Case Title: SUTTER v. SUTTER RANCHING CORP.

Citation: 

Docket Number: 94850

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2000-10-31T00:00:00Z

Document:
SUTTER v. SUTTER RANCHING CORP.  SUTTER v. SUTTER RANCHING CORP. 2000 OK 84 14 P.3d 58 71 OBJ 2890 Case Number: 94850 Decided: 10/31/2000 Mandate Issued: 12/01/2000 Supreme Court of Oklahoma Owen C. Sutter, an individual, Appellant v. Sutter Ranching Corporation, an Oklahoma "Family Farming/Ranching Corporation" and its shareholders; Ms. Carol Craiger and Rita K. Walker, Appellees ON APPEAL FROM THE DISTRICT COURT, ELLIS COUNTY, OKLAHOMA ¶0 Plaintiff/appellant, owner of one-third of the outstanding shares of Sutter Ranch Corporation, an Oklahoma farming and ranching corporation, initiated this action seeking dissolution of the corporation under 18 O.S.1991, §953(D) and declaratory judgment under 12 O.S.1991, §1651. Defendants/appellees, the corporation and the owners of two-thirds of the outstanding shares of Sutter Ranch Corporation, answered, counterclaimed and moved for partial summary judgment. The district court, the Honorable Charles L. Goodwin, sustained the motion for summary judgment. Finding no cause for delay, the district court directed entry of final judgment in favor of defendants/appellees on the claim for dissolution and ordered a stay of the undecided claim and counterclaims pending appeal. Appeal was timely commenced and this Court granted appellant's motion to retain. SUMMARY JUDGMENT REVERSED AND CAUSE REMANDED FOR FURTHER PROCEEDINGS. Larry D. Patton, Oklahoma City, Oklahoma, for appellant. Harry A. Woods, Jeremy Tubb, Crowe & Dunlevy, Oklahoma City, Oklahoma, for appellees. BOUDREAU, J: [14 P.3d 59] ¶1 The dispositive question in this appeal is one of first impression: Does a super-majority provision in the certificate of incorporation as authorized by 18 O.S.1991, §1006(B)(4) preclude the right of a minority shareholder in a farming and ranching corporation to maintain an action for dissolution of the corporation under 18 O.S.1991, §953(D)? We answer in the negative. We conclude [14 P.3d 60] that the super-majority provision in the Amended and Restated Certificate of Incorporation of Sutter Ranch Corporation which increased the shareholder voting requirements to 75% of the outstanding shares to dissolve the corporation does not preclude the minority shareholder holding at least 25% of the outstanding shares from seeking judicial dissolution under 18 O.S.1991, §953(D). We hold the district court erred in granting summary judgment in favor of defendants/appellees. Accordingly, we reverse the summary judgment and remand this cause for further proceedings. The Sutter family ranch ¶2 For nearly seventy-five years, the Sutter family has operated a cattle ranch on several thousand acres of land in Ellis County. The land was acquired by Owen E. Sutter, the father of L.T. Sutter and the grandfather of Owen C. Sutter, Carol Craiger and Rita K. Walker. ¶3 On several occasions in 1992, L.T. Sutter met with his three children, Owen, Carol and Rita, and discussed operational and tax and estate planning considerations for transfer of his estate to his children. All the children agreed to a corporate format to operate the ranch. Accordingly, the family reorganized L-CORN Ranch by filing an amended and restated certificate of incorporation with the Secretary of State in accordance with the Oklahoma General Corporation Act (OGCA). ¶4 L.T. Sutter and Owen, Carol and Rita, the owners of all issued and outstanding shares of capital stock in Sutter Ranch, also entered into a shareholders' agreement in September, 1992. The agreement includes a general restriction on the shareholders' right to sell or otherwise dispose of the shares of stock. [14 P.3d 61] ¶5 From its inception in 1992 until 1996, Owen was president and manager of Sutter Ranch. After the death of L.T. Sutter in 1995, the working relationship among his three children began to deteriorate. In late 1996, Carol and Rita removed Owen as president of Sutter Ranch and named Carol to fill the office. Immediately thereafter, Carol relieved Owen of any and all responsibility in connection with the "ranching assets, operations and employees of Sutter Ranch Corporation as well as its mineral leasing activities." The judgment denying dissolution ¶6 In early 1997, Owen initiated this action in the district court in Ellis County against Sutter Ranch and his sisters. In his first claim, Owen sought dissolution of Sutter Ranch alleging shareholder dissension and oppressive conduct by the majority shareholders.5 In their answer, defendants denied that plaintiff was entitled to seek dissolution of the corporation alleging that he specifically consented to a provision in the certificate of incorporation of Sutter Ranch which requires the consent of the holders of 75% of the shares to dissolve and liquidate.6 ¶8 In opposition to summary judgment, plaintiff contends that the super-majority provision in the certificate of incorporation relates only to voluntary dissolution by corporate action. He contends that the provision does not apply to a shareholder seeking dissolution by judicial action pursuant to §953(D) and that the certificate of incorporation contains no language that restricts his §953(D) right to seek judicial dissolution. ¶9 The district court sustained defendants' summary judgment motion. The court apparently held that by consenting to the super-majority provision in the certificate of incorporation, plaintiff was barred from seeking judicial dissolution. It determined that there was no just reason for delay in entering final judgment upon plaintiff's first claim for relief and directed the filing of a final judgment in favor of defendants. Plaintiff timely filed his petition in error and motion to retain the appeal in this Court. ¶10 This Court ordered plaintiff to show cause why the appeal should not be dismissed for lack of an appealable order or recast as a petition for certiorari review of a certified interlocutory order. Upon consideration of the show