Present: All the Justices
RONALD L. WILLARD
v. Record No. 002354 OPINION BY JUSTICE DONALD W. LEMONS
September 14, 2001
MONETA BUILDING SUPPLY, INC.
FROM THE CIRCUIT COURT OF BEDFORD COUNTY
James W. Updike, Jr., Judge
In this appeal, we consider whether Ronald L. Willard’s
(“Willard”) cause of action against Moneta Building Supply,
Inc. (“Moneta”) is governed by the five-year statute of
limitations set forth in Code § 8.01-243(B) or by the two-year
statute of limitations set forth in Code § 8.01-248.
Specifically, we must decide whether a loss of dissenters’
rights to demand payment for shares of stock constitutes an
injury to property.
I. Facts and Proceedings Below
Willard previously filed a derivative action pursuant to
Code § 13.1-672.1 on behalf of Moneta and all its stockholders
against Moneta, A.S. Cappellari (“A.S.”), Rose Mary Cappellari
(“Rose Mary”), and David Cappellari (“David”), the son of A.S.
and Rose Mary. Willard sought to void the sale of Moneta’s
assets to Capps Home and Building Center, Inc. (“Capps”) on
the grounds that the transaction involved a conflict of
interest in violation of Code § 13.1-691. Following a bench
trial, the trial court held that Willard failed to present
sufficient evidence to support his claims and dismissed his
bill of complaint. In Willard v. Moneta Building Supply,
Inc., 258 Va. 140, 515 S.E.2d 277 (1999), we affirmed the
judgment of the trial court.
Willard subsequently filed the current motion for
judgment against Moneta seeking monetary damages for Moneta’s
alleged injury to Willard’s property. Since the factual
background of this case is virtually identical to that of our
prior decision, we provide only a brief recitation of the
relevant facts.
In his motion for judgment, Willard alleges that the
shareholders of Moneta and their respective percentages of
share ownership of common stock were, A.S. (49.8%), Rose Mary
(25.4%), Willard (19.7%), and David (5.1%). On November 15,
1996, A.S. and Rose Mary, who were officers, directors, and
shareholders, caused Moneta to enter into a contract to sell
substantially all of Moneta’s assets to Capps. Capps is a
Virginia corporation engaged in the building supply business
and David is its controlling shareholder. By letter dated
November 22, 1996, all shareholders were notified of the
proposed sale. Included with the letter was a “Notice of
Special Meeting of the Stockholders of Moneta Building Supply,
Inc. on Proposed Sale of Substantially All of Its Assets to
Capps Home and Building Center, Inc.,” which contained a
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description of the proposed transaction. Significantly, the
notice did not contain any notice of dissenters’ rights.
The special meeting took place on December 20, 1996.
A.S. and Rose Mary voted in favor of the proposed sale to
Capps, while Willard voted against the sale and made a
competing offer at a price greater than Capps’ offer.
Nevertheless, the votes of A.S. and Rose Mary were sufficient
to approve the sale to Capps. The transaction closed in early
January 1997 and Moneta ceased doing business.
Willard filed his current motion for judgment against
Moneta in the Circuit Court of Bedford County on January 12,
2000. In response, on February 25, 2000, Moneta filed a
demurrer, a plea of the statute of limitations, an amended
plea of res judicata, and an amended plea of collateral
estoppel.
After a hearing and upon consideration of argument and
memoranda, the trial court issued a letter opinion on April
18, 2000 sustaining Moneta’s plea of the statute of
limitations and dismissing Willard’s motion for judgment.
Specifically, the trial court ruled that Willard’s motion for
judgment was not an action for injury to property that
entitled him to the benefit of the five-year limitation period
set forth in Code § 8.01-243(B). Instead, the trial court
held that deprivation of his rights as a dissenting
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shareholder was personal to Willard and, accordingly, his
motion for judgment was barred by the two-year limitation
contained in the catch-all provisions of Code § 8.01-248.
Willard appeals the adverse ruling of the trial court.
II. Standard of Review
Upon Moneta’s plea of the statute of limitations there
are no material facts in dispute. The sole issue on appeal,
determination of the correct statute of limitations applicable
to Willard’s claim, presents a question of law. Carwile v.
Richmond Newspapers, Inc., 196 Va. 1, 6, 82 S.E.2d 588, 591
(1954) (discussing Richmond Redev. and Housing Auth. v.
