Derek Blaine Baumbouree v. Sharon Meche Baumbouree

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

15-1053

DEREK BLAINE BAUMBOUREE

VERSUS

SHARON MECHE BAUMBOUREE

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. C-2014-3303
HONORABLE DAVID A. BLANCHET, DISTRICT JUDGE

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PHYLLIS M. KEATY
JUDGE

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Court composed of Sylvia R. Cooks, John D. Saunders, Jimmie C. Peters, Phyllis
M. Keaty, and John E. Conery, Judges.

Cooks, J., dissents without reasons.

Saunders, J., dissents and assigns written reasons.

AFFIRMED.

G. Bruce Kuehne
Kuehne & Foote, APLC
10839 Perkins Road
Baton Rouge, LA 70810
(225) 767-7186
COUNSEL FOR DEFENDANT/APPELLANT:
Sharon Meche Baumbouree

Andre’ Doguet
Attorney at Law
1223 St. John Street
Lafayette, LA 70506
(337) 235-7144
COUNSEL FOR PLAINTIFF/APPELLEE:
Derek Blaine Baumbouree

Charles J. Boudreaux, Jr.
Jones Walker
600 Jefferson Street, Suite 1600
Lafayette, LA 70501
(337) 593-7600
COUNSEL FOR OTHER APPELLEE:
Hamilton Medical Group, APC

KEATY, J.

Sharon Meche Baumbouree appeals from the trial court’s grant of partial

summary judgment in favor of Derek Blaine Baumbouree, her former husband,

“holding that the stipulated per share value of Hamilton Medical Group, A

Professional Corporation, is $1,000.00 per share as provided in the shareholders’

agreement contained in a Stock Subscription Agreement . . . , which is the

definitive value to be used in [their community property] partition proceeding.”

For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

Derek and Sharon were married on May 30, 1992, under the legal regime of

community acquets and gains. On May 1, 2001, during the existence of the

community regime, Derek, a pediatrician, purchased one share of stock in

Hamilton Medical Group (HMG), a medical corporation consisting of employee

physician shareholders, for $1,000.00. The stock was issued and registered in

Derek’s name only. On September 18, 2013, the employee/physician shareholders

of HMG executed a Stock Subscription Agreement with an accompanying

Shareholder Agreement, which provided, in pertinent part:

1. PURPOSE

1.1 The purpose of this Agreement is to provide for orderly
continuation of the affairs of Corporation in the event of death,
incapacity, disqualification or termination of employment of the
Shareholders of the Corporation, or the occurrence of other events
whereby Shareholder or Corporation seeks to terminate Shareholder
status, including but not limited to the occurrence of events specified
herein. Such purpose shall be accomplished by the purchase by the
Corporation of the shares of stock held by any Shareholder to whom
such event has occurred . . . and further that the said Shareholder shall
agree to sell the said stock held by the said Shareholder to the
Corporation, upon the occurrence of any of the events described
herein.

2. PURCHASE AND SALE

2.1 Corporation agrees to purchase and each Shareholder agrees to
sell and transfer to the Corporation Shareholder’s stock in the
Corporation at the time, for the consideration and in the manner set
forth in this Agreement.

3. EVENTS REQUIRING SALE

3.1 Upon the happening of any of the following events, the affected
Shareholder or said Shareholder’s estate, shall sell and transfer to
Corporation and Corporation shall purchase the share or shares of
stock in Corporation held by such Shareholder at the same price for
which said Shareholder purchased the share or shares, that price being
One-thousand and No/100 ($1,000.00) Dollars per share:

(a) The death of the Shareholder;

(b) The suspension, revocation or cancellation of the
Shareholder’s right to practice medicine in the State of
Louisiana;
(c) The imposition of any restrictions or limitations by any
governmental authority having jurisdiction over the
Shareholder to such an extent that the Shareholder cannot
engage in the professional practice of medicine;

(d) Termination of employment with the Corporation for any
reason or cause, or for no cause, as provided in the Employment
Agreement between Shareholder and the Corporation, to
include voluntary or involuntary termination or retirement of a
Shareholder from the practice of medicine[.]

