Stuparich v. Harbor Furniture Mfg., Inc.

83 Cal.App.4th 1268 (2000)

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Nature of the Case

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Facts

Ps are sisters. Harbor Furniture (D) was founded by their grandfather in 1929. Malcolm Jr., Ps’ brother, eventually took over as CEO in 1982. He got a salary of $153,000 plus bonuses. His wife was employed as office manager and got a salary of $42,000, and their son was a salesman with a salary of $27,000 plus commissions. Ps were not involved with the company other than at board meetings and had obtained their shares by gift and inheritance. They filed a dissolution proceeding in 1996, and they each held 19.05 percent of the voting shares and 33.33 percent of the nonvoting shares. Ps were dissatisfied with the failure of the company to observe various formalities and while they were given positions of authority they had no real control over what happened. Ps did receive monthly dividends from 1984-1996. They tripled from $1,000 per month to $3,000 per month and with additional quarterly payments, they got over $800,000 in dividends since 1984. In total, Harbor had distributed in excess of $2.7 million in dividends during this time frame even with a $2.5 million loss in the furniture business. D moved for summary judgment on the dissolution action. The court found that Ps sought involuntary dissolution on the grounds of animosity between them and their brother made it impossible to participate in corporate activities. The court found that they could get a seat on the board and that they also got dividends and therefore their rights were not in need of protection. This appeal resulted.