Gift Of Stock To Sons Was Unconditional And Irrevocable And Not Contingent On Future Employment
In the business planning and business litigation case of Spiko v. Koger, Inc, 12-4-4727, (Chancery Div., Bergen Cy), the court held that the gift of shares of stock by the father was unconditional and irrevocable.
Plaintiff Robert Sipko and Defendant Ratstislav Spiko are the sons of George Sipko. Defendant Koger, Inc. was founded by George. Robert and Ras joined the company. In 2000, George gifted 1.5 percent of Koger stock to Robert and Ras. Defendant Koger Distributed Solutions, Inc. (“KDS”) was incorporated in 2002; Ras and Robert each owned 50 percent of the stock. Defendant Kroger Professional Services, Inc. (“KPS”) was incorporated in 2004; Ras and Robert each owned 50 percent of the stock. In 2006, Robert left the companies and surrendered his stock in KDS and KPS. George asserted that his gift of 1.5 percent of Kroger stock was conditioned on Robert’s continuing to work for the family business. George purported to revoke the gift and Robert filed this action alleging that he was an oppressed shareholder. Ultimately, the New Jersey Supreme Court granted Robert’s petition for certification, limited to the question of whether George’s gift of Koger stock was conditioned on Robert’s continued employment. The court also granted defendants’ cross-petition for certification, limited to whether Robert retains his holdings in KDS and KPS. The court reversed the Appellate Division’s determination on the issue of George’s gift to Robert of a 1.5 percent interest in Koger, concurring with the trial court that the gift was unconditional and irrevocable. The court also concurred that Robert was not an oppressed shareholder. The court agreed with the Appellate Division that the transfer of Robert’s interests in KDS and KPS was void. Thus, Robert’s claims as they relate to KDS and KPS were reinstated. The court remanded for the appropriate remedy, to include an accounting of the income and expenditures of KDS and KPS. Here, although Ras tried to deprive Robert of value by backdating the stock transfer certificate, the court declines to conclude that his conduct constitutes oppression of a fellow shareholder, or a fraud upon him, or an action which thwarted Robert’s reasonable expectation as a shareholder, or warrants imposition of a buy-out remedy as to KPS. Robert voluntarily left the Kroger businesses and surrendered his interests in KPS (and KDS) in February 2006 of his own free will, not because of duress or any wrongdoing. The accounting remedy will reveal what, if anything, he may be entitled to as a result.
Reference: Case & Analysis, New Jersey Law Journal, 217 N.J.L.J. 395 (August 4, 2014)
Filed Under: Business Litigation: Estate Planning; Business Planning