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S.M.S. v. IBS

Court of Appeals of Missouri, Eastern District, First Division

July 30, 2019

S.M.S., Respondent/Cross-Appellant,
v.
IBS., Appellant/Cross-Respondent.

          Appeal from the Circuit Court of St. Louis County 13SL-DR04529 Honorable Kristine A. Kerr

          ROBERT M. CLAYTON III, JUDGE.

         J.B.S. ("Husband") appeals portions of the trial court's May 30, 2017 amended dissolution judgment pertaining to the classification of certain stock, retained earnings, and funds in a bank account as marital property. S.M.S. ("Wife") cross-appeals portions of the trial court's May 30, 2017 amended dissolution judgment pertaining to, (1) the classification of an ownership interest in an LLC and certain stock as Husband's separate property; and (2) the valuations of stock. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.[1]

         I. BACKGROUND

         A. Relevant Evidence Adduced at Trial and Disputed Issues on Appeal and Cross-Appeal

         Wife filed her petition for dissolution of marriage on July 30, 2013. Husband answered and filed a cross-petition for dissolution on August 16, 2013. Husband then filed his amended cross-petition for dissolution of marriage on July 24, 2015. An eleven-day bench trial was held between December 7, 2015 and March 30, 2016, revealing the following facts.

         Husband and Wife were married on September 18, 1993. Two children were born of the marriage and remained unemancipated at the time of trial.[2]

         The parties enjoyed substantial financial resources throughout the marriage. In addition, there were multiple bank accounts opened during the marriage, including Business Bank Account x7520. Except for evidence related to a disputed issue in Husband's appeal pertaining to the trial court's classification of Business Bank Account x7520 as marital property that is discussed in detail below in Section III.C. of this opinion, the relevant evidence adduced at trial and disputed issues on appeal and cross-appeal all relate to Husband's involvement in and/or ownership of three family businesses during the marriage: Provider Plus, Inc. ("PPI"), Specialized Insurance Assistance ("SIA"), and Phoenix Wing, LLC ("Phoenix Wing").[3]

         1. PPI and SIA

         a. PPI

         PPI is a closely-held and Subchapter S corporation originally founded by Husband's mother K.M.S. ("K.M.S. or "Mother") in the early 1990's. PPI is a provider of medical equipment and supplies and has approximately 200 employees. Husband's Mother, who passed away on November 1, 2012, was the sole shareholder of PPI through 2004.

         During the parties' marriage and Husband's Mother's lifetime, Husband acquired a total of 235 shares of PPI stock and was employed by PPI. Husband first began working at PPI in the early 1990's, and he worked full-time at PPI throughout the course of the parties' marriage. After Mother's death on November 1, 2012, Husband became more involved in PPI, and his ownership of the company increased.

         i. The 235 shares of PPI stock Husband received during his Mother's lifetime

         At the time of the trial, the 235 shares of PPI stock Husband acquired during the parties' marriage and Husband's Mother's lifetime represented a 23.5% ownership interest in PPI. At trial, both parties presented conflicting evidence as to the valuation of all outstanding shares of PPI stock and a valuation as to the 235 shares of PPI stock Husband acquired during the marriage. The trial court ultimately adopted Husband's expert's valuations of PPI stock, and whether the trial court erred in doing so is a disputed issue in Wife's cross-appeal.

         Husband acquired 100 of the 235 shares of PPI stock directly from his Mother, specifically receiving: (1) 15 shares of voting common stock from his Mother on January 31, 2005; (2) 50 shares of non-voting common stock from his Mother on December 31, 2006; and (3) 35 shares of voting common stock from his Mother on August 1, 2012. Husband later transferred the previously-mentioned shares to his living trust dated February 20, 2008.

         At trial, Husband claimed the 100 shares of PPI stock he received from his Mother were acquired by gift. Husband testified he provided no services, money, or property in exchange for the shares, and he took absolute ownership of the shares when they were transferred to him. In the instant case, it is undisputed that the trial court properly classified the 15 shares of voting common stock Husband received from his Mother on January 31, 2005 and the 50 shares of non-voting common stock Husband received from his Mother on December 31, 2006 as Husband's separate property because those shares were acquired by gift. However, one issue raised in Wife's cross-appeal is whether the trial court erred in classifying the 35 shares of voting common stock Husband received from his Mother on August 1, 2012 as Husband's separate property on the basis the shares were acquired by gift.