Laburnum Constr. Corp., 195 Va. 827, 80 S.E.2d 574 (1954)).
Accordingly, the trial court’s ruling that Willard’s claim was
time-barred by the two-year limitation period contained in
Code § 8.01-248 is subject to de novo review. See Donnelly v.
Donatelli & Klein, Inc., 258 Va. 171, 180, 519 S.E.2d 133, 138
(1999).
III. Analysis
On appeal, Willard contends that the trial court erred in
ruling that the two-year limitation period set forth in Code
§ 8.01-248 governed his claim against Moneta. Willard asserts
that the lack of notice of his dissenters’ rights caused an
injury to property and his claim is governed by the five-year
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limitation period of Code § 8.01-243(B). Therefore, Willard
argues, his motion for judgment was timely filed.
Moneta assigns no cross-error and urges affirmation of
the trial court’s holding regarding the applicability of Code
§ 8.01-248 to Willard’s claim. Further, Moneta asserts an
additional ground upon which to affirm the trial court’s
judgment. Moneta claims that its transaction with Capps did
not trigger dissenters’ rights because, according to Code
§ 13.1-730(A)(3)(ii), there are no dissenters’ rights in the
case of a cash sale pursuant to a plan to disburse all or
substantially all of the proceeds to stockholders within one
year. However, we do not consider Moneta’s alternative
justification for affirming the trial court’s judgment.
Moneta raised this argument before the trial court on
demurrer, but the trial court made no ruling on the demurrer,
nor did the trial court rule on the plea of res judicata or
plea of collateral estoppel. The trial court only ruled on
Moneta’s plea of the statute of limitations.
The sole issue in this appeal is whether Willard’s motion
for judgment alleges an “action for injury to property,” under
Code § 8.01-243(B). If so, the five-year limitation governs
and his suit is timely filed. If not, the catch-all
provisions of Code § 8.01-248 apply and Willard’s action is
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time-barred by the two-year limitation. See Pigott v. Moran,
231 Va. 76, 79, 341 S.E.2d 179, 181 (1986).
The trial court based its decision that Willard did not
allege an injury to property upon application of three factors
set forth in the United States Court of Appeals’ opinion in
Brown v. American Broad. Co., 704 F.2d 1296 (4th Cir. 1983). 1
On appeal, Willard claims that the trial court’s application
of these factors was erroneous, while Moneta asserts that
these factors compel the conclusion that Moneta’s failure to
1
In Brown, the court stated:
[T]he Virginia Supreme Court has been
extremely technical in its determination
of whether the damage for which a
plaintiff seeks to recover is a direct
injury to property and thereby qualifies
for the benefit of the five year statute
of limitations. In order for the five
year statute to apply, the following
facts, among other things, must be found:
(1) the injury must be against and affect
directly the plaintiff’s property; (2) the
plaintiff must sue only for the direct
injury; and (3) the injury, to qualify as
a direct injury, must be the very first
injury which results from the wrongful
act.
Id. 704 F.2d at 1303-04 (internal citations and quotation
marks omitted). The court identified these factors based on
the United States District Court for the Western District of
Virginia’s opinion in Holdford v. Leonard, 355 F.Supp. 261
(W.D.Va. 1973). Although the court noted that Holdford was
decided under Virginia’s former scheme for statutes of
limitation, the court stated that the analysis in that case
was nevertheless applicable to the current statutes of
limitations. Brown, 704 F.2d at 1303.
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give notice did not constitute an injury to Willard’s
property.
In Keepe v. Shell Oil Co., 220 Va. 587, 260 S.E.2d 722
(1979), decided four years prior to Brown, we reviewed prior
Virginia case law in order to address whether certain claims
were barred by the catch-all period of limitations then
embodied in Code § 8-24. The trial court in Keepe ruled that
certain damages were direct damages to property subject to the
five-year limitation period, but the remainder of the damages
were consequential to the wrong and not direct damages to
property and were barred by the prevailing catch-all
limitation period. Id. at 590, 260 S.E.2d at 723-24. We
reversed, holding that the five-year limitation period applied
to the entire motion for judgment because “all the damages
claimed flowed from injury to property interests, and no cause
of action is based on injury to the person.” Id. at 594, 260
S.E.2d at 727. See also First Virginia Bank-Colonial v.