4. VALUATION OF STOCK

4.1 The purchase price of each share of capital stock of the
Corporation shall under all circumstances be One-thousand and
No/100 ($1,000.00) Dollars. At no time and under no circumstances
shall the Corporation be called upon to pay more than One-thousand
and No/100 ($1,000.00) Dollars to redeem any share of stock of the
Corporation.

....

6. RESTRICTIONS ON OTHER TRANSFERS

6.1 None of the Shareholders of Corporation shall transfer, assign,
hypothecate or in any way alienate or encumber any of Shareholder’s
shares or any right or interest therein. All shares of stock in the
Corporation in the case of sale or transfer by a Shareholder shall be to
the Corporation, and shall not be made to any other person or entity
other than Corporation.
2

Sharon refused to sign the Shareholder Agreement. Derek filed a petition

for divorce and for judicial partition of community property on June 26, 2014. A

judgment of divorce was rendered on October 13, 2014, terminating the

Baumbourees’ community property regime retroactive to the date the petition was

filed. In connection with the partition, Sharon filed a subpoena duces tecum on

April 29, 2015, requesting that HMG produce various documents pertaining to

HMG’s incorporation, finances and assets, and Derek’s compensation by the

corporation. On May 22, 2015, HMG filed a motion to quash the subpoena and for

a protective order, asserting that the Stock Subscription Agreement executed by

Derek on September 18, 2013 fixed the value of Derek’s stock interest in HMG at

$1,000.00, and thus, Sharon was not entitled to production of the requested

documents.

On June 16, 2015, Derek filed a motion for partial summary judgment,

requesting that the trial court hold that the value of the HMG stock for the purposes

of the partition proceeding was $1,000.00. Derek attached to his motion a personal

affidavit dated June 16, 2015, wherein he attested to the dates of his marriage to

and divorce from Sharon; to his acquisition of one share of HMG stock during his

marriage to Sharon; to his signing of a Stock Subscription Agreement and

accompanying Shareholder Agreement on September 18, 2013, which established

a stipulated stock value of $1,000.00; and to the fact that the provisions of the

agreements were still in force and had not been modified or amended. Also

attached to Derek’s motion was an affidavit from Louise Derise, the Administrator

and CFO of HMG, dated June 11, 2014. Ms. Derise attached a copy of the

September 18, 2013 Stock Subscription Agreement and Shareholder Agreement to

3

her affidavit, and she stated that the agreements were “in full force and effect” and

had not been amended or modified.

Sharon opposed the motion, arguing that the HMG stock was community

property and that she cannot be bound by a Shareholder Agreement that she did not

sign. She further argued that the Shareholder Agreement could not be used to

value the HMG stock because it fixed the value of the stock only upon the

occurrence of the four events, i.e., the death of a Shareholder; the suspension,

revocation or cancellation of the Shareholder’s right to practice medicine in

Louisiana; the imposition of any restrictions or limitations of a Shareholder’s

ability to engage in the professional practice of medicine; or the termination of a

Shareholder’s employment with the Corporation, none of which had occurred.

Because the Shareholder Agreement failed to mention divorce and/or partition of

community property, Sharon contended that it could not be used to set the value of

the stock in her and Derek’s partition. Finally, Sharon argued that Louisiana law

does not permit one spouse to “unilaterally declare that certain property is not

community, or to establish a value for community partition purposes, without the

consent of the other spouse.” Sharon attached to her opposition memorandum an

affidavit by Mark Shirley, a CPA, who stated that he had been asked by counsel for

Sharon to provide a value to Derek’s medical practice. Mr. Shirley stated that to

do so, he needed to identify and quantify two “distinct intangible assets,” goodwill

and going concern value. According to Mr. Shirley, the fair market value of the

HMG stock needed to be determined in the context of the Baumbourees’ partition,

but the “subjective and static stated value contained in the shareholder agreement

excludes all of the necessary elements which must be considered in quantifying

either the ‘fair market value’ or ‘fair value’ of the community property.” Finally,

Mr. Shirley stated that the only function of a stated stock value such as the one in
4

the HMG Shareholder Agreement was “to penalize the member/shareholder upon

exiting the practice.” Sharon also attached to her opposition a personal affidavit

dated July 6, 2015, wherein she stated that she and Derek were physically

separated and contemplating divorce when he tried to get her to sign the

Shareholder Agreement in late 2013. At that time, Derek told her that the purpose

of the document was to protect the company, that it would not affect her, and that it

had nothing to do with their divorce.