cause filings, this Court allowed the cause to proceed as an appeal from a final order resolving a separate claim for relief pursuant to 12 O.S.Supp.1999, §994. This Court granted plaintiff's motion to retain. ¶11 A summary judgment disposes solely of issues of law and therefore, it is reviewable by a de novo standard. I. A corporation must be dissolved in a manner prescribed by statute. ¶12 Private corporations are [14 P.3d 62] creatures of statute and, like their formation,9 they can be dissolved only under authority of an act of the legislature.10 Accordingly, the statutory methods for dissolving a corporation are exclusive, and a corporation cannot be dissolved except in a manner prescribed by statute.11 II. Oklahoma law permits a corporation, in its certificate of incorporation, to increase the shareholder voting requirements for approval of corporate actions up to any desired amount including unanimity. ¶16 In addition to the matters required to be set forth in a certificate of incorporation, 4. Provisions requiring for, any corporate action, the vote of a larger portion of the stock or of any class or series thereof, or of any other securities having voting power, or a larger number of the directors, than is required by the provisions of the Oklahoma General Corporation Act; (Emphasis added.) This subparagraph allows a corporation, by way of a super-majority provision, to increase the voting requirements for approval of corporate actions by shareholders up to any desired amount, including unanimity. ¶17 Under the statute, a corporation may adopt a super-majority provision that increases the voting requirements for any corporate action that is subject to voting requirements under the OGCA. The super-majority provision may relate to ordinary or routine corporate actions or those corporate actions that affect the fundamental nature of the corporation such as merger or consolidation, sale of all or substantially all of the assets, and dissolution. Under the OGCA, fundamental changes require the affirmative vote of a majority of the shares entitled to vote III. The super-majority provision in the amended and restated certificate of incorporation of Sutter Ranch does not preclude plaintiff from petitioning the court for dissolution of the corporation under 18 O.S.1991, §953(D). ¶18 The board of directors of L-CORN Ranch, Inc. consented to the filing of an amended and restated certificate of incorporation which included a super-majority provision, pursuant to §1006(B)(4), increasing the voting requirements for corporate actions relating to three changes affecting the fundamental nature of the corporation. The super-majority provision reads as follows: NINTH The affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of the Corporation entitled to vote thereon shall be required before the Corporation can take the following actions: (a) merge or consolidate with or into any other corporation, entity or association; (b) enter into any agreement for the sale, lease or exchange of all or substantially all of the assets and property of the Corporation; or (c) dissolve and liquidate. (Emphasis added.) ¶19 Defendants argue that this super-majority provision is a bar to plaintiff's right as a minority shareholder to sue for judicial dissolution under §953(D).24 Plaintiff, on [14 P.3d 64] the other hand, argues that the provision applies only to dissolution by corporate action and does not restrict his right to seek a judicial dissolution. Both parties argue that this super-majority provision unambiguously supports their respective interpretations. ¶20 Generally, the certificate of incorporation constitutes a contract between the corporation and its shareholders and the rules governing the interpretation of contracts apply to the interpretation of a certificate of incorporation.25 If the language of the certificate of incorporation is clear and unambiguous, it does not require construction by this Court.26 ¶22 The super-majority provision does not affect the right of a minority shareholder to seek judicial dissolution under §953(D). The super-majority provision refers to three specific actions by the corporation all of which are subject to voting requirements under the OGCA. The filing of a petition seeking judicial dissolution under §953(D) is not an action of the corporation, rather it is an act of a qualified shareholder exercising a right granted by statute to petition a court to dissolve involuntarily a corporation by judicial decree. Because the filing of a §953(D) petition is not a corporate action, it is not subject to the voting requirements of the OGCA. While §953(D) imposes a standing requirement that the petition be filed by holders of at least 25% of the outstanding shares, a petition for dissolution may be filed, as in this instance, by a qualifying minority shareholder against the wishes of all other shareholders. ¶23 In support of their position that the super-majority provision bars plaintiff's right to sue for judicial dissolution, defendants rely on Leventhal v. Atlantic Finance Corporation, 55 N.E.2d 20 (Mass. 1944). Defendants' reliance on this case is misplaced. The dispute in Leventhal did not concern a super-majority provision but involved a contract between the only two stockholders of the corporation that "expressly prohibited either stockholder from causing a [14 P.3d 65]dissolution except as provided therein." Summary ¶25 Plaintiff's first claim for relief sought to dissolve the corporation under 18 O.S.1991, §953(D). Under that section, plaintiff is entitled to maintain the claim until he has an opportunity to make a showing of good cause for dissolving Sutter Ranch Corporation. The super-majority provision, as authorized in 18 O.S.1991, §1006(B)(4) and set forth in the Sutter Ranch certificate of incorporation, does not bar plaintiff's right to maintain his §953(D) claim. Summary judgment in favor of defendants on plaintiff's claim for dissolution is reversed. SUMMARY JUDGMENT REVERSED AND CAUSE REMANDED FOR FURTHER PROCEEDINGS. ¶26 ALL JUSTICES CONCUR. FOOT