Baker, 225 Va. 72, 84, 301 S.E.2d 8, 15 (1983)(stating that
Keepe implicitly overruled prior inconsistent decisions in
which undue emphasis was placed on direct versus consequential
damage).
Significantly, pursuant to the statutory changes adopted
in 1977, “survivability no longer is germane in determining
which statute of limitations applies. Code § 8.01-25 provides
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that all causes of action survive the death of the plaintiff
or defendant. Moreover, the problem of determining direct or
indirect injury has been eliminated.” Pigott, 231 Va. at 80,
341 S.E.2d at 181. Accordingly, we hold that the trial court
erred in basing its ruling in the present case upon the test
in Brown.
The interest represented by a stock certificate is an
intangible personal property right. Ward v. Ernst & Young,
246 Va. 317, 327, 435 S.E.2d 628, 633 (1993). See also
Virginia Pub. Serv. Co. v. Steindler, 166 Va. 686, 695, 187
S.E. 353, 356 (1936) (stating that stock is “property . . .
subject to depreciation as well as appreciation in value”);
Iron City Bank v. Isaacsen, 158 Va. 609, 628, 164 S.E. 520,
526 (1932)(noting that “[a] share of stock of a corporation is
intangible personal property partaking of the nature of a
chose in action”). However, we have not, until today, had
occasion to consider whether stockholders’ dissenters’ rights
are property rights for the purpose of the statute of
limitations.
It is well-established by our cases that actions for
trespass or conversion constitute claims of injury to property
because they involve allegations of wrongful exercise or
control over the property of another. See Bader v. Central
Fidelity Bank, 245 Va. 286, 427 S.E.2d 184 (1993); Vines v.
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Branch, 244 Va. 185, 418 S.E.2d 890 (1992). We based our
decisions in these cases on the rationale that “conduct . . .
directed at [another’s] property, . . . constitutes an injury
to property.” Id. at 190, 418 S.E.2d at 894. Additionally,
we held in Lavery v. Automation Mgmt. Consultants, Inc., 234
Va. 145, 360 S.E.2d 336 (1987), that a suit for the
unauthorized use of a person’s name, portrait, or picture was
an injury to property. In reaching this conclusion we noted:
Property is not necessarily a taxable thing any
more than it is always a tangible thing. It
may consist of things incorporeal, and things
incorporeal may consist of rights common in
every man. One is not compelled to show that
he used, or intended to use any right which he
has, in order to determine whether it is a
valuable right of which he cannot be deprived,
and in which the law will protect him. The
privilege and capacity to exercise a right,
though unexercised, is a thing of value – is
property – of which one cannot be despoiled.
Id. at 152-53, 360 S.E.2d at 341 (quoting Munden v. Harris,
134 S.W. 1076, 1078 (Mo.Ct.App. 1911)).
We have previously held that an allegation of nothing
more than disappointed economic expectations does not amount
to an injury to property. Rather, the law of contracts
provides the sole remedy for such a loss. Sensenbrenner v.
Rust, Orling & Neale, Architects, Inc., 236 Va. 419, 425, 374
S.E.2d 55, 58 (1988). Moreover, we stated in Pigott, that if
the property is in the same condition and available for the
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same use after the defendant’s actions as before, the alleged
wrongs were directed at the plaintiffs personally rather than
at their property. 231 Va. at 81, 341 S.E.2d at 182. With
these principles in mind, we consider whether Willard’s motion
for judgment alleged an “injury to property” within the
meaning of Code § 8.01-243(B).
Article 15 of the Virginia Stock Corporation Act (“Act”)
governs the rights of a shareholder to dissent from corporate
action and the circumstances under which a shareholder is
entitled to assert those rights. Code § 13.1-729 et seq.
Code § 13.1-730 addresses the circumstances giving rise to a
shareholder’s right to dissent and receive fair value for his
stock, and Code § 13.1-732 requires the corporation to give
notice of these dissenters’ rights. A service of notice and
demand by the dissenter must be given to the corporation in
order to exercise dissenters’ rights. (§ 13.1-733 – Notice of
intent to demand payment; § 13.1-734 – Notice of corporate
action; § 13.1-735 – Shareholder duty to demand payment.) The
remainder of Article 15 of the Act addresses the situation
where the shareholder is dissatisfied with the payment
received from the corporation.