Following a contradictory hearing, the trial court sustained Derek’s motion

for partial summary judgment and designated the judgment as final for purposes of

immediate appeal.1 Sharon appealed and is now before this court asserting that:

1. The Trial Court erred in holding, without factual basis in the
Shareholder Agreement, that an arbitrary price ($1,000 - not based
on any indicia of financial value) requiring sale or redemption of
the ownership interest in HMG upon Derek’s death, inability to
practice medicine, or termination of employment, also governed
the “value,” determined pursuant to La. R.S. 9:2801A(4)(a), of the
use and enjoyment of ownership interest while Derek continued to
practice medicine with HMG.

2. The Trial Court erred in holding that a spouse in whose name an
asset is registered may unilaterally, without the consent of the
other spouse, by a contract which does not purport to pertain to a
partition action, determine the value of community property in a
partition action, thus usurping the duty to “value the assets” of the
former community, which duty is assigned to the trial court by La.
R.S. 9:2801A(4)(a).

3. The Trial Court erred in considering itself bound by a valuation
method which is inconsistent with Louisiana law.

DISCUSSION

Appellate courts review summary judgment motions de novo, giving no

weight to the trial court’s judgment. Covington v. McNeese State Univ., 08-505

(La.App. 3 Cir. 11/5/08), 996 So.2d 667, writ denied, 09-69 (La. 3/6/09), 3 So.3d

1
The trial court also granted HMG’s motion to quash the subpoena filed by Sharon; that
ruling is not at issue in this appeal.
5

491. “The summary judgment procedure is designed to secure the just, speedy,

and inexpensive determination of every action . . . . The procedure is favored and

shall be construed to accomplish these ends.” La.Code Civ.P. art. 966(A)(2). “The

judgment sought shall be rendered forthwith if the pleadings, depositions, answers

to interrogatories, and admissions, together with the affidavits, if any, admitted for

purposes of the motion for summary judgment, show that there is no genuine issue

as to material fact, and that mover is entitled to judgment as a matter of law.”

La.Code Civ.P. art. 966(B)(2), amended by 2015 La. Acts No. 422, § 1. The

burden of proof is on the mover. La.Code Civ.P. art. 966(C)(2), amended by 2015

La. Acts No. 422, § 1.

Unless they validly contract otherwise, spouses domiciled in
Louisiana are under the legal regime of community acquets and gains.
La.Civ.Code arts. 2328 and 2334. The property of married persons is
either community or separate. La.Civ.Code art. 2335. Community
property includes all property acquired during the existence of the
legal regime through the effort, skill, or industry of either spouse.
La.Civ.Code art. 2338. The community is a patrimonial mass that
includes both assets and liabilities. La.Civ.Code art. 2336 cmt. (c).
Each spouse owns a present undivided one-half interest in the
community property. La.Civ.Code art. 2336.

Succession of Moss, 00-62, pp. 4-5 (La.App. 3 Cir. 6/21/00), 769 So.2d 614, 618,

writ denied, 00-2834 (La. 12/8/00), 776 So.2d 462.

Ownership of a thing is defined by our Civil Code. It is “the right that

confers on a person direct, immediate, and exclusive authority over a thing. The

owner of a thing may use, enjoy, and dispose of it within the limits and under the

conditions established by law.” La.Civ.Code art. 477(A). In a partition action,

“[t]he court shall value the assets as of the time of trial on the merits, determine the

liabilities, and adjudicate the claims of the parties.” La.R.S. 9:2801(A)(4)(a).

“[E]ach party shall file a sworn detailed descriptive list of all community property,

the fair market value and location of each asset, and all community liabilities.”

6

La.R.S. 9:2801(A)(1)(a). Thereafter, “[t]he court shall divide the community

assets and liabilities so that each spouse receives property of an equal net value.”

La.R.S. 9:2801(A)(4)(b).

