares, citing the Club’s lack of authority
to levy assessments for the purpose of repurchasing a member’s stock. As the dissension over
this point mounted, Mullins announced that his share would be put up for sale as well.
The Club responded to Mullins’s and Stinson’s failure to pay their assessments by
suspending their membership privileges and scheduling a board meeting to consider their
expulsion. In December 2004, the board met and terminated their memberships on two
grounds: 1) failure to pay the assessments, and 2) providing false information about
McQueen’s $212,000 offer to Stinson. The latter ground was based on the board’s belief that
Mullins and Stinson misrepresented that Stinson had a firm deal to sell his share to McQueen.
The Board also rescinded its $212,000 offer to purchase Stinson’s share. President
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Cite as 2011 Ark. App. 381
Hearnsberger appointed a committee to engage an appraiser for the purpose of establishing
the value of Mullins’s and Stinson’s shares.
Meanwhile, Mullins, Stinson, and Tyson hired an attorney, who informed the board
that all three men would sell their shares (five total) to the Club for $212,000 each. The Club
apparently took this letter as proof that all three men were involved in a conspiracy to
artificially increase the value of their stock, and the board scheduled a meeting to address
Tyson’s conduct with regard to the sales. In April 2005, the board voted to terminate Tyson’s
membership for “conduct unbecoming a member” and to rescind its offer to purchase Tyson’s
share.
At some point, the Club obtained an appraisal that valued its shares at $93,100
each—an amount less than the original 1993 subscription price and far less than the price the
Club agreed to pay at the October 2004 meetings. The Club informed appellees that it would
pay that price for their shares.
Mullins, Stinson, and Tyson did not accept the Club’s offer to purchase their shares for
$93,100. Instead, they sued the Club and its remaining members for wrongful expulsion,
alleging the Club’s lack of authority to impose the assessments and other “oppressive”
conduct. Their complaint sought an order enjoining the Club’s actions, declaring the Club’s
actions null and void, awarding monetary damages, and dissolving the Club and appointing
a receiver. The Club answered that it had the power to levy the assessments and that all three
appellees had engaged in conduct unbecoming a member, warranting their expulsion.
Following discovery, each side filed a motion for summary judgment with numerous
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Cite as 2011 Ark. App. 381
attachments, including minutes of relevant meetings; corporate articles, by-laws, and other
documents; and affidavits and depositions from almost all members and directors. After
viewing the attachments and hearing the parties’ arguments, the circuit court entered a partial
summary judgment, ruling that the Club’s assessments were improper; that the termination
of appellees’ memberships was improper; that the Club’s actions were oppressive; and that the
Club should be dissolved and a receiver appointed.
The Club now appeals from the summary-judgment order. It argues that, contrary to
the court’s ruling, it possessed the authority to burden Mullins’s and Stinson’s shares with
assessments; that it had the power to expel Mullins and Stinson for not paying the assessments;
that it had the power to expel all three appellees for conduct unbecoming a member, i.e.,
conspiring to inflate the price of their shares; and that it did not engage in oppressive conduct
that would require corporate dissolution under Ark. Code Ann. § 4-27-1430 (Repl. 2001).
As we will explain, issues of material fact remain on each of these issues, thereby precluding
the entry of summary judgment.
With regard to the Club’s authority to levy assessments, both sides asked the circuit
court to glean the extent of the Club’s assessment power by reviewing the language in its
corporate documents. The court’s task was akin to contract interpretation. See William Meade
Fletcher, Fletcher Cycolpedia of the Law of Private Corporations §§ 3640 & 4198 (Revs. 2006 and
2001). See also Taylor v. Hinkle, 360 Ark. 121, 200 S.W.3d 387 (2004). The law of contract
interpretation is well established. The court’s duty is to construe the meaning of the writing
in accordance with the plain language employed. Machen v. Machen, 2011 Ark. App. 47, ___
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S.W.3d ___. When a contract is free of ambiguity, its construction and legal effect are
questions of law for the court to determine. Id. But, if there is doubt or uncertainty as to the
meaning of the writing and it is fairly susceptible to more than one equally reasonable
interpretation, it is ambiguous. Id. The meaning of an ambiguous writing is a question of fact,
and the fact-finder may use parol evidence to aid in interpreting the writing. See First Nat’l
Bank v. Griffin, 310 Ark. 164, 832 S.W.2d 816 (1992).
