RICHARD L. FRYE, AND
C.E. FRYE FARMS, INC.,
Defendants Below, Appellants.
Appeal from the Circuit Court of Hampshire County
Honorable Donald H. Cookman, Judge
Civil Action No. 02-C-78
Submitted: April 6, 2005
Filed: June 30, 2005
Clyde M. See, Jr. John
See & See
Moorefield, West Virginia Attorney
for the Appellee
Joyce E. Stewart
Saville & Stewart
Moorefield, West Virginia
Attorneys for the Appellants
The Opinion of the Court was delivered PER CURIAM.
CHIEF JUSTICE ALBRIGHT dissents and reserves the right to file a dissenting
SYLLABUS BY THE COURT
1. In reviewing challenges to the findings
and conclusions of the circuit court made after a bench trial, a two-pronged
deferential standard of review is applied. The final order and the ultimate disposition
are reviewed under an abuse of discretion standard, and the circuit court's underlying
factual findings are reviewed under a clearly erroneous standard. Questions of
law are subject to a de novo review. Syllabus
Point 1, Public Citizen, Inc. v. First National Bank, 198 W. Va.
329, 480 S.E.2d 538 (1996).
2. Where a corporation issues stock
. . . with the consent and participation of all the stockholders, and there is
no charter, statutory or constitutional provision rendering the transaction void,
the agreement is valid and binding as against the corporation, and it [cannot]
afterwards repudiate the agreement . . . or compel [the stockholder] to pay the
difference between the par value of the stock and what has been paid or agreed
upon as full payment for it. Syllabus Point 1, in part, Vasey v. New
Export Coal Co., 89 W. Va. 491, 109 S.E. 619 (1921).
3. Where all the stockholders and officers
of a corporation participate without dissent in an informal meeting thereof .
. . they, as well as the corporation, are estopped to deny the legality of the
meeting. Syllabus Point 1, in part, Kearneysville Creamery Co. v. American
Creamery Co., 103 W. Va. 259, 137 S.E. 217 (1927).
The defendants below and appellants herein,
Richard L. Frye (hereinafter referred to as Richard Frye) and C.E.
Frye Farms, Inc. (hereinafter referred to as Frye Farms), appeal
from a final decision by the Circuit Court of Hampshire County, in favor of the
plaintiff below and appellee herein, Richard F. Frye (hereinafter referred to
as Rick Frye). On appeal, Richard Frye (See
footnote 1) assigns two separate errors: (See
footnote 2) (1) the circuit court erred in finding that certain stocks
were properly issued to Rick Frye, and (2) the circuit court erred in finding
that Rick Frye paid valuable consideration for the stocks. As cross-assignments
of error, (See footnote 3) Rick
Frye assigns two separate errors: (1) the circuit court erred when it declined
to award him attorney's fees in the dissolution action, and (2) the circuit court
erred when it declined to award Rick Frye compensation for his years of unpaid
service at Frye Farms. Upon a review of the parties' arguments, the record submitted for appellate
consideration, and the pertinent authorities, we affirm the decision of the
FACTUAL AND PROCEDURAL HISTORY
Frye Farms is a closely-held family farming
corporation. It was incorporated in 1961 with 700 shares of capital stock authorized
and issued. In 1982, Richard Frye came to live on the farm and work as the farm
manager. Richard Frye's son, Rick Frye, came to live and work on the family farm
in 1985. A shareholder's meeting was held in 1985, and the minutes of the meeting
indicate that Rick Frye was employed as a full-time employee of Frye Farms and
was to receive $75.00 per week for his labor on the farm. He also was permitted
to live in a corporately-owned house with almost no expenses (See
footnote 4) and was allowed use of the realty for his personal cattle
operation. The corporate minutes reflect that Rick Frye received compensation
for a total of three years, and did not receive monetary compensation thereafter
because the corporation was unable to pay him. For health reasons, Richard Frye
resigned as farm manager and Rick Frye was appointed farm manager, effective
