Opinion ID: 3161633
Heading Depth: 2
Heading Rank: 3

Heading: Summary of Events Before and During Litigation

Text: ¶11. Despite Jo Ann’s efforts, she could never get Gerald and the other minority shareholders to a corporate meeting after 1998. Jo Ann often tried, with no success, to talk to Gerald about the businesses and financial accounts. This often resulted in unpleasant exchanges. Jo Ann’s last attempt to have a corporate meeting came after Hurricane Katrina. When Gerald stated the only way Jo Ann could get him to a meeting was by suing him, Jo Ann retained counsel and filed suit. ¶12. Jo Ann filed her complaint in August 2006 in the Hancock County Chancery Court. She requested that the chancery court order an accounting, compel a shareholders’ meeting for the purposes of dissolution, and, alternatively, partition the property. She amended her 6 complaint in August 2007 to add as defendants the minority shareholders in the Trailer Park and the Restaurant corporations, as well as a lienholder, the Peoples Bank. ¶13. In August 2008, after attempting mediation, Gerald purchased the minority shares in the Restaurant and the Trailer Park for $180,000. Gerald asserted this money came from the funds of other individuals, and not monies from the Campground or Restaurant, in which Jo Ann had an equal interest. After Gerald purchased the minority shares, Gerald and Jo Ann held the following interests in the three corporations: the Trailer Park, Gerald sixty-percent and Jo Ann forty-percent; the Restaurant, Gerald fifty-five-percent and Jo Ann forty-fivepercent; and the Campground, Jo Ann fifty-percent and Gerald fifty-percent. ¶14. Gerald then called for a stockholder’s meeting to remove Jo Ann from the boards of the Restaurant and the Trailer Park corporations, so she could no longer act on their behalf. In response, Jo Ann sought a preliminary injunction to stop the meeting. In November 2008 after a hearing on the minority shareholders’ cross-motion to dismiss, the chancellor dismissed the minority shareholders as defendants when it was disclosed that Gerald had purchased their stock. ¶15. In December 2009, the chancellor ordered the parties to maintain the status quo regarding the corporate/business operations until he could hear and decide the matter. “[N]o person or company should make expenditures from operations on the properties or in the companies that are not in the interest of the companies and which are not reasonable and necessary to that company; further there shall be no waste of the corporate assets or income.” 7 The chancellor also found it was necessary to order a forensic accounting of the income and expenditures of each party over the past decade. D. The Trial and the Chancellor’s Final Amended Judgment ¶16. The case was tried over a period of four days: on August 29 and 30, 2011, and on February 8 and 9, 2012. Jo Ann amended her complaint a second time in October 2011 to add a claim for a partition in kind of the properties. In response, Gerald elected to purchase Jo Ann’s shares under the dissolution statute Section 79-4-14.34 of the Mississippi Code, which the chancellor denied. ¶17. The chancellor appointed Alexander, Van Loon, Sloan, and Farve (“AVL”), to conduct the forensic accounting. Kim Marmalich testified as the expert forensic accountant. Marmalich noted that all three corporations were closely held. She stated Jo Ann filed personal tax returns, but that Gerald had not filed since 2004. She also testified Gerald’s books were unclear and there was not enough information to determine Gerald’s income or the monies he made on the Campground and the Restaurant properties. The AVL report showed that the operation and management of the corporations under the control of Gerald and Jo Ann revealed a commingling of revenue and expenses. The chancellor admitted the report into evidence as a trial exhibit. Shelley Ray, an accountant with the Rigby CPA Firm, also testified about these accounting problems. She had done accounting work for Gerald and Jo Ann in the past for the corporations. She stated Jo Ann had provided bank statements and verifying receipts, but that Gerald gave only receipts for cash payments. 8 ¶18. After being qualified as an expert, Harry Hebert, an appraiser hired by Jo Ann, gave testimony as to the value of the Restaurant, the Trailer Park, and the Campground properties. Mike Cassady, a surveyor also hired by Jo Ann, also testified and put forth several versions of a proposed division of the Scafidi properties. ¶19. Gerald testified that the funds he used to purchase the minority shareholders’ shares for the total cash consideration of $180,000 came from his personal funds and the funds from five other individuals. Two of these individuals testified at trial, though they offered very little documentation. ¶20. On January 17, 2013, the chancellor entered a Final Judgment. In his finding, the chancellor stated that Gerald was “less than forthcoming to the point of being secretive and non-responsive to discovery requests regarding all financial matters, specifically including the income and expenses of the restaurant, campgrounds, or rental account.” ¶21. In addition to Gerald’s failure to respond to discovery, the chancellor found “that the appointment of a forensic accountant was necessitated by the failure of Gerald to maintain even minimally acceptable books and records . . . .”4 The chancellor noted that, although “the forensic accounting . . . experts attempted to do their job,” he found “that the methods used by the forensic accountants [could] not be reliably applied to the facts of this case to establish the amount of misappropriation of money by Gerald.” 