from Marshall Circuit Court (CV-15-900158)
Lynd, a physician ("Dr. Lynd"), appeals from a
summary judgment entered by the Marshall Circuit Court in
favor of Marshall County Pediatrics, P.C. ("MCP"),
in her action seeking a judgment declaring the proper
valuation of her shares in MCP. We reverse and remand.
1978, John M. Packard, M.D. ("Dr. Packard"), filed
articles of incorporation forming MCP, a medical practice
specializing in pediatrics in Guntersville. At the same time,
MCP adopted bylaws. Those bylaws reference a separate
"stockholder agreement, " but one was never
executed. Over time, Dr. Packard hired other physicians to
work with him in MCP. In 2005, Dr. Packard hired Dr. Lynd as
a pediatrician to work for MCP.
1, 2013, Dr. Packard retired from practice, and he sold MCP
to four other physicians who were then working for MCP: Dr.
David Chupp, Dr. Don Jones, Dr. Sarah Rhodes, and Dr. Lynd.
On July 31, 2013, each of the four physicians executed
separate agreements pursuant to which each physician
purchased 25 percent of Dr. Packard's shares in MCP --
each agreeing to pay him $25, 000 -- for a total purchase
price of $100, 000. At the time of sale, each physician paid
Dr. Packard $1, 000, with the understanding that he or she
would pay Dr. Packard the remaining amount due for his or her
shares, with interest, over a period of several years.
time the four physicians acquired MCP from Dr. Packard, they
accepted the bylaws without alteration. They did not execute
a stockholder agreement. Dr. Rhodes stated in an affidavit
that the physicians had "no intent or purpose to
avoid" executing a stockholder agreement among
themselves; she stated that they "simply never got it
meeting of the shareholders held on August 27, 2013,
following Dr. Packard's retirement, each of the four
physicians, including Dr. Lynd, was elected as a director of
MCP. Dr. Lynd was also elected secretary of MCP.
March 2, 2014, Dr. Lynd telephoned each of the other
physicians to inform him or her that she would be leaving MCP
to go to Oklahoma to care for her mother, whose health was
declining. On April 3, 2014, Dr. Lynd provided written notice
to the other physicians that she was leaving the practice
effective June 30, 2014. However, following a meeting of the
shareholders on May 7, 2014, Dr. Lynd determined that she
could no longer work at MCP, and she issued a resignation
letter and severed her employment with MCP on May 16, 2014.
At a shareholder meeting specially called on December 29,
2014, the other three physicians officially voted to remove
Dr. Lynd as a director and an officer of MCP. In an affidavit
submitted in the trial court, Dr. Lynd stated that she was no
longer licensed to practice medicine in Alabama.
Rhodes testified in her affidavit that, upon Dr. Lynd's
severance from MCP, the other three physicians did not
dispute that Dr. Lynd was owed her portion of the
receivables/production bonuses generated by MCP. According to
Dr. Rhodes, MCP paid Dr. Lynd $43, 783.60 in
receivables/production bonuses. Dr. Rhodes also stated that,
as of the date Dr. Lynd severed her employment with MCP, Dr.
Lynd had personally paid Dr. Packard $1, 000 and that,
through the practice, Dr. Lynd had paid an additional $11,
261.40 toward the $25, 000 purchase price for her shares of
stock in MCP.
Lynd demanded, based on the bylaws, that MCP purchase her
shares in the practice at "fair value." Article VI,
§ 4, of MCP's bylaws provides:
"If any shareholder of the corporation for any reason
ceases to be duly licensed to practice medicine in the state
of Alabama, accepts employment that, pursuant to law, places
restrictions or limitations upon his continued rendering of
professional services as a physician, or upon the death or
adjudication of incompetency of a stockholder or upon the
severance of a stockholder as an officer, agent, or employee
of the corporation, or in the event any shareholder of the
corporation, without first obtaining the written consent of
all other shareholders of the corporation shall become a
shareholder or an officer, director, agent or employee of
another professional service corporation authorized to
practice medicine in the State of Alabama, or if any
shareholder makes an assignment for the benefit of creditors,
or files a voluntary petition in bankruptcy or becomes the
subject of an involuntary petition in bankruptcy, or attempts
to sell, transfer, hypothecate, or pledge any shares of this
corporation to any person or in any manner prohibited by law
or by the By-Laws of the corporation or if any lien of any
kind is imposed upon the shares of any shareholder and such
lien is not removed within thirty days after its imposition,
or upon the occurrence, with respect to a shareholder, of any
other event hereafter provided for by amendment to the
Certificates of Incorporation or these By-Laws, then and in
any such event, the shares of this [c]orporation of such
shareholder shall then and thereafter have no voting rights
of any kind, and shall not be entitled to any dividend or
rights to purchase shares of any kind which may be declared
thereafter by the corporation and shall be forthwith
transferred, sold, and purchased or redeemed pursuant to the
agreement of the stockholders in [e]ffect at the time of such
occurrence. The initial agreement of the stockholders is
attached hereto and incorporated herein by reference[;]
however, said agreement may from time to time be changed or
amended by the stockholders without amendment of these
By-Laws. The method provided in said agreement for the
valuation of the shares of a deceased, retired or bankrupt
stockholder shall be in lieu of the provisions of
10, Chapter 4, Section 228 of the Code of Alabama of
1975." (Emphasis added.)