January 1, 1995. At this time, Rick Frye received sixty shares of treasury stock
for his years of service and improvements to the farm. (See
In 1997, four stockholders, (See
footnote 6) owning a total of 240 shares of stock, instituted a civil
action seeking a dissolution of Frye Farms. Pursuant to the circuit court order,
the corporate assets were sold at a public auction, and a per value share was
established. The four remaining shareholders; Richard Frye, Linda Frye, (See
footnote 7) Dorothy Novak, (See
footnote 8) and Rick Frye, along with non-shareholder, Fred Novak, (See
footnote 9) desired to find a way to keep the farm. Subsequent to
the 1997 dissolution proceeding, ownership of Frye Farms was held by Richard
Frye, Linda Frye, Rick Frye, and Dorothy Novak, and the 240 reacquired stock
shares were designated as treasury or non-issued stock. The cost of buying out
the minority shareholders, along with the associated costs and fees, required
Frye Farms to borrow $374,900.00 on two bank notes. Fred Novak contributed $100,000.00
towards the repayment of the bank notes. The source of the funds used to pay
the bank notes is a point of contention on appeal and will be discussed later
in this opinion.
Thereafter, 120 shares of the reacquired
stocks were issued to Rick Frye. On February 25, 1998, Richard Frye signed at
least two stock certificates. (See
footnote 10) Richard Frye asserts that he signed the certificates
to replace certificates lost by the former shareholders from the 1997 dissolution
proceeding (but that were subsequently found). Rick Frye and Linda Frye assert,
and the circuit court agreed, that the stocks were issued to Rick Frye. Stock
Certificate No. 11, dated February 25, 1998, bears Richard Frye's signature (See
footnote 11) and Linda Frye's signature, (See
footnote 12) and the names of Linda B. Frye or Richard F. Frye,
j/t as owners of the sixty shares; and Stock Certificate No. 13, dated
February 25, 1998, bears Richard Frye's signature and Linda Frye's signature,
and the names of Richard F. Frye or Linda B. Frye, j/t as owners
of the sixty shares. Richard Frye testified that he signed the certificates when
they were blank and that he did not realize they had been issued to Rick Frye
until the spring of 2000 when he saw copies of the certificates.
Meanwhile, as the years progressed with Rick
Frye as farm manager, Rick and Richard Frye began to disagree about the proper
way to run Frye Farms. Physical
altercations and arrests ensued until Rick Frye returned home one day in July
2002 to find that the locks had been changed on the corporate home where he
had been living. Rick Frye filed suit on August 9, 2002, requesting a dissolution
of Frye Farms. A bench trial followed and the circuit court ordered a dissolution
of the corporation (See
footnote 13) pursuant to W. Va. Code § 31D-14-1430(2)
(2002) (Repl. Vol. 2003) (See
footnote 14) based on the finding that the corporation had failed
to elect a board of directors as required by law, (See
footnote 15) and that Richard Frye's actions
amounted to oppressive conduct. In its November 7, 2003, order, the circuit
court found that Stock Certificates Numbers 11 and 13 were validly issued to
Rick Frye, and that Rick Frye contributed approximately $292,896.70 as consideration
for the 120 stock shares.
Post-judgment motions were filed by both
parties. By order entered February 9, 2004, the circuit court denied Richard
Frye's motion for a new trial, and further declined to award Rick Frye his attorney's
fees or compensation for his unpaid years of service to Frye Farms. On appeal
to this Court, Richard Frye asserts the circuit court erred in holding that the
120 stocks, represented by Stock Certificates Numbers 11 and 13, were validly
issued to Rick Frye for fair and adequate consideration. Rick Frye cross-claims
and appeals to this Court the issues of attorney's fees and compensation for
STANDARD OF REVIEW
standard of review concerning appeals to this Court from non-jury trials, or
bench trials, is set forth in Syllabus Point 1 of Public Citizen, Inc. v.
