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Bissias v. Koulovatos
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MAINE SUPREME JUDICIAL COURT			      	                   Reporter of Decisions
Decision:	2000 ME 189
Docket: 	Sag-00-54
Argued :	October 4, 2000
Decided:	October 30, 2000




	[¶1]  James Koulovatos and Town House Apartments, Inc., appeal from
a judgment entered in the Superior Court (Sagadahoc County, Marden, J.)
dissolving Town House and appointing a receiver pendente lite.  Koulovatos
contends that the trial court erred by concluding that Peter Bissias was a
shareholder and thus had standing to commence an action for judicial
dissolution of Town House.  We find no error and affirm the judgment.
	[¶2]  On August 27, 1992, Bissias and Koulovatos executed a purchase
and sale agreement to buy an apartment complex in Bath, which was later
renegotiated for a reduced price of $450,000 due to the discovery of lead
and asbestos in the building.  Concerned with potential liability from the
lead and asbestos, the parties, with the help of Attorney David A. King,
formed a corporation on October 7, 1992, under the name of Town House
Apartments, Inc.  Both parties assigned their rights in the renegotiated
purchase and sale agreement to the corporation.  Koulovatos provided the
down payment, used his real estate as security for mortgage financing, and
contributed personal property as well.
	[¶3]  Bissias and Koulovatos were directors of Town House; Bissias was
also vice president and treasurer, and Koulovatos was president.  The plan
for selling stock authorized the issuance of 2000 shares of no par value stock
in return for money or property (other than stock or securities) only. 
Attached stock subscriptions were neither signed nor indicated a number of
shares for either party.  Within the next year, the parties executed various
documents indicating that each held a one-half interest in Town House,
including:  an election for tax treatment as an S-Corporation, waivers of
workers' compensation benefits from both parties, and Town House's 1992
federal income tax return.  Furthermore, the stock transfer ledger of Town
House stated that both Bissias and Koulovatos each held fifty of the one
hundred shares that were issued.
	[¶4]  Bissias brought this complaint for judicial dissolution of Town
House following significant disagreement between the parties regarding
their contributions to the corporation.{1}  Following a non-jury trial conducted
over several days, the court dissolved Town House and appointed a receiver
pendente lite.  The court found that Bissias had been issued fifty valid shares
of Town House stock, as evidenced by the entry to that effect in the stock
transfer ledger, and that the contract rights Bissias assigned to Town House
constituted valuable consideration sufficient to allow the issuance of the
shares to him, making him a valid shareholder with standing to bring the
lawsuit.  A dollar value was never placed on the purchase and sale agreement
that Bissias and Koulovatos assigned to Town House.  The court noted that as
president, Koulovatos was in an equal or better position to see that the value
of the purchase and sale agreement was determined, but did not do so.  This
appeal by Koulovatos and Town House followed.
	[¶5]  Judicial dissolution is authorized in an action brought by a
shareholder.{2}  13-A M.R.S.A. § 1115 (1981).  Koulovatos contends that
Bissias has no standing to bring this action because he is not a shareholder. 
He contends that 13-A M.R.S.A. § 506(2) (1981){3} requires that the directors
fix the value of consideration given for shares, and that shares purportedly
issued without such valuation are void.  Because Town House never affixed a
definite dollar value to the property Bissias transferred to Town House in
exchange for his shares, namely his rights in the renegotiated purchase and
sale agreement, Koulovatos argues, any shares Bissias claims to hold
according to the stock transfer ledger entry are void.
	[¶6]  The shareholder status of a party sufficient to confer standing
represents a mixed question of law and fact.  The underlying historical facts
on which the Superior Court based its finding of standing are reviewed for
clear error.  H.E. Sargent, Inc. v. Town of Wells, 676 A.2d 920, 923
(Me. 1996).  The interpretation of section 506(2) and the legal conclusion of
shareholder status sufficient to confer standing are legal questions subject to
de novo review.   Austin v. Austin, 2000 ME 61, ¶ 8, 748 A.2d 996, 1000.
	[¶7]  The plain language of section 506(2) does not require that a
dollar value be placed on all property given to a corporation in exchange for
shares.  Nor does it provide that the failure to place such value invalidates
the shares given in exchange for property.  Rather, section 506(2) merely
requires that consideration be given for shares and that such consideration
have a value.  The trial court found as a fact, and the parties do not challenge
the finding, that Bissias assigned all his rights in the renegotiated purchase
and sale agreement to the corporation.  The trial court also found that the
assigned purchase and sale agreement had considerable value, a finding that
is supported by the record.  Koulovatos can cite to no persuasive authority
for the proposition that shares issued in exchange for valuable consideration
but on which no dollar value is placed are void.{4}  The language of section
506(2) does not require any more than that some valuable consideration be
given in exchange for the issuance of shares.  Accordingly, the failure of
corporate directors to fix a monetary value for property given in
consideration for shares of stock does not by itself automatically invalidate
such shares.
	[¶8]  The trial court also found that fifty shares of Town House
common stock had indeed been issued to Bissias.  That finding is supported
by the evidence.  Both parties, as well as the corporation's clerk, Attorney
King, understood that the parties would split the business 50/50.  The
corporate attorney entered fifty shares for each in the stock transfer
ledger.{5}  Bissias and Koulovatos at all times prior to December of 1993
represented to others, including various governmental agencies, that they
were equal owners of the corporation.  Furthermore, the evidence shows
that Bissias's shares were issued in exchange for the consideration of his
rights in the purchase and sale agreement, and that both parties, by their
conduct and the circumstances, regarded that property as having sufficient
value to be consideration for the exchange.  The trial court's finding that
Bissias was the owner of fifty shares of stock in Town House is therefore not
clearly erroneous.
	The entry is:
			Judgment affirmed.

Attorneys for plaintiff: Peter S. Plumb, Esq., (orally) Krista N. Everly, Esq. Murray Plumb & Murray P O Box 9785 Portland, ME 04104-5085 Attorneys for defendants: George J. Marcus, Esq., (orally) Regan M. Hornney, Esq. Marcus, Grygiel & Clegg, P.A. 100 Middle Street (East Tower) Portland, ME 04101
FOOTNOTES******************************** {1} 1. "The Superior Court of this State shall have full power to decree the dissolution of, and to liquidate the assets and business of, a corporation . . . [i]n an action filed by a shareholder . . . ." for reasons such as wasted corporate assets or fraudulent acts of directors. 13-A M.R.S.A. § 1115 (1981). {2} . A shareholder is defined as "one who is a holder of record shares in a corporation." 13-A M.R.S.A. §102(17) (1981). {3} . Section 506 permits issuance of shares without par value "for such consideration as may be fixed from time to time by the board of directors . . . ." 13-A M.R.S.A. § 506(2) (1981). {4} . The requirement of consideration is meant to protect third parties from undercapitalization in corporations. This is not a case involving the protection of third parties as against a corporation, but instead involves a dispute between the only two shareholders of a corporation, a context well outside the scope of the rationale for consideration. {5} . "The books of a corporation are the regular evidence of their doings." Coffin v. Collins, 17 Me. 440, 442 (1840).