Although generally either spouse acting alone may manage,
control or dispose of community property, La.Civ.Code art. 2346, the
Civil Code tempers this right with regard to certain property. Each
spouse has the exclusive right to manage or encumber movables
issued or registered in his or her name as provided by law.
La.Civ.Code art. 2351 (emphasis added). Shares of stock are
incorporeal movables. La.Civ.Code art. 473. Stock issued in the name
of a spouse is subject to management by that spouse exclusively.

Succession of Moss, 769 So.2d at 620. “A spouse is liable for any loss or damage

caused by fraud or bad faith in the management of the community property.”

La.Civ.Code art. 2354.

Central to each of Sharon’s assignments of error is her assertion that the trial

court erred in concluding that the stock in HMG had a value of $1,000.00 for the

purposes of the partition. For the following reasons, we find Sharon’s argument to

be fundamentally flawed. In Succession of Moss, 769 So.2d 614, this court held

that transfer restrictions affecting community property consisting of corporate

stock that were contractually agreed to by one spouse are binding on the non-

contracting spouse. Coury Moss, Inc. was a closely held corporation formed by

William J. Moss and A. Sam Coury to operate an automobile dealership. Moss and

Coury entered into Shareholders’ Agreement which required that upon the death of

either of them, their heirs or representatives were required to transfer any stock in

excess of 25% of the total shares back to the corporation at book value. After

Moss’ death, his succession representative and surviving spouse argued that her

shares of former community stock were not bound by the restriction. We upheld

the restriction, rejecting the argument that a spouse “enjoys the contractual

freedom to acquire community property but is precluded from contractually

7

regulating that acquisition.” Succession of Moss, 769 So.2d at 619. In doing so,

we reasoned:

By their express terms, the Articles of Incorporation “bind and
obligate” not only the two incorporating shareholders, but also “such
other persons who may hereafter join or become associated with them
or their successors.” Since this restrictive contract was executed
during the existence of the community and affected community
property, the obligation it created is a community obligation.
La.Civ.Code art. 2361; Cutting v. Cutting, 625 So.2d 1112 (La.App. 3
Cir.1993), writ denied, 93-2770 (La.1/7/94); 631 So.2d 453. Mrs.
Moss’ ownership interest in the stock does not give her autonomous
control over the stock; rather, her interest is subject to the transfer at
death restrictions in the Articles of Incorporation.

Id. at 621.

Later, in Rao v. Rao, 05-59, p. 3 (La.App. 1 Cir. 11/4/05), 927 So.2d 356,

359, writ denied, 05-2453 (La. 3/24/06), 925 So.2d 1232, the first circuit held that

a restriction signed by a physician spouse in stockholders’ agreement concerning a

physician-owned corporation “establishing a stipulated value of $25,000.00 for the

stock of each equal stockholder in the event of resignation, death, or termination as

a stockholder, or in the event of divorce” was binding on the non-employee spouse

in the context of a partition proceeding incident to their divorce. In rejecting the

former wife’s attempt to not be bound by the transfer restrictions, the first circuit

explained:

The evidence clearly supports the conclusion that the
hypothetical value postulated by Mrs. Rao’s expert accountant was
largely based upon goodwill attributable to the personal qualities and
patient relationships of Dr. Rao and his fellow stockholder physicians
using the corporate facilities as part of their professional practice. . . .
It is inappropriate to use such goodwill attributable to Dr. Rao in the
valuation of community corporate stock. See La. R.S. 9:2801.2. See
also Preis v. Preis, 94-442, pp. 6-7 (La.App. 3rd Cir.11/2/94), 649
So.2d 593, 595-96 and Depner v. Depner, 478 So.2d 532, 534
(La.App. 1st Cir.1985), writ denied, 480 So.2d 744 (La.1986).
Although the issue has not been specifically addressed by the
legislature and seems to be res nova, we conclude it is likewise
inappropriate to incorporate goodwill attributable to the personal,
professional qualities of the other physician stockholders in such
valuation. See 16 Katherine S. Spaht and Richard D. Moreno,
8

Louisiana Civil Law Treatise: Matrimonial Regimes § 7.27 (2nd
ed.1997; 2004 pocket part).