First National Bank, 198 W. Va. 329, 480 S.E.2d 538 (1996):
reviewing challenges to the findings and conclusions of the circuit court made
after a bench trial, a two-pronged
deferential standard of review is applied. The final order and the ultimate
disposition are reviewed under an abuse of discretion standard, and the circuit
court's underlying factual findings are reviewed under a clearly erroneous
standard. Questions of law are subject to a de novo review.
With these standards in mind, we now consider the parties' arguments.
On appeal to this Court, Richard Frye presents
two grounds for reversal. First, he challenges the circuit court's finding that
the 120 shares of stock, represented by Certificate Numbers 11 and 13, were properly
issued to Rick Frye. Richard Frye asserts that stock issuance takes the consent
of the board of directors and the shareholders, and that such consent, express
or implied, was lacking in this exchange. Second, Richard Frye contends that
Rick Frye paid no consideration for the 120 shares of stock, and argues that
Rick Frye used money that belonged to Richard Frye to pay for the debts of the
farm, and further, that certain corporate monies were improperly credited to
On cross-appeal to this
Court, Rick Frye presents two arguments for our consideration. First, he asserts
that the circuit court erred in not awarding him attorney's fees pursuant to
W. Va. Code § 31D-14-1434(e). (See
footnote 16) Second, Rick Frye argues he was entitled to
compensation for the seven and one-half years he worked as the farm manager
without monetary compensation. Following a review of the record, we find that
the circuit court's underlying factual findings are not clearly wrong; and
further, that the circuit judge did not abuse his discretion in reaching the
ultimate disposition set forth in the final order. We first turn to the issue
of the validity of the stock issuance, which necessitates a discussion of the
consideration paid for the stocks. The discussion will then shift to Rick Frye's
cross- assignments of error.
A. Validity of Stock Issuance
The precipice of our determination
must necessarily be whether Stock Certificates No. 11 and 13 were validly issued
to Rick Frye. The board of directors may authorize shares to be issued
for consideration consisting of any tangible or intangible property or benefit
to the corporation, including cash, promissory notes, services performed, contracts
for services to be performed or other securities of the corporation. W. Va.
Code § 31D-6-621(b) (2002) (Repl. Vol. 2003). Therefore, to determine
the validity of Rick Frye's stock represented by Stock Certificates Number
11 and 13, we must determine whether the
stocks were issued to Rick Frye and what, if any, consideration was paid by
Rick Frye for the stocks.
We will first address the issuance of the
stocks. We note that the law requires that
the corporation issues shares, the board of directors must determine that the
consideration received or to be received for shares to be issued is adequate.
That determination by the board of directors is conclusive insofar as the adequacy
of consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid and nonassessable.
W. Va. Code § 31D-6-621(c) (2002). If it is determined that the corporation
issued the shares to Rick Frye, the law states that it is conclusive that the
consideration received was adequate.
Testimony before the circuit court revealed
two different versions surrounding Stock Certificates Numbers 11 and 13, each
issued for sixty shares and dated February 25, 1998. Linda Frye testified that
on February 25, 1998, she was in the kitchen with Richard Frye and Rick Frye.
Richard Frye directed Linda Frye, as secretary of Frye Farms, to prepare two
stock certificates for Rick Frye. Linda Frye prepared Stock Certificate Number
11 and made a mistake on Certificate Number 12, which she voided. She then proceeded
to complete Stock Certificate Number 13. Richard Frye then signed the stock certificates.
Both Linda and Rick Frye testified that they witnessed Richard Frye sign the
then Rick Frye directed that his mother's name be added to the certificates.
Conversely, Richard Frye testified that he
signed four stock certificates for the re-issuance of stock to former stockholders
who claimed they had lost their stock certificates. Richard Frye further maintained
that the stock certificates were blank when presented to him for his signature.