We hold that dissenters’ rights are property interests
and that allegations of loss of dissenters’ rights constitute
an allegation of “injury to property” within the meaning of
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Code § 8.01-243(B). Ownership of stock provides the
shareholder with a bundle of rights, some of which are
provided by contract while others are provided by the Code.
Some rights may be unique to certain classes of stock, while
other rights exist in all stock, independent of class. We
have previously stated, for example, that the right to vote
shares of stock at a corporate meeting is an incident of
ownership; it is a part of the stockholder’s property
interest. Carnegie Trust Co. v. Security Life Ins. Co., 111
Va. 1, 27, 68 S.E. 412, 421 (1910). In Fein v. Lanston
Monotype Mach. Co., 196 Va. 753, 767, 85 S.E.2d 353, 361
(1955), we held that “[t]he right to vote for directors is a
right to protect property from loss, and to make its
possession beneficial. To deprive a stockholder of his right
to vote is to deprive him of an essential attribute of his
property.”
Similarly, Code § 13.1-730(A)(3) gives a shareholder a
right incident to ownership of stock, the right to dissent
from certain corporate actions. A share of stock with such
rights may be more valuable than one without such rights. The
presence of dissenters’ rights triggers a series of rights and
obligations under the Code that ultimately provides the
shareholder the opportunity to demand the fair value of his
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shares. Consequently, the loss of such rights, regardless of
how effectuated, injures the stock.
In the present case, Willard alleges that he was denied
dissenters’ rights because Moneta failed to give him proper
notice pursuant to Code § 13.1-732(A). Accordingly, Moneta’s
alleged failure to provide such notice is properly
characterized as conduct directed at Willard’s property. Just
as the loss of the right to vote for directors constitutes an
injury to property, so is the loss of the right to demand fair
value as a dissenting shareholder. Commentators and other
courts agree. As one commentator has noted:
Essentially, an appraisal is the method of
paying shareholders for taking their property;
it is the statutory means whereby shareholders
can avoid the conversion of their property into
other property not of their choosing and is
given to shareholders as compensation for the
abrogation of the common-law rule that a single
shareholder could block a merger. The purpose
of these statutes is to protect the property
rights of dissenting shareholders from actions
by majority shareholders which alter the
character of their investment.
12B William M. Fletcher, Cyclopedia of the Law of Private
Corporations § 5906.10, at 340-41 (perm. ed. 2000 rev. vol.)
(emphasis added) (internal footnotes omitted). See also
Breniman v. Agricultural Consultants, Inc., 829 P.2d 493, 496
(Colo.Ct.App. 1992); Settles v. Leslie, 701 N.E.2d 849, 856
(Ind.Ct.App. 1998); In re Watt & Shand, 283 A.2d 279, 281 (Pa.
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1971)(noting that the statutory protection of dissenting
shareholders through the appraisal provision is designed to
safeguard property rights).
Finally, Moneta argues that Willard’s motion for judgment
does not allege an injury to property because Willard did not
lose his dissenters’ rights as a result of alleged lack of
notice. According to Moneta, Willard’s stock was not injured
on November 22, 1996, the date Willard claims he was due
notice of dissenters’ rights, because Willard still had
dissenters’ rights after that date. Moneta claims that
Willard retained dissenters’ rights up until the sale of
Moneta’s assets to Capps, regardless of whether Willard was
aware of those rights. Without commenting on the merits of
Moneta’s position, we conclude that it has no impact on our
decision today.
Moneta blurs the concepts of causation and injury. The
failure to give notice is not the injury alleged; the loss of
dissenters’ rights, an incident of stock ownership, is the
injury alleged. The applicable statute of limitations is
determined by the type of injury alleged. Whether the alleged
failure to give Willard notice of dissenter’s rights in
accordance with Code § 13.1-732 caused injury or loss is a
different question.
IV. Conclusion
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For the foregoing reasons, we hold that the trial court
erred in determining that Willard’s motion for judgment was
subject to the two-year catch-all limitation provided by Code
§ 8.01-248 and in dismissing his claim. We further hold that
Willard alleged an “injury to property” and his claim was thus
subject to the five-year limitation in Code § 8.01-243(B).
Reversed and remanded.
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