Stock transfer restrictions do not affect ownership of the stock;
they merely qualify the privilege of disposition of the stock. Mestayer
v. Williams, 569 So.2d 1102, 1106-7 (La.App. 3rd Cir.1990). Because
stock transfer restrictions such as the sell/buy provisions at issue do
not alter the nature of the legal matrimonial regime or the
classification of stock acquired during marriage as community
property, they do not constitute prohibited matrimonial agreements
under La. C.C. art. 2329. Guidry v. Guidry, 01-1615, p. 4 (La.App.
3rd Cir.10/30/02), 830 So.2d 570, 572. The latter case involved the
divorce of an attorney shareholder of a legal corporation. He and his
wife had executed a shareholders agreement and stock subscription
agreement which set forth an agreed-upon method of disposition and
valuation of shareholder stock in the event of divorce. The appellate
court found that the agreements were “valid interspousal contracts
which are binding in that we find no derogation of law or public
policy.” Id.

The evidence shows that the object of the Amended
Stockholders Agreement’s sell/buy and stock valuation provisions
was to establish a stipulated, binding value of equal stock interests in
a close corporation with a specialized purpose, in the event of any
stockholder’s death, termination of ownership, or divorce, and to
effect an orderly transfer of ownership according with the
corresponding change in ownership interest in the medical group.
That object is not contrary to public policy; thus, it is not absolutely
null as contra bonos mores. See La. C.C. arts. 7, 2030. See also 7
Glenn G. Morris and Wendell H. Holmes, Louisiana Civil Law
Treatise: Business Organizations § 29.10 (1999).

Shares of stock issued in the name of a spouse are subject to
management by that spouse exclusively. La. C.C. art. 2351, Revision
Comment (a) (1979). See also La. C.C. art. 2352. The undisputed
evidence in the record shows that the stock certificate at issue,
evidencing ownership of fifty shares of common stock of Louisiana
Endoscopy Center, Inc., was issued in Dr. Rao’s name only. Thus, Dr.
Rao clearly had the right to execute both the original and the
Amended Stockholders Agreement, thereby subjecting the stock to the
terms of the transfer restrictions and the stipulated stock value,
without Mrs. Rao’s written assent. Succession of Moss, 00-62, p. 10
(La.App. 3rd Cir.6/21/00), 769 So.2d 614, 620, writ denied, 00-2834
(La.12/8/00), 776 So.2d 462. A stock transfer agreement which is
unambiguous, clearly sets forth its terms, and is executed by capable
parties is enforceable. Id., 00-62 at p. 10, 769 So.2d 614, 620-21.
The sell/buy provisions of Articles IV and VI were valid and binding
stock transfer restrictions, and clearly governed the valuation of the
stock.

Id. at 365-67.
9

We find the salient facts of the instant case indistinguishable from the facts

presented in Rao. In both instances, a non-employee spouse is attempting to avoid

being bound, in the context of a community property partition, by a stock valuation

agreed to by her physician/shareholder ex-spouse with regard to stock in a medical

corporation owned by him and other physician stockholders. As in Rao, although

the stock issued in the name of the physician/shareholder spouse only is a

community asset, the physician/shareholder spouse had the exclusive right to

manage that stock. Thus, the fact that Sharon did not sign the Shareholder

Agreement does not prevent the application of the stock valuation contained

therein. Further, as noted by the Rao court, the purpose of the valuation of the

stock in a “close corporation,” such as a medical practice, is “not contrary to public

policy,” but instead has the purpose of effecting “an orderly transfer of ownership”

should one of the physician shareholders have to leave the practice. Rao, 927

So.2d at 366. In Rao, the first circuit held that “[i]t is inappropriate to use such

goodwill attributable to Dr. Rao in the valuation of community corporate stock”

and “it is likewise inappropriate to incorporate goodwill attributable to the personal,

professional qualities of the other physician stockholders in such valuation.” Id. at

365-66. Accordingly, the assertions made by CPA Mark Shirley in the affidavit

submitted by Sharon regarding the need to quantify the goodwill or going concern

value of HMG or any of its physician shareholders are irrelevant as it would be

inappropriate to incorporate such values in the Baumbourees’ partition. Finally,

Sharon would have a remedy under La.Civ.Code art. 2354 if she were to prove that

Derek acted fraudulently or in bad faith in signing the Shareholder Agreement, but

no such proof was made in this case. Along those lines, we note that if Derek is

forced to sell his one share of HMG stock back to the corporation upon the

10

occurrence of any of the triggering events found in Section 3.1 of the Shareholder

Agreement, he will only be paid $1,000.00 as fixed in that agreement.

