## Facts

- Harbor Furniture Manufacturing, Inc. was a closely held, family-owned California corporation operating both a furniture manufacturing business and a profitable mobile home park (The Californian).
- Ann Stuparich and Candi Tuttleton, sisters and minority shareholders, held about 19.05% of the voting shares each and one-third of the nonvoting shares; their brother, Malcolm Tuttleton Jr., held majority voting control (about 51.56%).
- Malcolm Jr. worked in the business for decades and became CEO after their father transferred leadership; he obtained majority voting control through family stock transfers, including purchases from their father at favorable terms.
- The sisters did not participate in day-to-day management and complained they were not fully informed of business activities and that corporate formalities were not consistently observed.
- The furniture manufacturing side was financially weak at times; the mobile home park produced steady income.
- Malcolm Jr. and his wife received significant compensation from the company, but the sisters continued to receive monthly dividends and retained their ownership interests.
- The family relationship deteriorated, including an incident in which Malcolm Jr. physically injured one sister; Malcolm Jr. refused requests to restructure the businesses or to buy out the sisters’ interests.
- The sisters sought involuntary dissolution, asserting they were effectively frozen out of governance and that liquidation was needed to protect their shareholder interests.

## Issues

1. Whether the minority shareholders raised a triable issue that liquidation was “reasonably necessary for the protection of the rights or interests” of the complaining shareholders under Cal. Corp. Code § 1800(b)(5).
2. Whether family conflict, lack of management participation, high insider compensation, and refusal to restructure or buy out minority interests can constitute the level of misconduct or harm warranting judicial dissolution.

## Decision

- The Court of Appeal affirmed summary judgment for the corporation, denying involuntary dissolution.
- The court held the evidence did not create a triable issue that liquidation was reasonably necessary to protect the sisters’ rights or interests under § 1800(b)(5).
- The court concluded the complained-of facts did not demonstrate illegality, fraud, or sufficiently oppressive conduct to justify the extreme remedy of dissolution.
- The court emphasized that the minority shareholders’ economic interests were not shown to be destroyed or effectively confiscated, given continued dividend payments and ongoing corporate profitability from the mobile home park.

## Legal Principles

- Involuntary dissolution under Cal. Corp. Code § 1800(b)(5) is an extreme remedy, reserved for strong showings that liquidation is reasonably necessary to protect minority shareholders’ rights or interests.
- Minority shareholders are not entitled to dissolution merely because they lack control, are dissatisfied with management, or experience interpersonal conflict with controlling shareholders.
- Majority control obtained through lawful stock transfers, including intra-family sales at favorable prices, does not by itself constitute actionable abuse warranting dissolution.
- Continued receipt of dividends and absence of evidence of looting, fraud, or deprivation of economic return weigh heavily against a finding that liquidation is reasonably necessary.

## Conclusion

The court held that minority shareholders who continued to receive economic benefits and did not show illegality, fraud, or severe oppression failed to meet the high statutory standard for involuntary dissolution, so summary judgment denying liquidation was properly affirmed.


Stuparich v. Harbor Furniture Mfg., Inc., 83 Cal. App. 4th 1268 (Ct. App. 2000)