On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-393-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Cuff, Fisher and Fasciale.
In this business dispute among family members, plaintiff Robert Sipko appeals from a final judgment dismissing most of his claims against his father, George Sipko, and brother, Rastislav Sipko (Ras). George and Ras cross-appeal from a dismissal of their counterclaim seeking damages and counsel fees. We affirm in part and reverse in part.
George started a business which evolved into three close corporations.*fn1 Robert claimed that he became an oppressed minority shareholder in the companies because George and Ras disapproved of Robert's relationship with Lisa, who became his wife, and his resignation was the product of physical force and intimidation. As a result, Robert attempted to force a buy-out of his interest in the businesses, as well as two properties he partly owned with George and Ras.*fn2 George and Ras countered that Robert voluntarily resigned to reside and work in California.
The Sipko family immigrated to the United States from Slovakia in the early 1990s. In 1994, George formed Koger to create information systems software for use by investment funds for internal processing. Koger's customers tended to be hedge fund and pension fund administrators. Robert and Ras joined Koger in 1997 and 1998, respectively. Robert attended graduate school in 1998 and returned to Koger in 2000. George was Managing Director, responsible for the development and design of the software. Ras primarily took care of the accounting, billing and bookkeeping. Robert helped with the development of the software and was responsible for the development of internet technology. Robert's title was Chief Technology Officer.
Around 2000, George gifted to Robert and Ras a 1.5% ownership interest in Koger, and George retained ownership of the remaining 97%. The parties disputed whether the 1.5% interest for each son was an unconditional gift from George. Robert maintained that it was an unconditional gift. George and Ras both testified that the gift was conditioned on the sons working in the Koger entities. The terms of the gift were never reduced to writing.
In June 2002, KDS was formed to diversify Koger's service lines, protect against liability, and aid in George's estate planning. In December 2004, KPS was formed for similar reasons, and to develop new software. Robert and Ras each had an ownership interest in KDS and KPS.
The Sipkos purchased Trotters Lane as a residence in which they would live with Gabriella, the mother of Robert and Ras.*fn3
Robert contributed 25% of the purchase price, or $250,000. In December 2004, Robert and Ras purchased the vacant Halifax Road property as an investment. Robert contributed approximately $285,000 for his 50% ownership interest.
George controlled the Koger entities. At George's direction, the Koger entities distributed their yearly profits, on an aggregate basis, 50% to George and 25% each to Robert and Ras. This distribution arrangement was never reduced to writing. George testified that he determined what salary his sons would receive, how much would be charged for the licensing of Koger's products, and how much money went back and forth between Koger, KPS and KDS. George also had the authority to veto any licensing agreements entered into by KPS and KDS.
George, Ras and Robert each used company credit cards for personal expenses. The parties disputed whether Robert's personal use of company credit was disproportionate to Ras's and George's personal charges.
Robert met Lisa in the summer of 2004 and told Gabriella about her in the fall of 2005. Gabriella was concerned about the relationship because Lisa was older, divorced with children, and from a "different culture." Gabriella told George about the relationship on February 3, 2006.
Once George learned about Lisa, the relationship between Robert and his family changed. Robert testified George warned him that Lisa would steal his money and chastised him for wanting to marry someone who was divorced with children and from a different culture. Robert contended that George physically harmed and threatened him and forced him to transfer his interest in KPS and KDS by signing certain documents. George denied these allegations.
The parties disputed whether Robert relinquished his ownership interest in KDS and KPS. Robert signed two documents purportedly transferring his interest in KDS and KPS, contended that George forced him to sign the documents, and argued that he received nothing of value in return. George and Ras testified that Robert voluntarily relinquished his interest in KDS and KPS.
Robert moved out of the family home and requested permission to work remotely from Lisa's home in California. George suggested to Robert that he should bring Lisa to the east coast because the Koger entities had their base in New Jersey.*fn4
George denied discussing whether Robert could work remotely, but testified that it would not have been possible because of the time difference between California and Europe. George also denied telling Robert that if he did not end his relationship with Lisa he could no longer work for Koger.
Robert worked remotely anyway and it affected his job performance. There were times when Robert took the red-eye flight back from California and then showed up late for work on Monday, or would take a nap in his car. There were instances where Robert missed a Monday meeting because he was late arriving from California.