However, on cross-examination, Richard Frye's testimony regarding his signing
of four stock certificates was shown to be an impossibility. He testified that
he signed four stock certificates that were consecutively numbered. Because it
is undisputed that he signed stock certificate numbers 11 and 13, he could have
only signed four consecutively-numbered certificates if they were numbers 10,
11, 12 and 13, or 11, 12, 13, and 14. However, stock certificate number 12, which
was the certificate that Linda Frye testified she had made a mistake on and had
voided, was presented and clearly did not have Richard Frye's signature on it.
It is impossible that Richard Frye could have signed stock certificate Number
9 on February 25, 1998, because Number 9 was the original sixty shares issued
to Rick Frye and was signed in December 1994. Therefore, the circuit court was
not clearly wrong in discrediting Richard Frye's factual recitation. Based on
the testimony and evidence presented, the circuit court was not clearly wrong
in finding that Stock Certificates Numbers 11 and 13 were issued to Rick Frye.
We pause briefly to address Richard Frye's
argument that no meeting occurred and that the board of directors did not approve
the issuance of the stock as required under
W. Va. Code 31D-6-621. To address this issue, we take notice of the fact
that Frye Farms never elected a board of directors until August 12, 2002. However,
this failure is not fatal to the validity of the stocks issued to Rick Frye
on February 25, 1998. The law requires that each corporation must have a board
of directors. W. Va. Code § 31D-8-801 (2002) (Repl. Vol. 2003). The
qualifications of a director are to be set forth in the bylaws of the corporation.
W. Va. Code § 31D-8-802 (2002) (Repl. Vol. 2003). An examination
of the bylaws of Frye Farms reveals that [t]he business of the corporation
shall be controlled by a board of directors of three members, each of whom
shall own at least five shares of common stock in the corporation. While
Frye Farms did not have a board of directors, the only persons qualified to
hold that position, according to the corporate bylaws, were shareholders. On
February 25, 1998, when the stock certificates in dispute were signed, all
shareholders of Frye Farms were present either in person or by proxy. Dorothy
Novak was the only shareholder not present; however, Richard Frye was authorized
to vote on her behalf by proxy under W. Va. Code § 31D-7-722 (2002)
(Repl. Vol. 2003).
We have previously held that [w]here
a corporation issues stock . . . with the consent and participation of all the
stockholders, and there is no charter, statutory or constitutional provision
rendering the transaction void, the agreement is valid and binding as against
the corporation, and it [cannot] afterwards repudiate the agreement . . . or
compel [the stockholder] to pay the difference between the par value of the stock
and what has been paid or agreed upon as full payment for it. Syl. pt.
1, in part, Vasey v. New Export Coal Co.,
89 W. Va. 491, 109 S.E. 619 (1921). Moreover, [w]here all the stockholders
and officers of a corporation participate without dissent in an informal meeting
thereof . . . they, as well as the corporation, are estopped to deny the legality
of the meeting. Syl. pt. 1, in part, Kearneysville Creamery Co. v.
American Creamery Co., 103 W. Va. 259, 137 S.E. 217 (1927). Therefore,
while the gathering on February 25, 1998, that resulted in the issuance of
Stock Certificates Number 11 and 13 was indeed informal, it was valid because
it constituted an action by the shareholders who were the only persons authorized
under the corporate bylaws to hold the position as directors.
As previously discussed, because the corporation
issued the shares to Rick Frye, it is conclusive that the consideration received
was adequate under W. Va. Code § 31D- 6-621(c). However, to buttress
the finding that Rick Frye paid valuable consideration for the stocks, we acknowledge
that under W. Va. Code § 31D-6-621(b), stocks can only be issued
for consideration consisting of . . . [a] benefit to the corporation, including
cash . . . [or] services performed. Rick Frye asserted before the circuit
court that his many years of unpaid service to Frye Farms, as well as his payment
of almost $293,000.00 toward bank notes, constituted valid consideration for
payment of the stocks. The circuit court found that Rick Frye never had a written
contract for employment, and found he was amply compensated in the fact that
he lived on the farm and was not required to pay rent, utilities, or insurance.
