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Shehee v. Shehee

Court of Appeals of Louisiana, Second Circuit

November 14, 2018

NELL SHEHEE AND SHANE SHEHEE Plaintiff-Appellants
v.
MARGARET SHEHEE, ANDREW SHEHEE AND KILPATRICK'S ROSE-NEATH FUNERAL HOMES CREMATORIUM AND CEMETERIES, INC. Defendant-Appellees

          Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 592, 484 Honorable Ramon Lafitte, Judge

          AYRES, SHELTON, WILLIAMS, BENSON & PAINE, L.L.C. Lee H. Ayres J. Todd Benson Ryan P. Telep Counsel for Appellants

          RICHIE, RICHIE & OBERLE, L.L.P. C. Vernon Richie Counsel for Appellees Margaret and Andrew Shehee

          WILLIAM T.F. DYKES Counsel for Appellee Kilpatrick's Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.

          Before WILLIAMS, MOORE, and STEPHENS, JJ.

          MOORE, J.

         Nell Shehee appeals a judgment that sustained peremptory exceptions of preclusion filed by Kilpatrick's Rose-Neath Funeral Home and by Margaret and Andy Shehee, and dismissed her (Nell's) supplemental and amending petition for a declaratory judgment. Rose-Neath, Margaret and Andy appeal the portion of the same judgment that denied their other peremptory exceptions pending a judicial determination of their good faith under La. R.S. 12:1-724 E. For the reasons expressed, we amend and affirm.

         FACTUAL BACKGROUND

         The case appears to arise from an intrafamily dispute between Nell Shehee (aligned with her older sister, Shane) and her younger sister, Margaret Shehee (aligned with their brother, Andy). All of them are shareholders in Rose-Neath, a closely held, family-run corporation, which was founded in 1936. Its longtime president, Virginia K. Shehee, was the daughter of one of the original incorporators, L.B. Kilpatrick. By the early 2010s, Virginia owned 2, 752 shares (about 46%) of the stock; her four children, Shane, Andy, Nell and Margaret, each owned 812 shares (about 13.5%). As Virginia's health failed, she executed two powers-of-attorney, both in favor of Margaret.

         In 2013, Nell filed four suits: to have Virginia interdicted, to have Virginia's powers-of-attorney nullified; to prevent Margaret from voting Virginia's shares; and to recover money that was "improperly taken" from Rose-Neath by Margaret and Andy. These matters were referred to mediation, in which the parties executed a "Mediation Agreement," October 23, 2013, handwritten by the mediator. Paragraph 1 stated:

➀ Management of all Shehee entities other than Kilpatrick Life Insur. Co. shall be undertaken by Nell, Margaret & Andy with regularly scheduled meetings; majority rule shall govern.* Virginia Shehee shall henceforth be a Director Emeritus of all such entities, without voting rights. This arrangement shall be confirmed via court order.
*Virginia's power of atty shall be modified to show Nell, Margaret and Andy as co-agents via majority rule. [Text of footnote written vertically in left-hand margin]

         Virginia died in July 2015, ending the interdiction. Everyone seems to agree that the Mediation Agreement settled Nell's other three suits. However, Nell had maintained that it did not affect the management of Rose-Neath. The corporate charter, executed in 1936, states, in Art. VIII:

All corporate powers of this corporation, including authority to make and alter by-laws, * * * are hereby vested in its Board of Directors, which shall be composed of three (3) members.

         Corporate minutes, however, show that since the early 1970s, the Board has regularly had four to eight members, and in 1996 the Board amended the bylaws to state that the "number of directors shall not be less than five (5) nor more than ten (10)." In fact, at the next shareholders' meeting after the Mediation Agreement, on April 28, 2014, Margaret nominated six Board members (Shane, Andy, Nell, herself, and two Rose-Neath key employees, Veva Grant and Max Corley), and at the April 2015 meeting, she nominated five (the same names, less Corley); all were elected unanimously.

         Tensions resurfaced in early 2016. At the Board meeting on March 1, 2016, Nell proposed a motion to make Margaret account for some $30, 000 in charges to the corporate credit card, which Nell felt were for Margaret's personal expenses, or to repay them within 15 days. (Margaret and Andy called this the "vindictive resolution.") Nell's motion passed 3-2 (Nell, Shane and Veva for, Margaret and Andy against).