On March 10, 2006, Robert submitted his resignation from Koger, stating:
I feel that the separation between business and family matter[s] that I have been asking for has not been honored. I have come back to work three times with the hope that as a family, we can keep the business separate from the family matters. Instead, each time more escalation of threats and imposition of control resulted. I believe that this has now reached a point of not being healthy for you as parents, me as your son and above all, Koger. As such, I am putting in my resignation of employment with Koger effective March 13, 2006. This is not what I wanted. . . . Unfortunately, I am left with no choice but to move on with my career elsewhere.
Robert and Lisa were married on December 31, 2006.
After Robert resigned and moved out of Trotters Lane, George and Ras passed a resolution recalling Robert's shares in Koger because Robert had abandoned the company and violated the condition for retaining the 1.5% interest. Ras also asked Robert to sign a document stating the date of his resignation from Koger and that Robert was relinquishing his 1.5% interest in Koger. Robert refused to do so, maintaining that he still owned stock in Koger.
In August 2007, Robert requested that Ras buy out his 50% interest in the Halifax Road property and that Ras and George buy out his 25% interest in the Trotters Lane property. Ras and George refused Robert's requests.
On November 13, 2007, Robert filed a verified complaint in the Chancery Division against George, Ras and each of the Koger entities seeking an accounting, the appointment of a fiscal agent, injunctive relief, compensatory and punitive damages, and attorney's fees. Robert sought to compel a buy-out of his interests, to dissolve the Koger entities, and to partition the Trotters Lane and Halifax Road properties. George, Ras, and the Koger entities filed a counterclaim and sought attorney's fees and damages for Robert's improper use of corporate credit cards. The judge ordered an accounting and enjoined any transfer or sale of ownership interest in the Koger entities without court approval.
The judge conducted a bench trial over seven days and rendered a written decision on January 12, 2009. He found that Robert quit the Koger entities because George and Ras refused to accept Robert's relationship with Lisa. The judge disbelieved Robert's testimony that he was assaulted, intimidated or threatened, concluded that Robert was not an oppressed minority shareholder, and stated that Robert voluntarily surrendered his interests in KPS and KDS, companies with no value. He found that George gave Robert an unconditional gift of 1.5% ownership interest in Koger but did not compel a buy-out of that interest because Robert was not an oppressed minority shareholder. The judge ordered that Robert be bought out from his interests in the Trotters Lane and Halifax Road properties, dismissed the counterclaim, and denied all requests for counsel fees.
Robert then filed a motion to clarify whether his 1.5% interest in Koger included the value of KPS and KDS. On March 20, 2009, the judge refused to make that finding and denied Robert's motion. This appeal follows.
On appeal, Robert contends that the judge erred by denying his request for (1) a buy-out of the Koger entities; (2) counsel fees; and (3) clarification of whether the 1.5% ownership interest in Koger included the value of KPS and KDS. In their cross-appeal, George and Ras argue the judge erred by (1) finding that George made an unconditional gift of 1.5% interest to Robert; (2) ordering that Robert's interest in Trotters Lane be bought out; and (3) denying counsel fees.
Robert's argument concerning his request for clarification is without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We confine our discussion to the parties' remaining contentions.
The scope of review of a judgment entered in a non-jury case is that the findings on which the judgment is based should not be disturbed unless they are not supported by adequate, substantial and credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). Thus, the fact findings and legal conclusions of the trial judge should not be disturbed unless the court is clearly convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonable credible evidence as to offend the interests of justice. Id. at 484.
We begin by addressing Robert's argument that the judge erred by denying his request to buy-out his interest in the Koger entities. Robert contends that he was an oppressed minority shareholder, and that his transfer of stock back to KDS and KPS was void because it was made under duress and without consideration. There is sufficient credible evidence that Robert was not an oppressed minority shareholder, and that his transfer of stock was void.
Whether a shareholder is oppressed, as that term is used in the minority shareholder oppression statute, is a mixed question of law and fact. Walensky v. Jonathan Royce Int'l, Inc., 264 N.J. Super. 276, 279 (App. Div.), certif. denied, 134 N.J. 480 (1993).
N.J.S.A. 14A:12-7 provides in pertinent part:
(1) The Superior Court . . . may . . . order a sale of the corporation's stock ...