Opinion ID: 74978
Heading Depth: 3
Heading Rank: 2

Heading: The Duncan Shares

Text: During the summer and fall of 1994, Timothy Smick, former PersonaCare Chairman and Chief Executive Officer, and James Duncan, former PersonaCare President, met with stock brokers, money managers and a tax attorney regarding the transfer of their TheraTx stock holdings to charitable remainder trusts in order to take advantage of the associated tax benefits. Smick established two trusts on 13 December 1994, and Duncan established two trusts on 22 December 1994. On 16 December 1994, Smick gifted at total of 150,000 shares of TheraTx stock to his two trusts. Smick also endorsed his certificate and delivered it to his stockbroker and the trusts' money manager, Alex. Brown & Sons, Inc. (Alex. Brown). On 27 December 1994, Duncan instructed Alex. Brown to transfer his TheraTx stock into two trust accounts on the date that suspended. The purpose of this letter is to inform you that the shelf registration will once again become effective commencing Friday, June 30, 1995 at 12:00 p.m., eastern time. Accordingly, beginning 12:00 p.m., eastern time, June 30th you will be permitted to once again sell shares pursuant to the shelf registration under the circumstances and in the manner described in the letter of instructions sent to you on December 7, 1994 (copy attached). R7-59, Ex. L-2. 6 the stock hit certain target prices, and, about the same time, delivered the stock certificate and a written assignment. The stock certificates of Duncan and Smick stated that their shares were transferable only on the share register of said corporation, in person or by duly authorized attorney. R13-98-Exs. R, S. On 12 January 1995, Alex. Brown notified TheraTx's stock transfer agent of the wishes of Duncan and Smick to transfer their stocks to their respective trusts. In each letter, Duncan and Smick requested that the shares be transferred without restrictions. Alex. Brown transferred the shares to the trusts and confirmed the transfers to Duncan and Smick. TheraTx's counsel notified TheraTx's stock transfer agent that the transfers of the request effective as of January 12, 1995 . . . on behalf of Mr. James W. Duncan, Jr. and of the request effective as of January 12, 1995 . . . on behalf of Mr. Timothy S. Smick were approved on 13 April 1995 and 23 March 1995, respectively. R12-96, Exs. F and G; R13-98, Ex. N at 39-41. TheraTx's stock transfer records show that the transfer from Duncan to his trusts occurred on 18 April 1995, and from Smick to his trusts occurred on 3 April 1995. Smick's federal income tax return reflected a December 1994 transfer of stock to the trusts. Duncan's federal income tax return reflected a January 1995 transfer of stock to the trusts. 7 The Duncans and Smicks filed a complaint for breach of contract as trustees, and sought damages on behalf of their respective trusts. The district judge dismissed these claims, holding that the trusts lacked standing because the registration rights under section 6.6 of the Agreement were not assignable. The Duncan Group moved for reconsideration, arguing that Duncan and Smick should be permitted to assert their breach of contract claims with respect to those shares of TheraTx stock transferred in April 1995 to their respective charitable remainder trusts. R12-96-2. The district judge, however, found that no determination of when Mssrs. Duncan and Smick transferred sizable portions of their TheraTx holdings to charitable trusts was necessary, because the undisputed evidence showed that, as to the shares transferred to the trusts, no damages were suffered by Duncan and Smick as a result of the breach, regardless of the dates of transfer. Although the Duncan Group, on reconsideration, requested that the district court determine the date of transfer, the district court denied the request, noting that there are no perils of uncertainty with respect to the charitable trust shares that should be laid at TheraTx's door and, instead, any belief that recovery may be had for these shares should be laid to rest. R15-113-3-4.