4 The chancellor further found “that if Gerald had truthfully responded to discovery and maintained accurate books and records . . . then it would not have been necessary to engage a forensic accountant . . . . [T]he work of the forensic accountant was hampered, delayed and made more expensive by Gerald’s failure to . . . cooperate fully with the forensic accountant.” 9 ¶22. The chancellor then found that Gerald’s purchase of the minority shares in the Restaurant and the Trailer Park corporations “was an attempt to acquire absolute control . . . to the detriment and oppression of Jo Ann, as a minority shareholder.” The chancellor did not find Gerald or his witnesses’ testimony credible as to the source of the $180,000. Then, the chancellor found that “the only source of funds available to him was from the restaurant and campgrounds corporations together with unreported income diverted from them in which Jo Ann and Gerald had an equal interest. Effectively, the other shares were therefore purchased with funds equitably owned by both Jo Ann and Gerald.” As a result of this finding, the chancellor equitably resolved the interests of Jo Ann and Gerald by disregarding the shares purchased by Gerald. The Court considered Jo Ann and Gerald to be equal shareholders in the Restaurant and the Trailer Park. ¶23. After finding that Jo Ann and Gerald each held an equal interest in the corporations, the chancellor reasoned that since “the parties treated the companies . . . informally,” he could “divide the assets and equities in a simpler manner.” He also ordered that the property lines be modified based on the revised survey so that Jo Ann and Gerald each owned approximately fifty percent of the real property at issue. In equalizing Gerald’s and Jo Ann’s interest in the land and corporations, the chancellor ruled: 5. ORDERED AND ADJUDGED, that the Court divides, partites, and equitably separates the parties by granting each full ownership of separate companies and then adjusting the property lines to accommodate the findings of this court; therefore, A. The Court does hereby order that the remaining property shall be divided in accordance with [the appraiser’s] recommendations and the revised survey . . . . 10 B. The Court finds that Jo Ann shall be the owner of the . . . Trailer Park . . . together with all personal property on that property as expanded by the revised . . . survey which includes part of the campground property; C. The Court finds that Gerald shall be the owner of the . . . Campground . . . together with all personal property on that property as reduced by the . . . survey; ... E. The Court hereby orders that each of the parties is to execute the necessary documents, including deeds, bills of sale and stock certificates to accomplish the directions of this court. 6. ORDERED AND ADJUDGED, that the restaurant building, including the Latino shop, shall be sold together with all personal property on site . . . . (Emphasis added.) ¶24. According to the chancellor, “the actions of Gerald . . . were the cause of the length and costs of this litigation,” so the chancellor equitably divided the costs, awarding Jo Ann a percentage of her attorney’s fees, fees for forensic accounting, and fees for the appraiser and the surveyor. ¶25. On April 8, 2013, the chancellor entered a Corrected Judgement, nunc pro tunc to January 17, 2013. The chancellor entered Final Judgment on April 25, 2013, nunc pro tunc to January 17, 2013, responsive to the parties’ post-trial motions to alter/amend the judgment, for the sole purpose of correcting and amending certain clerical errors, including the survey line dividing the Trailer Park and the Campground properties. The chancellor ordered that the survey line be adjusted to comport with the court’s decision to equalize the parties’ interest in the properties. That same day, the chancery court entered an agreed order that the Restaurant building and land be sold.5 5 The chancery court entered an order on July 19, 2013, approving the sale of the Restaurant property. The tract sold for $385,000, resulting in net proceeds of $313,765.59, which were divided under the chancellor’s orders entered in these proceedings. 11 ¶26. Gerald then filed a Notice of Appeal with this Court on May 24, 2013. On February 6, 2014, the chancellor entered an order on pending post-trial motions, recognizing that the partition line referenced in the Final Judgment was in error, but that he did not have jurisdiction to modify it because of the appeal to this Court. After the last post-trial order, the chancellor entered his Order of Recusal on March 6, 2014, as Gerald had filed suit against the chancellor in federal court. On March 12, 2014, by order of the Mississippi Supreme Court, a special judge was appointed.6 ¶27. On April 7, 2014, Gerald, under Mississippi Rule of Civil Procedure 60(b), filed a Motion Seeking Relief from Final Judgment. This Court dismissed Gerald’s appeal and remanded the case to the Chancery Court of Hancock for further hearings on motions. Then, Gerald filed his Supplemental Motion to Amend/Alter the Judgment, for New Trial, for JNOV, and to Supplement the Record. The special chancellor entered an Amended Final Judgment on May 12, 2014, to correct a calculation error. On June 4, 2014, this Court denied Gerald’s Petition for Permission for Interlocutory Appeal and Stay of Proceedings in the Lower Court. Gerald appealed. Because of the many issues in this case, we will discuss the facts relevant to each issue below.