Present: All the Justices 

MARILYN S. SCHULTZ 

v. Record No. 941129 OPINION BY JUSTICE LEROY R. HASSELL 

 June 9, 1995 

GERALD A. SCHULTZ, ET AL. 

FROM THE CIRCUIT COURT OF HENRICO COUNTY 

George F. Tidey, Judge 

 In this appeal of a decree in a suit to dissolve a 

corporation, we consider whether a stockholder who has been 

ordered by a court to take certain action is a necessary party. 

 Gerald A. Schultz and Marilyn S. Schultz, husband and wife, 

both certified public accountants, were the sole shareholders, 

directors, and officers of an accounting firm organized as a 

Virginia professional corporation, Gerald A. Schultz & 

Associates, P.C., Inc. Gerald and Marilyn are also litigants in 

an acrimonious divorce proceeding in the Circuit Court of 

Middlesex County. The chronology of events in these two suits is 

important. 

 The divorce court entered a decree that prohibited Gerald 

and Marilyn from transferring any assets out of the marital 

estate. The divorce court appointed a "special master" who 

determined that the fair market value of Gerald A. Schultz & 

Associates was $500,000. 

 Gerald filed this dissolution suit pursuant to Code § 13.1-

747 against Gerald A. Schultz & Associates, after the divorce 

court had entered the decree prohibiting him from transferring 

assets out of the marital estate. Marilyn was not a named party 

in this suit. The dissolution court conducted an ore tenus

hearing, considered the testimony of several witnesses, including 

Marilyn, and held that the corporation's board of directors was 
"deadlocked." The dissolution court dissolved the corporation 

and appointed a receiver. 

 Subsequently, Marilyn filed a motion to intervene. She 

asserted that Gerald sought relief against her personally and 

that the dissolution suit was filed to circumvent the divorce 

court's order which had prohibited him from transferring any 

marital assets. She also requested in her motion that the court 

reconsider its order dissolving the corporation, and she sought a 

dismissal of the order of dissolution. The dissolution court did 

not adjudicate her motion. 

 Marilyn also filed a motion in the divorce proceeding, 

requesting that the divorce court hold Gerald in contempt of 

court for violating that court's order enjoining the transfer of 

any marital assets. The divorce court informed the dissolution 

court, by letter, that the value of the corporation was an issue 

in the divorce proceeding, and that it had enjoined Marilyn and 

Gerald from transferring any property out of the marital estate. 

 The dissolution court, by letter, assured the divorce court that 

"no further Orders or proceedings will be conducted" in the 

dissolution suit until all matters were resolved in the divorce 

proceeding or with the concurrence of the divorce court. 

 Subsequently, without notice to Marilyn or the divorce 

court, the dissolution court entered an "order approving plan of 

reorganization and dissolution and compelling production of 

documents and information." Marilyn filed a motion requesting 

that the dissolution court vacate that order. That court denied 

the motion, and we awarded Marilyn an appeal.*

 

 

 *We find no merit in Gerald's contention that Marilyn's 

appeal is not timely. 
 Marilyn argued in her motion to vacate, and asserts on 

appeal, that the dissolution court erred by entering an order to 

dissolve Gerald A. Schultz & Associates because, pursuant to Code 

§ 13.1-747(D), she is a necessary party in a suit to dissolve the 

corporation. Gerald argues that the dissolution court "properly 

took no action on Mrs. Schultz's Motion to Intervene and made no 

error in neglecting to include her as a party defendant." We 

disagree with Gerald. Code § 13.1-747 authorizes a circuit 

court to dissolve a corporation for certain enumerated reasons 

including, under certain circumstances, a deadlock in the board 

of directors. Code § 13.1-747(D) states: "It is not necessary 

to make directors or shareholders parties to a proceeding to be 

brought under this section unless relief is sought against them 

individually." 

 Gerald alleged, in his bill of complaint, that there were 

only two shareholders in the corporation, that each shareholder 

owned 50% of the outstanding shares, and that the directors were 

"deadlocked." Gerald asked that the court "dissolve the 

defendant corporation . . . appoint a receiver, and issue such 

injunctions and orders as may be necessary to preserve corporate 

assets, and [grant] such further relief as the case may require." 

 

 The dissolution court granted the relief that Gerald had 

requested by entering an order approving the plan of dissolution. 

 That order granted Gerald relief against Marilyn individually in 

numerous respects. The order directed that Marilyn cooperate 

with the receiver and provided that she "shall execute such 

documents, agreements and instruments and produce to the Receiver 
in a prompt manner all documents and information requested by the 

Receiver in connection with the Plan [or] implementation of the 

Plan." The plan also provided for the formation of a new 

corporation in which Marilyn would be the sole shareholder. The 

plan imposed numerous obligations upon Marilyn and her courtordered new corporation, one of which is to require the 

corporation to indemnify and hold Gerald A. Schultz & Associates 

harmless from certain claims. 

 Certainly, under these facts, Marilyn is a necessary party 

against whom relief was both sought and granted individually in 

this suit. And, as we have said, "a court cannot render a valid 

judgment when necessary parties to a proceeding are not before 

the court." Allen v. Chapman, 242 Va. 94, 99, 406 S.E.2d 186, 

188 (1991); McDougle v. McDougle, 214 Va. 636, 637, 203 S.E.2d 

131, 133 (1974). Therefore, we hold that the dissolution court 

erred by failing to grant Marilyn's motion to vacate the 

dissolution order. 

 Accordingly, we will reverse the judgment of the dissolution 

court. We will direct the dissolution court to vacate the order 

approving the plan of reorganization and dissolution and 

compelling production of documents and information. We will also 

direct the dissolution court to enter an order granting Marilyn's 

motion to intervene. Additionally, as we previously observed, 

the value of Gerald A. Schultz & Associates is an issue involved 

in the divorce proceeding in Middlesex County. Therefore, we 

will direct the dissolution court to stay all proceedings in the 

dissolution suit until the divorce proceeding is final. 

Reversed and remanded.