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Crouse v AgOrganic, Inc.

A-4999-05T1 (N.J. Super. App. Div. 2007) (Unpublished)

CORPORATIONS; SHAREHOLDERS; STATUTE OF LIMITATIONS — A purported shareholder who claims that the corporation or its assets were sold without notice whatsoever to that person, but waits more than the statutory period of limitations, has the burden to establish why the statute should be tolled for the time period during which that person allegedly did not know that the company or its assets had been sold.

A brother and a sister worked on a farm that was owned and operated by their family. The two siblings were the sole shareholders in a company that transformed municipal sludge into fertilizer for the farm. Neither a development plan for the company nor the bid documents later distributed indicated how many shares were held by either one of them. The company expanded over the years and was ultimately sold by the brother to another waste treatment corporation for roughly eleven million dollars. Little more than six years following the sale, the sister sued her brother claiming fraud, conversion of her interest in the company, breach of contract, breach of fiduciary duty, and promissory estoppel. She claimed to have been unaware of the sale of the company to the waste treatment corporation or that her brother had listed himself as the sole shareholder when the company was sold. Her claims were dismissed and then remanded on appeal. On remand, the lower court found that the sister never established why the statute of limitations should have been tolled for the time period that she claimed not to have known that the company was sold.

On further appeal, the sister argued that the lower court’s findings were considerably outweighed by the evidence and that the lower court was in error when it found that her brother did not breach his fiduciary duty to her. She presented a number of explanations as to why the lower court should have found that she was unaware that her brother sold the company and, as a result, should have tolled the statute of limitations. The Court found that the lower court could have found in her favor, but that she did not provide reasons or evidence that were so overwhelmingly convincing so as to result in overturning the lower court’s factual findings. Such findings are to receive considerable deference when questioned on appeal. The sister argued that the lower court’s finding to the effect that her brother had fulfilled his fiduciary duty to her was a factual finding that was not properly before the lower court. According to her, the lower court should only have decided on the procedural matter of whether the statute of limitations should have been tolled. The Court agreed that the question of the brother’s fiduciary duty to his sister was not properly before the lower court, but still held that the lower court’s decision did not exceed permissible bounds. It found that the lower court properly decided not to toll the statute of limitations to allow extended the discovery period. All of the lower court’s findings were affirmed.

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