After having performed a de novo review, we are convinced that the law

supports Derek’s position and, thus, we conclude that partial summary judgment

was properly granted in his favor.

DECREE

The judgment of the trial court granting partial summary judgment in favor

of Derek Blaine Baumbouree is affirmed. All costs of this appeal are assessed to

Sharon Meche Baumbouree.

AFFIRMED.

11

STATE OF LOUISIANA

COURT OF APPEAL, THIRD CIRCUIT

15-1053

DEREK BLAINE BAUMBOUREE

VERSUS

SHARON MECHE BAUMBOUREE

Saunders, J., dissents and assigns written reasons.

I disagree with the majority opinion that Sharon’s argument that the trial

court erred in concluding that the stock in HMG had a value of $1,000.00 for the

purposes of partition is “fundamentally flawed.”

Unless they validly contract otherwise, spouses domiciled in
Louisiana are under the legal regime of community acquets and gains.
La.Civ.Code arts. 2328 and 2334. The property of married persons is
either community or separate. La.Civ.Code art. 2335. Community
property includes all property acquired during the existence of the
legal regime through the effort, skill, or industry of either spouse.
La.Civ.Code art. 2338. The community is a patrimonial mass that
includes both assets and liabilities. La.Civ.Code art. 2336 cmt. (c).
Each spouse owns a present undivided one-half interest in the
community property. La.Civ.Code art. 2336.
Moss, 769 So.2d at 618.

In general, community property may be managed, controlled, or disposed of

by either spouse acting alone. La.Civ.Code art. 2346; Moss, 769 So.2d 614.

However, “[a] spouse has the exclusive right to manage, alienate, encumber or

lease movables issued or registered in his name as provided by law.” La.Civ.Code

art. 2351. Shares of stock are incorporeal movables, La.Civ.Code art. 473, and

may be managed exclusively by the spouse in whose name they are registered.

La.Civ.Code art. 2351 cmt. (a); Moss, 769 So.2d 614.

Restrictions on the transfer of corporate stock are valid. Louisiana Weekly

Pub’g. Co. v. First Nat’l. Bank of Commerce, 483 So.2d 929 (La.1986). Transfer

restrictions do not affect the ownership of the stock in the community, and the

spouse in whose name they are not registered still has an undivided one-half

interest in it. See e.g. Messersmith v. Messersmith, 229 La. 495, 86 So.2d 169;

Moss, 769 So.2d 614. Instead, such restrictions “merely qualify the privilege of

disposition of the stock.” Rao v. Rao, 927 So.2d 356 (La.App. 1 Cir. 2005), writ

denied, 925 So.2d 1232 (La. 2006).

In light of these principles of law, it is clear that a spouse in whose name

stock is registered has the authority to execute a stock subscription agreement

containing transfer restrictions. Thus, there is no doubt that Derek had the

exclusive authority to execute the stock subscription agreement restricting the

transfer of the stock upon his death, inability to practice medicine, or termination

of employment back to the corporation for the agreed upon price and that such a

restriction is valid. However, at the crux of the instant dispute is Derek’s assertion

that, because the terms of the stock subscription agreement prohibits him from

transferring the stock to any other person or entity besides the corporation for the

agreed upon price of $1,000.00, such is the value that must be used for the

purposes of partition. I disagree.

Ownership of a thing is defined by our Civil Code. It is “the right that

confers on a person direct, immediate, and exclusive authority over a thing. The

owner of a thing may use, enjoy, and dispose of it within the limits and under the

conditions established by law.” La.Civ.Code art. 477(A). In a partition action, the

assets of the community must be valued. La.R.S. 9:2801(4)(a). Then, each of the

assets is allocated or assigned to the spouses. “The court shall divide the

2

community assets and liabilities so that each spouse receives property of an equal

net value.” La.R.S. 9:2801(4)(b).