Lynd and the other three physicians disagreed as to the
method of valuation for Dr. Lynd's shares in MCP. Dr.
Lynd insisted that the valuation should be based on the
"fair value" of the shares, pursuant to the method
for valuing stock provided in § 10A-4-3.02, Ala. Code
1975. The relevant subsections of § 10A-4-3.02 provide:
"(a) Upon the death of a shareholder of a domestic
professional corporation or if a shareholder of a domestic
professional corporation becomes a disqualified person or if
shares of a domestic professional corporation are transferred
by operation of law or court decree to a disqualified person,
the shares of the deceased shareholder or of the disqualified
person may be transferred to a qualified person and, if not
so transferred, shall be purchased or redeemed by the
domestic professional corporation to the extent of funds
which may be legally made available for the purchase.
"(b) If the price for the shares is not fixed by the
governing documents of the domestic professional corporation
or by private agreement, the domestic professional
corporation, within six months after the death or 30 days
after the disqualification or transfer, as the case may be,
shall make a written offer to pay for the shares at a
specified price deemed by the domestic professional
corporation to be the fair value thereof as of the date of
the death, disqualification or transfer. ..."
(Emphasis added.) Based on a valuation pursuant to §
10A-4-3.02, Dr. Lynd calculated her shares to be worth $230,
the other three physicians insisted that the valuation should
be based on the "book value" of the shares,
pursuant to the method provided in former § 10-4-228,
Ala. Code 1975 (repealed in 1980), referenced in the bylaws,
which stated, in pertinent part:
"The articles of incorporation may provide for the
purchase or redemption of the shares of any shareholder upon
the death or disqualification of such shareholder, or the
same may be provided in the bylaws or by private agreement.
In the absence of a provision for the same in the articles of
incorporation or the bylaws or by private agreement, the
professional corporation shall purchase the shares of a
deceased shareholder or a shareholder no longer qualified to
own shares in such corporation within 90 days after the death
of the shareholder or disqualification of the shareholder, as
the case may be. The price for such shares shall be the book
value as of the month immediately preceding the death or
disqualification of the shareholder. Book value shall be
determined from the books and records of the professional
corporation in accordance with the regular method of
accounting used by such corporation. ..."
(Emphasis added.) Based on a valuation pursuant to §
10-4-228, the other three physicians calculated Dr.
Lynd's shares to be worth $6, 275.
April 21, 2015, Dr. Lynd sued MCP in the Marshall Circuit
Court, asserting a claim of breach of contract and seeking
specific performance of MCP's obligation to purchase her
stock as well as a judgment declaring that she was entitled
to the "fair value" of those shares from MCP. MCP
filed an answer to the complaint.
September 20, 2016, Dr. Lynd filed a motion for a summary
judgment along with a brief and exhibits in support of the
motion. On October 3, 2016, MCP filed a motion for a summary
judgment along with a brief and exhibits in support of its
motion. Following a hearing on the motions, the parties
submitted supplemental briefs.
December 27, 2016, the trial court entered an order granting
MCP's summary-judgment motion and denying Dr. Lynd's
summary-judgment motion. In pertinent part, the order stated
that "[t]he value of stock rights of Dr. Lynd is set at
book value on [the] date she left the practice."
January 9, 2017, Dr. Lynd filed a motion to alter, amend, or
vacate the trial court's December 27, 2016, order in
favor of MCP. MCP filed a reply to the motion on March 28,
2017. Following a hearing on the motion, the trial court
entered an order on March 31, 2017, denying Dr. Lynd's
motion. The order stated, in pertinent part:
"The Court's Order of December 27, 2016, is hereby
affirmed, denying [Dr. Lynd's] Motion for Summary
Judgment and all relief requested by [Dr. Lynd] and
[MCP's] Motion for Summary Judgment is granted in full,
thereby confirming the finding that the value of [Dr.
Lynd's] stock is 25% of book value, $6, 275.00. All other
relief not granted herein is denied."
Dr. Lynd appeals.