Sunday, November 24, 2013

Stuparich v. Harbor Furniture Mfg., Inc. case brief

Stuparich v. Harbor Furniture Mfg., Inc. case brief summary
83 Cal.App.4th 1268 (2000)


CASE SYNOPSIS
Plaintiffs appealed a decision by the Superior Court of Los Angeles County (California) granting summary judgment in favor of defendant, a closely-held family corporation, in plaintiffs' action seeking involuntary dissolution of defendant.

CASE FACTS
Plaintiffs brought an action seeking involuntary dissolution of defendant, a closely held family corporation, pursuant to Cal. Corp. Code §1800(b)(4), (b)(5). The trial court granted summary judgment to defendant, and plaintiffs appealed. Plaintiffs were sisters who were given nonvoting stock as gifts, and their brother held the majority of the voting stock and ran the furniture operation.

DISCUSSION

  • The court held the distribution of voting shares was consistent with California law, and did not present a reasonable necessity for dissolution. 
  • The court found that plaintiffs had chosen to not participate in governance of the corporation. 
  • There was no evidence of bad faith. 
  • While the furniture operation had been losing money, a mobile home park continued to generate significant profits which were paid to plaintiffs in the form of dividends. 
  • Evidence further showed that the furniture business was becoming more successful. 
  • The court held that the drastic remedy of liquidation was not reasonably necessary for the protection of plaintiffs' rights or interests in the corporation.

CONCLUSION
The court affirmed the grant of summary judgment in favor of defendant, because dissolution was not reasonably necessary to protect plaintiffs' rights or interests in defendant, as the distribution of voting shares in defendant was consistent with California law, and there was not evidence of bad faith conduct.

Recommended Supplements for Corporations and Business Associations Law

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