         The remaining 135 shares of PPI stock Husband acquired during the parties' marriage and Husband's Mother's lifetime were received by Husband on December 15, 2006, as a result of PPI issuing a document on that date titled "Unanimous Written Consent of the Sole Director [K.M.S.] of [PPI] in Lieu of a Special Meeting" ("PPI Consent"). The PPI Consent provides in pertinent part:

. . . a dividend in the form of shares of [PPI's] non-voting common stock should be declared on the issued and outstanding shares of [PPI's] common stock.
. . . [PPI] shall issue to the shareholders Nine (9) shares of its non-voting common stock, no par value, for each one (1) share of voting common stock, $1 par value . . ..

         Before the PPI Consent was issued, Husband owned the 15 shares of voting common stock in PPI that he undisputedly acquired as a result of a gift from his Mother on January 31, 2005. After the PPI Consent was issued, Husband was the owner of 15 shares of voting common stock and 135 shares of non-voting common stock. Wife's expert, Frank Wisehart, testified the PPI Consent had the effect of "recapitalizing the shares" in PPI and resulted in Husband owning a total of 150 shares, which did not change Husband's percentage of ownership in PPI. One issue raised in Husband's appeal is whether the trial court properly classified the 135 shares as marital property on the basis the shares were acquired as a result of a stock dividend.

         ii. Husband's involvement in and ownership of PPI following his Mother's death

         Following Husband's Mother's death, Husband remained employed by PPI and he became the President, Secretary, and a member of the Board of Directors of PPI. In addition, Husband's trust became the owner of 50% of PPI stock, and Husband's brother's ("Brother") trust became the owner of the other 50% of PPI stock. Husband is the trustee of his trust and his Brother's trust.

         Husband receives a salary and shareholder income from PPI. PPI did not distribute all of Husband's shareholder income for several years, including from 2013-2015 (the timeframe between when Wife filed her petition for dissolution of marriage and when the bench trial began, i.e., the pendency of the dissolution proceedings). As a result, PPI had a significant amount of retained earnings during those years. The testimony of Wayne Bircher, the certified public accountant ("CPA") for PPI, demonstrates that Husband, in his role as President of PPI, had the sole authority to order the company's retained earnings to be distributed to the shareholders of PPI during the pendency of the dissolution proceedings.

         b. SIA

         SIA is also a closely-held corporation originally founded by Husband's Mother in the early 1990's. SIA is a medical claims billing company that has one customer (PPI) and zero employees. Because PPI is SIA's only customer, all of SIA's revenue comes from PPI.

         During Mother's lifetime, 100% of SIA stock was owned by Mother or her trust. After Husband's Mother's death, her trust created a trust for Husband and a trust for Husband's Brother, and subsequently, Husband's trust and his Brother's trust each owned 50% of the shares of SIA. Husband is the trustee of his trust and his Brother's trust.

         Following his Mother's death, Husband became the President, Secretary, and a member of the Board of Directors of SIA. Although Husband does not receive a salary from SIA, he does receive shareholder income from the company. SIA did not distribute all of Husband's shareholder income for several years, including during the pendency of the dissolution proceedings (from 2013-2015). Accordingly, SIA had a significant amount of retained earnings during those years. The testimony of Wayne Bircher, the CPA for SIA, demonstrates that Husband, in his role as President of SIA, had the sole authority to order the company's retained earnings to be distributed to the shareholders of SIA during the pendency of the dissolution proceedings.

         c. Relevant Parts of the Trial Court's Amended Dissolution Judgment Relating to Portions of Retained Earnings of PPI and SIA

         In determining Husband's annual income for purposes of his monthly child support and maintenance obligations, the trial court considered, inter alia, portions of retained earnings from both PPI and SIA. The trial court ultimately found Husband's annual income was $1, 509, 120, i.e., $125, 760 per month. In the instant case, neither party challenges the trial court's determination of Husband's annual income, the court's consideration of portions of Husband's retained earnings from PPI and SIA in determining his annual income, or the court's orders relating to child support and maintenance.

         The trial court also considered portions of retained earnings of PPI and SIA in connection with the division of property, finding portions of retained earnings from both companies during the pendency of the dissolution proceedings (from 2013-2015) were marital property, even though Wife had also requested the trial court to classify the retained earnings from many more years as marital property.

         With respect to PPI, the trial court ordered Wife to receive a total of $172, 273 by way of a cash equalization payment from Husband. And with respect to SIA, the trial court ordered Wife to receive a total of $459, 513 by way of a cash equalization payment from Husband. In the instant case, neither party challenges the trial court's calculations underlying either cash equalization payment; however, Husband does argue in his appeal that the trial court erred in classifying the portions of retained earnings of PPI and SIA as marital property and awarding Wife half of the value of the portions of retained earnings in each company.