We find no authority that supports Derek’s assertion that the value of the

stock for the purposes of partition following a divorce of the shareholder spouse is

$1,000.00 because the stock subscription agreement requires the stock be

transferred to the corporation for the price of $1,000.00 in the event that the

shareholder dies, becomes unable to practice medicine, or terminates his

employment with HMG. The stock agreement certainly sets the value of the

disposition of the stock in the enumerated circumstances. However, the stock

subscription agreement does not purport to value the stock except in the event of

its disposition in those limited circumstances. In other words, the agreement does

not purport to set the value of the use and enjoyment of the stock, but only the

value of its disposition should Derek die, become ineligible to practice medicine,

or terminate his employment with HMG.

Ownership of the stock in the instant matter inured to Derek a multitude of

benefits and, thus, had value to Derek outside of a disposition in the few

enumerated circumstances. In opposition to Derek’s motion, Sharon submitted the

affidavit of Mark Shirley, CPA, which identifies “[t]wo distinct intangible assets:

[that] require identification and quantification” in the partition action. These assets

are goodwill and going concern value. Counsel for Derek submitted no evidence to

controvert the affidavit of Mr. Shirley. These assets must be valued and

partitioned to determine the value of the corporation and, thus, Derek’s interest in

it as a shareholder. See Landry v. Simon, 98-1386 (La.App. 3 Cir. 3/17/99), 732

So.2d 587, writ denied, 99-1050 (La. 5/28/99), 743 So.2d 672; McDonald v.

McDonald, 40,035 (La.App. 2 Cir. 8/17/05), 909 So.2d 694. Moreover, ownership

of the HMG stock gives the shareholder voting rights, a right to receive dividends

3

or distributions, and a right to receive a share of the proceeds upon liquidation.

See Louisiana Business Corporation Act, La.R.S.12:1-101 et. seq. Each of these

rights inures some benefits to Derek, and such must be valued for the purposes of

the partition.

My conclusion is not without authority. In Borrello v. Borrello, 614 So.2d

91 (La.App. 4 Cir. 1992), writ denied, 616 So.2d 706 (La.1993), a former spouse

of a partner in a law firm sought discovery of certain financial documents

pertaining to the law firm for the purpose of valuing the partner spouse’s interest in

the firm. The law firm moved to quash a subpoena duces tecum requesting

production of the documents and the motion was granted. On appeal, the former

wife asserted that the trial court erred in denying discovery of the requested

documents on the grounds that they were necessary to determine the value of the

former husband’s partnership interest. The law firm argued that the former wife

was bound by the partnership agreement, which purported to value the former

husband’s interest in the partnership. The fourth circuit held that the former wife

“should be permitted to discover information necessary for her to establish the

value of her husband’s partnership interest beyond the value set forth in the

partnership agreement.” Id. at 94.

In Fastabend v. Fastabend, 606 So.2d 794, 798 (La.App. 3 Cir.), writ

denied, 609 So.2d 231 (La.1992), the former husband, a physician, argued that the

trial court erred in including the accounts receivable of a medical practice in

calculating the value of his interest in the medical partnership, on the grounds that

the partnership agreement provided that “[n]o partner shall have or own any

interest nor have any claim or right in and to the accounts receivable or any other

asset of the partnership.” This court rejected that argument, finding that the

accounts receivable were an asset of the partnership and must be valued to

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determine the value of the partnership, in order to determine the former husband’s

interest in that partnership. This court noted, in particular, that nothing in the

partnership agreement prohibited the accounts receivable from being valued in

such a manner.

In the instant matter, it is clear that the Shareholder’s Agreement establishes

the value for the disposal of the stock in the event of the death of a shareholder, the

inability of the shareholder to practice medicine, and termination of the

shareholder’s employment with the corporation. However, none of these

circumstances are present in the instant matter. Thus, the trial court must ascertain

the value of the stock outside of its disposition. Accordingly, I respectfully

dissent as I would remand to the trial court for further proceedings.

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