THE MATTER OF THE ESTATE OF FRANKIE DON WARE, DECEASED: CAROLYN WARE, EXECUTRIX
RICHARD WARE IN THE MATTER OF THE ESTATE OF FRANKIE DON WARE, DECEASED: CAROLYN WARE, AS EXECUTRIX OF THE ESTATE OF FRANKIE DON WARE
OF JUDGMENT: 12/28/2015
OF JUDGMENT: 10/11/2016
COUNTY CHANCERY COURT HON. KENNETH M. BURNS
COURT ATTORNEYS: THOMAS A. WICKER CASEY LANGSTON LOTT REX F.
SANDERSON DUSTIN COLT CHILDERS
ATTORNEYS FOR APPELLANT: RHETT R. RUSSELL THOMAS A. WICKER
ATTORNEYS FOR APPELLEE: CASEY LANGSTON LOTT
RANDOLPH, P.J., KING AND BEAM, JJ.
RANDOLPH, PRESIDING JUSTICE.
This case involves a dispute between a mother and son,
Carolyn Ware ("Carolyn") and Richard Ware
("Richard"), regarding the distribution of shares
of stock of three closely held corporations. The shares were
being held by the estate of the deceased husband/father,
Frankie Don Ware ("Frankie"). Frankie's will
directed that the shares be distributed to a testamentary
trust. The bylaws of the corporations (in which Frankie,
Carolyn, and Richard were the sole shareholders) required any
outstanding shares of stock be offered to the corporations
prior to any transfer. Carolyn, the executrix, filed a
petition to close Frankie's estate and to distribute
Frankie's assets (including the shares) to the trust.
Richard filed an objection to the closing of the estate,
asserting the corporate bylaws of the three corporations.
Carolyn responded, arguing that Richard lacked standing to
object. The chancellor found for Richard and required Carolyn
to offer the shares back to each corporation prior to
transferring the shares to the trust. Carolyn subsequently
appealed. The Court finds that Richard lacked standing to
object to the closing of Frankie's estate.
AND PROCEDURAL HISTORY
On April 8, 2011, Frankie passed away, leaving a last will
and testament. Frankie appointed his wife, Carolyn, to serve
as executrix of his will. The will created "The Frankie
Ware Family Trust, " which was to receive all of
Frankie's estate's assets available for distribution.
Carolyn, Richard, and his two sisters, Angela and Dana, were
named trustees of the Frankie Ware Family Trust. The primary
purpose of the trust was to provide the income and principal
to Carolyn during her lifetime. His will provided that upon
Carolyn's death, Richard and his sisters were to receive
only income benefits from the trust, and that his
grandchildren were to receive the income and/or principal for
their medical and educational needs.
Included in the assets available for distribution to the
family trust were outstanding shares of stock equal to 25% of
three closely held corporations: Ware Milling, Inc.;
Chickasaw Farm Services, Inc.; and Chickasaw Grain
Transportation, Inc. Carolyn also owned 25% of the shares of
each corporation in her own name. Richard owned the remaining
50% of the shares in each of the corporations.
Three years after Frankie's will was admitted to probate,
Carolyn, as executrix, filed a Petition to close the estate
and to distribute the assets according to Frankie's will.
Richard filed an objection to the closing of the estate,
asserting a section of each corporation's bylaws that
required shares to be offered back to the corporations prior
to any transfer. Each of the corporation's bylaws
contained the following provision:
No shareholder shall have the right to sell, assign, pledge,
encumber, transfer, or otherwise dispose of any of any [sic]
of the shares of the corporation without first offering the
shares for sale to the corporation at the annually
established net asset value of such shares. Such offer shall
be in writing, signed by the shareholder. The written offer
shall be sent by registered or certified mail to the
corporation at its principal executive office, and shall
remain open for acceptance by the corporation for a period of
120 days from the date of mailing.
argued that because Carolyn, as executrix, had not yet
offered the shares to the corporations, the estate, as holder
of the shares, could not be closed until the corporate
restrictions were satisfied. Carolyn responded that Richard
lacked standing as an individual to object on behalf of the
corporations. Furthermore, Carolyn argued that the objection
was an unreasonable restraint on the disposition of
Frankie's will, and the restriction in the bylaws did not
apply to testamentary dispositions.
A hearing on Richard's objection was held on November 24,
2014. Richard and Carolyn testified about the share
restriction of the corporations and its purpose, as well as
Frankie's purpose in constructing his will. Richard
testified that the intent of the share restriction was to
limit stock ownership to the three original
shareholders-Frankie, Carolyn, and Richard. Richard also
offered an attorney, Albert Delgadillo, as an expert witness
who opined that the word "transfer" in the share
restriction applied to testamentary dispositions. Carolyn
testified that her and her husband's intent with regard
to the corporations was to ensure that the entire family
benefitted from the businesses, and not just the original
three shareholders. Carolyn also requested that if the trial
court required the shares be offered back to the
corporations, that the court also order an appraisal and
audit of each corporation.
The trial court subsequently entered an order appointing The
Koerber Company ("Koerber") to conduct a forensic
audit and valuation of each corporation. Koerber conducted an
extensive study of each corporation, and determined the net
asset value of a 25% equity interest, established as of April
8, 2011 (the date of Frankie's death), totaled $2, 109,
after discount. Koerber applied a 20% discount for "lack
of control, " and a 20% discount for "lack of
marketability, " to decrease the value of a 25% equity
interest in each corporation.
Carolyn disagreed with Koerber's valuation, arguing that
the value of a 25% equity interest in the corporations was
worth more than fifteen million dollars. Richard also
disagreed with Koerber's valuation, arguing that it was
too high, as the value of Ware Milling's accounts