Further compensation was found by Rick Frye's use of the corporation's land for
his own personal cattle business. Rick Frye's lack of monetary compensation could
be the sole basis to find valid consideration; however, the circuit court found
that Rick Frye contributed $292,896.70, to Frye Farms, which constituted valid
consideration for the stocks.
It is undisputed that Fred Novak contributed
$100,000.00 toward the payment of the bank notes. The issue on appeal is whether
this amount should be credited as payment from Rick Frye on the assertion that
the money was a gift to Rick Frye so that he could keep the farm, or whether
the money should be credited to the corporation as an investment by Fred Novak
in the corporation that his wife was a partial owner. The circuit court heard
evidence that, during the 1997 dissolution suit, Fred Novak had participated
in conversations wherein Rick Frye stated his intent to try to keep the farm,
but voiced his concerns that he could not afford to pay the appraised value of
the stock to acquire the outstanding stock. It was at this time that Fred Novak
offered $100,000.00 so that Rick Frye could keep the farm. Fred Novak came to
the farmhouse and in the presence of Richard Frye, Linda Frye, and Dorothy Novak,
delivered two checks to Linda Frye, totaling $100,000.00. Rick Frye and Linda
Frye testified that this money was to help Rick Frye keep the farm; whereas,
Dorothy Novak asserted that the money was for the benefit of the family to keep
the farm. Significantly, Fred Novak was present at the trial, but was not called
as a witness on behalf of Richard Frye or Frye Farms. The money was deposited
into Rick Frye's account, and there is no dispute that it was used to pay off
the initial bank note on January 2, 1998, in the amount of $106,920.16.
Rick Frye asserts that he also contributed
$131,351.50, toward payment of the second note. The circuit court recognized
that a significant portion of the proceeds originated as gifts from Linda Frye
to Rick Frye; however, the testimony supported that these gifts were made to
Rick Frye and that he used this money to pay toward the second note. Moreover,
it was found that Rick Frye contributed $54,625.04, towards the construction
of a new home on the property of Frye Farms. Therefore, the circuit court found
that Rick Frye contributed a total of $292,896.70, to reacquire the outstanding
stock relinquished during the 1997 dissolution proceeding. It is undisputed that
Frye Farms accepted and allowed Rick Frye to contribute these monies toward the
corporation and the bank notes.
On appeal, Richard Frye and Frye Farms argues
that the circuit court improperly credited an amount of $92,000.00 to Rick Frye,
when in fact, it was from the sale of corporate timber and was applied to the
bank notes. We do not find support for this proposition in the record. A review
of the record shows that the circuit found that [t]he total contributions
by Rick Frye from his earnings and gifts for the benefit of the corporation amount
to approximately $292,896.70. In reaching this amount, the circuit court
totaled all of the monetary gifts that Rick Frye applied to the bank notes, the
$100,000.00 gifted from Fred Novak, the money Rick Frye made with his personal
cattle business, and the money that Rick Frye contributed for the construction
of a new home on the corporate land. Richard Frye contends that Rick Frye's lack
of a salary makes it impossible for him to have contributed such a large sum
of money. However, the circuit court acknowledged that a large
portion of the money credited to Rick Frye was gifted money. Based on the monies
contributed by Rick Frye toward the payment of the bank notes, along with the
many years of uncompensated service that Rick Frye gifted to the corporation,
the circuit court found that Rick Frye gave fair and adequate consideration
for the 120 shares of stock represented by Stock Certificates Numbers 11 and
13. The underlying factual findings made by the circuit court are not clearly
wrong, and the court did not abuse its discretion in reaching its ultimate
conclusion. Therefore, we affirm the circuit court's finding that the 120 stock
shares represented by Stock Certificates Number 11 and 13 were validly issued
to Rick Frye and further affirm the decision that Rick Frye paid adequate consideration
for the stocks.