Here, the parties presented the court with more than one equally reasonable
interpretation of the Club’s corporate documents. The Club cited provisions of its private
offering memorandum, subscription agreement, and articles of incorporation, stating that
stockholders’ shares were “assessable” and that memberships could be terminated for failing
to pay any assessments. Appellees cited provisions of those same documents, along with the
Club’s by-laws, purporting to limit the Club’s assessment authority to certain specific
purposes, none of which included the repurchase of a member’s share. The private offering
memorandum, for instance, declared that members’ shares were subject to assessments for
“additional capital”; or for “alteration, modification, or improvement of the Corporation’s
facilities”; or for “operating expenses and capital improvements.” The subscription agreement
and articles of incorporation allowed assessments “as set forth in the by-laws,” which, in turn,
provided that taxes and “capital assessments” would be subject to payment by all shareholders,
and that any assessment recommended or requested for “alteration, modification, or
improvement of Corporation facilities” must be approved by the shareholders at a special
meeting.
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Cite as 2011 Ark. App. 381
The parties also offered, as attachments to their motions for summary judgment,
extrinsic evidence as an aid to interpreting the documents. The Club provided minutes from
previous shareholder meetings in which assessments were imposed and presented affidavits
from several shareholders who stated that the Club was not a money-making enterprise and
that the only way to buy a member’s share, pursuant to the Club’s right of first refusal, would
be by assessment. Appellees, for their part, claimed that the assessments mentioned in the
Club’s minutes were strictly for the purpose of improvements or repairs. They also noted that
one set of minutes reflected the repurchase of a member’s share via a bank loan rather than
by a designated assessment. Based on these submissions, the court ruled that the Club lacked
the authority to impose the assessments on Mullins’s and Stinson’s shares.
Given the nature of the parties’ arguments and proof, we cannot help but conclude that
the circuit court weighed the parties’ evidence, interpreted an ambiguous set of documents,
and reached a factual finding as to their meaning.3 A factual finding, however, is not within
the realm of a summary judgment. See Lee v. Mansour, 104 Ark. App. 91, 289 S.W.3d 170
(2008). The purpose of a summary judgment is not to try the issues but to determine whether
there are any issues to be tried. Beckworth v. Diamante, 2010 Ark. App. 815, ___ S.W.3d ___.
Even where parties file cross-motions for summary judgment, the proceeding is not converted
into a bench trial; rather, the circuit court’s ruling must still be one of law. If material issues
3
Both sides, in their opening briefs to this court, cite the clearly erroneous standard
of review, which is applicable when reviewing a circuit court’s factual findings. Ark. R. Civ.
P. 52(a) (2011).
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Cite as 2011 Ark. App. 381
of fact remain to be decided, the circuit court may deny cross-motions for summary
judgment. Acuff v. Bumgarner, 2009 Ark. App. 854, ___ S.W.3d ___. We therefore hold, as
we did in Deltic Timber Corp. v. Newland, 2010 Ark. App. 276, ___ S.W.3d __, that where it
is impossible to determine on appeal that either party is entitled to judgment as a matter of
law, summary judgment should be reversed, even if the parties have filed cross-motions for
summary judgment.
Our holding applies equally with regard to the circuit court’s rulings that appellees’
expulsions were improper and that the Club’s conduct was oppressive.4 On each
point—including whether appellees made misrepresentations amounting to conduct
unbecoming a member—the facts, though in no serious dispute, support conflicting
inferences. Such inferences should be viewed not through the lens of summary judgment but
from the standpoint of a fact-finder following a bench trial or jury trial. Where facts are not
disputed but reasonable inferences to be drawn therefrom are, summary judgment is
inappropriate. See Flentje v. First Nat’l Bank of Wynne, 340 Ark. 563, 11 S.W.3d 531 (2000).
Reversed and remanded.
M ARTIN and B ROWN, JJ., agree.
4
The parties agree that the reasonableness of the Club’s $93,100 per-share appraisal
is a fact question.
8
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