         2. Phoenix Wing

         Phoenix Wing is a Missouri limited liability company formed during the parties' marriage by Husband, his Brother, and their Mother. After its formation, Phoenix Wing owned and managed commercial real estate in St. Charles County.

         The operating agreement for Phoenix Wing provides Husband received a 49.5% ownership interest in Phoenix Wing in the form of 4, 950 Non-Voting Class B Units on February 15, 2006, a date which occurred during the parties' marriage. On February 20, 2008, the date Husband's living trust was created, Husband transferred his 49.5% ownership interest in Phoenix Wing to his living trust.

         There was conflicting evidence adduced at trial as to how Husband acquired his 49.5% ownership interest in Phoenix Wing. On the one hand, the Operating Agreement indicates Husband received his 49.5% ownership interest in Phoenix Wing in February 2006 in exchange for Husband making a capital contribution of $247.50. In contrast, Husband testified at trial that his Mother gifted him his 49.5% ownership interest in Phoenix Wing in 2006, and he did not provide any capital contribution, money, or services in exchange for the interest. One of the issues raised in Wife's cross-appeal is whether the trial court erred in classifying the 49.5% ownership interest as Husband's separate property on the basis the interest was a gift to Husband from his Mother.

         B. Relevant Procedural Posture Including the Trial Court's Amended Dissolution Judgment

         The trial court issued an initial dissolution judgment on February 9, 2017. Husband and Wife each filed a post-trial motion requesting the court to, inter alia, amend the initial dissolution judgment. Subsequently, on May 30, 2017, the trial court entered the amended dissolution judgment at issue in the instant case.

         Husband appeals portions of the trial court's amended dissolution judgment which: (1) classifies the 135 shares of non-voting common stock in PPI that Husband received on December 15, 2006 as a result of the PPI Consent as marital property and awards Wife half of the value of the shares on the basis the shares were acquired as a result of a stock dividend; (2) classifies portions of the retained earnings of PPI and SIA as marital property and awards Wife half of the value of the portions of the retained earnings in each company; and (3) classifies Business Bank Account x7520 as marital property and awarding Wife half of the value of the account.

         Wife cross-appeals portions of the trial court's amended judgment which: (1) classifies the 49.5% ownership interest in Phoenix Wing and 35 shares of voting common stock in PPI that Husband received on August 1, 2012 as Husband's separate property on the basis the ownership interest and shares were acquired by gift; and (2) adopts Husband's expert's valuation of all outstanding shares of PPI stock and his valuation as to the 235 shares of PPI stock Husband acquired during the marriage.[4]

         II. GENERAL STANDARD OF REVIEW

         As with any court-tried case, an appellate court reviews a trial court's dissolution judgment pursuant to Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Landewee v. Landewee, 515 S.W.3d 691, 694 (Mo. banc 2017). Accordingly, we will affirm the trial court's decision unless it is not supported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Id.

         "Substantial evidence is evidence that, if believed, has some probative force on each fact necessary to sustain the trial court's judgment." Day v. Hupp, 528 S.W.3d 400, 411 (Mo. App. E.D. 2017). Evidence is considered to have probative force when it has a tendency to make a material fact more or less likely. Id. When our Court reviews whether the trial court's decision is supported by substantial evidence, we view the evidence and inferences therefrom in the light most favorable to the trial court's judgment and disregard all contrary evidence and inferences. Id. In addition, because the trial court is free to believe any, all, or none of the testimony and other evidence presented at trial, we defer to the trial court's credibility determinations. Id. Ultimately, the trial court's judgment is supported by substantial evidence when "the evidence and inferences favorable to the challenged proposition have probative force upon the proposition and constitute evidence from which the trier of fact can reasonably decide that the proposition is true." Id.

         On the other hand, a claim that the trial court's judgment is against the weight of the evidence presupposes there is sufficient evidence to support the judgment, and our Court will reverse the judgment under this standard of review only in rare cases when we have a firm belief the trial court's decision is wrong. Id. at 411-12. When our Court reviews whether the trial court's decision is against the weight of the evidence, "we defer to the trial court's findings of fact when the factual issues are contested and when the facts as found by the trial court depend on credibility determinations." Id. at 412. Nevertheless, when reviewing an against-the-weight-of-the-evidence challenge "we can consider evidence contrary to the trial court's judgment that is not based on a credibility determination." Id. Furthermore, as recently stated by this Court:

A trial court's judgment is against the weight of the evidence only if the court could not have reasonably found, from the record at trial, the existence of a fact that is necessary to sustain the judgment. When the evidence poses two reasonable, although different conclusions, we must defer to the trial court's assessment of that evidence.