B. Cross-Assignments of Error
On appeal to this Court,
Rick Frye asserts cross-assignments of error pursuant to Rule 10(f) of the
West Virginia Rules of Appellate Procedure. (See
First, he asserts that the circuit court erred in
not awarding him attorney's fees pursuant to W. Va. Code § 31D-14-
1434(e). (See footnote
Second, Rick Frye argues he was entitled to compensation for
the seven and one- half years he worked as the farm manager without monetary
First, Rick Frye asserts that because the
circuit court ordered a dissolution of the corporation, he is entitled to receive
attorney's fees under W. Va. Code § 31D-14-1434(e). The relevant portion of that code section states that [i]f the
court finds that the petitioner shareholder had probable grounds for relief
under . . . [§ 31D-14-1430(2)(B) or (D)] . . . it may award to the petitioning
shareholder reasonable fees and expenses of counsel[.] While we have
held that the use of the word shall connotes a mandatory intent,
this code section uses the word may to emphasize the discretionary
nature of its intent. See State v. Allen
, 208 W. Va. 144, 153,
539 S.E.2d 87, 96 (1999) (Generally, 'shall' commands a mandatory connotation
and denotes that the described behavior is directory, rather than discretionary. (citations
omitted)); Syl. pt. 1, E.H. v. Matin
, 201 W. Va. 463, 498 S.E.2d
35 (1997) (It is well established that the word shall, in
the absence of language in the statute showing a contrary intent on the part
of the Legislature, should be afforded a mandatory connotation.(citation
omitted)). Keplinger v. Virginia Elec. and Power Co.
, 208 W. Va.
11, 21-22, 537 S.E.2d 632, 642-43 (2000). Based on the language of the statute,
the circuit court could award attorney's fees, but such an award was not mandated.
In areas in which the trial court is vested
discretion, we have held that '[w]here the law commits a determination
to a trial judge and his discretion is exercised with judicial balance, the decision
should not be overruled unless the reviewing court is actuated, not by a desire
to reach a different result, but by a firm conviction that an abuse of discretion
has been committed.' Intercity Realty Co. v. Gibson
, 154 W. Va. 369,
377, 175 S.E.2d 452, 457 (1970) [overruled on other grounds by Cales v. Wills
212 W. Va. 232, 569 S.E.2d 479 (2002)] [internal citations omitted]. Covington
, 213 W. Va. 309, 322-23, 582 S.E.2d 756, 769-770 (2003). In its November 7, 2003, order, the circuit
court expressly found that [t]he costs of this action are to be born
by both parties equally. Thereafter, during the hearing on post-trial
motions on January 28, 2004, the trial court again addressed the issue. The
circuit court stated that the request was previously considered and not granted
because it was not mandatory. The trial court did not abuse its discretion
in denying an award of attorney's fees.
Second, Rick Frye asserts that he is entitled
to compensation for the seven and one-half years he worked without compensation
as the farm manager. He asserts that he received sixty shares for uncompensated
work as a farm employee, and should be similarly rewarded for his uncompensated
time in the more demanding position of farm manager. The November 7, 2003, order
from the circuit court specifically stated
[T]he Court further finds that
Rick Frye is not entitled to compensation in any amount for his services rendered
for the benefit of the corporation as he has validly received a total of 180
shares of Charles E. Frye Farms, Inc. stock, as well as (a) the free use of a
corporate house, (b) by the corporation paying all electricity for the corporate
house, (c) by the corporation paying all casualty insurance on the corporate
house, (d) by the corporation paying all taxes on the corporate house and (e)
by the farm manager's use of the corporate farm's machinery and equipment for
personal farming businesses. Moreover, Rick Frye also received permission to
utilize corporate lands for the use of his cattle operation . . . . The Court
also finds that Rick Frye knew the corporation was not financially able to pay
him and, when compensation ceased, he did not quit his employment with the corporation
or request to be paid.