         A few weeks later, Margaret and Andy called a special shareholders' meeting to elect a new Board, consisting of only three Directors, in accordance with Rose-Neath's original charter, Art. VIII. However, before this meeting occurred, Nell executed a document, "Amendment to Articles of Incorporation," changing Art. VIII to provide that all corporate powers are vested in a Board "which shall be composed of not less than five (5) nor more than ten (10) directors." Nell filed this with the Secretary of State on April 20, 2016. Margaret and Andy have steadfastly denied that the Board ever authorized this amendment or filing.

         At the start of the special shareholders' meeting, April 26, 2016, Nell and Shane's counsel, Mr. Pesnell, presented objections, which were filed into the minutes. Andy, as chair, nominated Margaret to the new Board; Margaret nominated Andy and Nell. Rose-Neath's counsel, Mr. Dykes, counted the ballots and announced that Margaret and Andy had been elected to the Board. Mr. Pesnell objected orally, but Mr. Dykes disagreed and hand-delivered to him a written notice of rejection of objections.

         Two days later, April 28, 2016, Nell and Shane filed this suit ("Original Petition") against Margaret, Andy and Rose-Neath. In addition to Margaret's use of the Rose-Neath credit card to charge $30, 000 in personal catering expenses, they alleged that Andy had applied over $100, 000 of corporate money to his personal "loan account." They demanded a declaratory judgment that all actions of the April 26 shareholders' meeting were null and void, and that the Directors were Margaret, Andy, Shane, Nell and Veva.

         In early May, Margaret and Andy requested another special shareholders' meeting, this time to amend and replace the "surreptitious and illegal" amendment executed by Nell, remove all current Directors, and elect three Directors in accordance with the original Art. VIII - adding that because Nell refused to vote at the prior meeting, one Board seat was empty.

         At the start of this special shareholders' meeting, May 23, 2016, Mr. Pesnell presented the same objections as before on Nell and Shane's behalf; again, these were filed in the minutes. Andy, as chair, announced the vote to amend and replace the "surreptitious and illegal" amendment filed by Nell earlier. This passed 4, 376 shares to 1, 624; Mr. Pesnell promptly lodged his objection to accepting this vote. Then, Andy announced the vote for three Directors. Andy nominated Margaret and a key employee, John Hensarling; Margaret nominated Andy and Nell; Nell made no nomination. Mr. Dykes, Rose-Neath's attorney, announced that Andy, Margaret and John had been elected. Mr. Pesnell lodged another objection, and Mr. Dykes hand-delivered to him a written notice of rejection of objections.

         Over a month later, June 29, 2016, Nell and Shane filed a supplemental and amending petition ("Amended Petition") reiterating all claims of the Original Petition but adding a demand for declaratory judgment that all actions of the May 23 shareholders' meeting were null and void.

         PROCEDURAL HISTORY

         In response to the Original Petition, Margaret and Andy reconvened to enforce the Mediation Agreement and demanded a declaratory judgment that Nell's filing with the Secretary of State was null and void and that the Board consists of only three members. Nell and Shane responded that the Mediation Agreement was no longer in effect, now that Virginia was deceased. Rose-Neath conceded that over the years, the Board had "occasionally" exceeded three members, but this was only because members were unaware that the 1936 document limited the number to three. Various other incidental pleadings and motions were filed, but they are not germane to this appeal.

         In July 2017, Margaret and Andy filed a document called "Peremptory Exceptions of (1) Liberative Prescription, Peremption, or Conclusiveness, with respect to the May 23, 2016, Board of Directors' Election, and (2) Supersession with respect to the April 26, 2016, Board of Directors' Election." The basis of the first was La. R.S. 12:1-724 E, which states that a corporate vote is "conclusive" unless a shareholder objects before the end of the meeting at which the vote was taken, the corporation rejects the objection, and the shareholder "proves in a summary proceeding, commenced within 10 days" of the notice of rejection, that the corporation's action was incorrect. Margaret and Andy argued that Nell and Shane did not file the Amended Petition until June 29, or 37 days after notice of rejection, and thus the election was conclusive. The basis of the second exception ...


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