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Egner v. Talbot's, Inc.

Supreme Court of Alaska

July 31, 2009

Carol EGNER, f/k/a Carol Burns, and f/k/a Carol Church, a shareholder in Talbot's, Inc., Appellant,
TALBOT'S, INC., an Alaska corporation; Jeffrey P. McNulty, president of Talbot's, Inc.; Nancy J. McNulty, director of Talbot's, Inc.; Jane T. Church; and Janet Minnich f/k/a Janet Church, Appellees.

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[Copyrighted Material Omitted]

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Paul D. Kelly, Kelly & Patterson, Anchorage, and Steven W. Edmiston, Invicta Law Group, PLLC, Seattle, Washington, for Appellant.

Alexander J. Hildebrand, Baxter Bruce & Sullivan P.C., Juneau, for Appellee.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, CARPENETI, and WINFREE, Justices.


EASTAUGH, Justice.


Alleging denial of her rights as a shareholder and asserting other claims concerning ownership of Talbot's, Inc., Carol Egner sued Talbot's, Inc., her mother, her sisters, and a brother-in-law in 2006. The defendants moved for summary judgment, arguing that Carol had never been a shareholder and, alternatively, that the contract statute of limitations barred her claims. The superior court granted complete summary judgment to the defendants on the statute of limitations issue.

We affirm. We hold that Carol was on inquiry notice no later than 1986 that her status as a shareholder was disputed. We also hold that her failure to make reasonable inquiry within the applicable statutes of limitations precludes all claims related to her purported shareholder status.


This case concerns claims relating to the ownership of Talbot's, Inc., a corporation that owns Talbot's, a general hardware and lumber store in Ketchikan.[1] In 2006 Carol

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(Church) Egner sued the corporation, Jane Church, Nancy McNulty, Janet Minnich, and Jeffrey McNulty; her complaint alleged that she was a shareholder of Talbot's and that the defendants had violated various duties allegedly owed to Carol. Carol is the daughter of Jane Church and the late James Church Sr.; Carol is the sister of Janet (Church) Minnich and Nancy (Church) McNulty and the sister-in-law of Jeffrey McNulty. We refer collectively to the parties Carol sued as " the defendants." We refer interchangeably to Talbot's and Talbot's, Inc.

In 1949 Jane Church's parents sold all three hundred issued shares in Talbot's, Inc. to Jane and her husband, James Church Sr. James Church Sr. received 153 shares; Jane received 147. Jane and James Sr. were the directors and officers of Talbot's, Inc. from 1949 to 1978. During this period James Sr. managed the business and handled all corporate matters, except those requiring Jane's signature.

Jane and James Sr. had four children: Janet, Nancy, Carol, and James Jr. All four children intermittently worked at Talbot's between 1958 and 1978. Carol stated in an affidavit that she began working at Talbot's in 1960 and that 1964 was her first year of recorded earnings at the store.

Carol also stated in affidavits that her father, James Sr., frequently told her that she owned stock in Talbot's; that on at least six occasions Before 1978 she was offered the option of a wage increase or stock and that she chose the stock; and that on at least three occasions (the last of which was in 1968), James Sr. showed her a stock ledger that indicated that she owned shares of Talbot's stock. The original stock ledger is not in the record; it was destroyed in a fire sometime Before 1978.

James Jr. stated in an affidavit that he also had accepted offers from James Sr. to take Talbot's stock in lieu of wage increases during the same time period.

Janet, Carol's oldest sibling, testified in her deposition that she worked full-or part-time at Talbot's from 1958 through 1984, with the exception of three gaps, one from late 1965 though early 1968, and two in the early 1970s. Janet's responsibilities included daily bookkeeping, making bank deposits, and placing orders for the store. She assumed a managerial role after James Sr.'s death in 1978. Janet testified that she believed her parents owned Talbot's in its entirety, that she was never aware of any transfer of shares or offer of stock to any of her siblings, and that any transfer or offer would have been discussed by the entire family.

When James Sr. died in 1978, his wife, Jane, inherited his shares. Jane testified at her deposition that she was the sole shareholder of Talbot's after James Sr.'s death. Carol stated in an affidavit that she had asked Jane for Carol's stock certificates after James Sr.'s death, and that Jane had responded by saying both that Carol " did not own any Talbot's stock," and that Jane and Janet were " taking care of things" and that " it took time."

The stock ledger produced in discovery after Carol sued in 2006 had been generated in 1979, after James Sr.'s death. Jeffrey McNulty, Nancy's husband, testified in his deposition that because the defendants could not find a stock transfer ledger for the 1949-1979 period, the share certificates and stock transfer ledger were recreated with entries dating from 1975 on, based on James Sr.'s 1975 tax information. These reconstituted records appear to support the defendants' contentions that Jane already owned 147 shares Before James Sr.'s death, that she inherited his 153 shares when he died, and that she was therefore the only shareholder as of 1979.

Three share certificates, created in 1979 but backdated to 1975, were for 153, 147, and 300 shares, respectively. The defendants contend on appeal that there were only 300 shares total, not 600 as the certificates imply. They contend that the third certificate, for 300 shares, was erroneously backdated; it should have been dated January 1979 and was intended to reflect Jane's ownership of the total of all 300 shares evidenced by the first two certificates after her husband's shares were transferred to her following his death in 1978. The third certificate potentially supports Carol's contention that there

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were more than 300 shares, and that she owned some of them even if Jane owned 300 after James Sr. died.

In March 1980 Jane, Janet, Nancy, and Carol entered into a five-year voting trust agreement by which the three sisters were to vote Jane's shares. This agreement gave each sister a one-third interest in the shares, including the rights to vote and manage those shares, but not the right to collect dividends. The agreement stated that Jane was the " party of the first part" and that the " first party" owned all of the shares of Talbot's. As part of this agreement, Carol, Nancy, and Janet were collectively issued one 300-share certificate dated March 7, 1980. Carol later asserted in an affidavit that she first learned in 2006 (when she received defendants' motion for summary judgment), that this 300-share certificate had been issued.

In November 1980 the then-board (Jane, Janet, Nancy, and Carol) met and determined that the voting trust agreement was not working and agreed that Jane and Janet would manage Talbot's until " other arrangements" could be made. Carol signed the minutes of that meeting. Janet and Nancy signed the back of the March 7, 1980 share certificate in order to transfer the 300 shares back to Jane, but Carol did not sign. Carol later stated in an affidavit (filed in response to the defendants' summary judgment motion) that she was not advised of what " other arrangements" would be made, and that she did not sign and would not have signed a document dissolving the voting trust agreement if she suspected that it would terminate her interest in Talbot's. By its own terms, the voting trust agreement expired five years after it was executed in 1980.

In a series of transactions between 1983 and 1986, Jane sold her shares in Talbot's to Nancy and Nancy's husband, Jeffrey McNulty. Carol stated in paragraph 23 of her August 10, 2006 affidavit, filed in response to defendants' statute of limitations summary judgment motion, that she " did not find ...

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