The underlying factual findings made by the circuit court are not clearly wrong,
and the court
did not abuse its discretion in reaching its ultimate conclusion. Therefore,
we affirm the circuit court's denial of Rick Frye's request for attorney's
fees, and we further affirm the circuit court's demurrer of Rick Frye's petition
for compensation for his years of service to Frye Farms.
For the foregoing reasons, we affirm the
orders entered November 7, 2003, and February 9, 2004, by the Circuit Court of
Richard Frye and Frye Farms
are represented by the same counsel, and will be referred to, collectively,
as Richard Frye.
We recognize that Richard
Frye set forth five assignments of error; however, the alleged misjudgments
are encompassed by the two errors discussed in this opinion.
Rule 10(f) of the West
Virginia Rules of Appellate Procedure provides:
if he is of the opinion that there is error in the record to his prejudice, may
assign such error in a separate portion of his brief and set out authority and
argument in support thereof. Such cross assignment may be made notwithstanding
the fact that appellee did not file a separate petition for an appeal within
the statutory period for taking an appeal. Appellant may answer the cross assignment
of error in his reply brief.
Richard Frye did not file a reply brief and, therefore, did not respond to
Rick Frye's cross- assignments of error in written form.
Rick Frye did not pay rent
for his use of the corporation's house, and expenses such as property insurance
and utilities were paid by Frye Farms.
These sixty stocks are
represented by Stock Certificate Number 9, and the
validity of the issuance of these stock shares is not in dispute by the parties.
These former stockholders
are not parties to the matter before this Court.
Linda Frye was married
to Richard Frye at the time of the 1997 dissolution and is the mother of Rick
Dorothy Novak is Richard
Frye's sister and is Rick Frye's aunt. Dorothy Novak is married to Fred Novak.
Fred Novak is married to
Dorothy Novak, and is Rick Frye's uncle. As previously noted, Fred Novak is
not a shareholder of Frye Farms.
Before the circuit court,
Richard Frye testified that he signed four blank stock certificates. However,
his testimony changed during cross-examination and questioning by the circuit
court judge. There is no dispute that his signature appears on the two stock
certificates at issue, Number 11 and 13.
There is no dispute that
Richard Frye, as president of Frye Farms, is authorized to sign stock certificates
Linda Frye was the secretary
of Frye Farms, and there is no dispute that she was authorized to sign stock
certificates in her capacity as its secretary.
The order of dissolution
is not an issue on appeal to this Court. Rather, the issue is one of the validity
of Rick Frye's stock. The number of stock owned by Rick Frye becomes supremely
relevant in a dissolution proceeding if the remaining shareholders or the corporation
desires to purchase the shares owned by the petitioning shareholder pursuant
to W. Va. Code § 31D-14-1434 (2002) (Repl. Vol. 2003).
The relevant portions of
W. Va. Code § 31D-14-1430(2) provide:
The circuit court may dissolve a corporation:
. . .
a proceeding by a shareholder if it is established that:
. . .
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;
The shareholders are deadlocked in voting power and have failed, for a period
that includes at least two consecutive annual meeting dates, to elect successors
to directors whose terms have expired[.]
It appears the corporation
was run rather loosely. A meeting of shareholders was not held yearly as required
by the corporate bylaws, and prior to the institution of the suit giving rise
to this appeal, the corporation never elected a board of directors. On August
2002, a special meeting was held in response to the August 9, 2002, filing
of the dissolution suit by Rick Frye. The first directors were elected during
W. Va. Code § 31D-14-1434
provides in relevant part:
. . . . If the court finds that the petitioning shareholder had probable grounds
for relief under paragraph (B) or (D), subdivision (2), section one thousand
four hundred thirty [§ 31D-14-1430] of this article, it may award to
the petitioning shareholder reasonable fees and expenses of counsel and of any
experts employed by him or her.
See note 3, supra
for the relevant language of Rule 10(f).
See note 16, supra,
for the relevant language of W. Va. Code § 31D-14-1434.