Id. (citation omitted).

         In addition, the trial court is vested with broad discretion in classifying, valuing, and dividing marital property in a dissolution proceeding, and an appellate court will interfere with the trial court's decision only if it constitutes an abuse of discretion. Landewee, 515 S.W.3d at 694; Cule v. Cule, 457 S.W.3d 858, 864-65 (Mo. App. E.D. 2015); Torrey v. Torrey, 333 S.W.3d 34, 36 (Mo. App. W.D. 2010). "An abuse of discretion occurs when a trial court's ruling is clearly against the logic of the circumstances then before the court and is so arbitrary and unreasonable as to indicate indifference and a lack of careful judicial consideration." Torrey, 333 S.W.3d at 36 (quotations omitted). Moreover, if reasonable persons can differ about the propriety of the trial court's decision, then it cannot be said the trial court abused its discretion. Id.

         Finally, in reviewing a court-tried dissolution case, our Court is predominately concerned with the correctness of the trial court's ruling rather than the route taken to reach it. McQueen v. Gadberry, 507 S.W.3d 127, 132, 138 (Mo. App. E.D. 2016). "Therefore, we are obliged to affirm if we determine that the trial court reached the correct result, regardless of whether the trial court's proffered reasons are wrong or insufficient." Id. (quotations omitted).

         III. DISCUSSION OF HUSBAND'S POINTS ON APPEAL

         Husband raises four points on appeal. Husband's first point on appeal claims the trial court abused its discretion in classifying the 135 shares of non-voting common stock in PPI that Husband received on December 15, 2006 as a result of the PPI Consent as marital property and awarding Wife half of the value of the shares on the basis the shares were acquired as a result of a stock dividend. Husband's second and third points on appeal assert the trial court abused its discretion in classifying portions of the retained earnings of PPI and SIA as marital property and awarding Wife half of the value of portions of the retained earnings in each company. And Husband's fourth point on appeal contends the trial court abused its discretion in classifying Business Bank Account x7520 as marital property and awarding Wife half of the value of the account.

         A. Whether the Trial Court Abused its Discretion in Classifying 135 Shares of Non-Voting Common Stock in PPI as Marital Property and Awarding Wife Half of the Value of the Shares on the Basis the Shares were Acquired as a Result of a Stock Dividend

         In Husband's first point on appeal, he claims the trial court abused its discretion in classifying the 135 shares of non-voting common stock in PPI that Husband received on December 15, 2006 as a result of the PPI Consent as marital property and awarding Wife half of the value of the shares on the basis the shares were acquired as a result of a stock dividend. Husband contends the 135 shares were acquired as a result of a stock split, and therefore, should have properly been classified as his separate property.

         1. General Law

         "Property acquired during the marriage is presumed to be marital property, but a party may overcome this presumption if he or she shows the property is separate." Id. at 136 n.10, 151 (citing, inter alia, sections 452.330.2 and .3 RSMo 2000[5]). The spouse asserting property is separate has the burden to overcome the presumption of marital property and demonstrate by clear and convincing evidence that the property falls under one of the exceptions set out in section 452.330.2. McQueen, 507 S.W.3d at 151. Furthermore, if the complaining party meets this burden, the property is rendered separate. Id.

         One of the exceptions listed in section 452.330.2 is property that, inter alia, is "acquired . . . in exchange for property acquired by gift[, ]" i.e., property which is acquired in exchange for separate property. Section 452.330.2(2); see also section 452.330.2(1) and Fike v. Fike, 509 S.W.3d 787, 802 (Mo. App. E.D. 2016) (property a spouse acquires by gift subsequent to the marriage is considered to be his separate property).

         When a spouse acquires additional shares of stock during the marriage by a stock split issued on original shares of stock that were gifted to the spouse subsequent to the marriage, the additional shares constitute property "acquired . . . in exchange for property acquired by gift" under section 452.330.2(2) and the additional shares are properly classified as the spouse's separate property. See Hoffmann v. Hoffmann, 676 S.W.2d 817, 822 (Mo. banc 1984); In re Marriage of Bruske, 656 S.W.2d 288, 295 (Mo. App. W.D. 1983); section 452.330.2(2); see also Davis v. Davis, 107 S.W.3d 425, 434 (Mo. App. E.D. 2003); Welch v. Welch, 821 S.W.2d 560, 561 (Mo. App. E.D. 1991); Drikow v. Drikow, 803 S.W.2d 122, 127 (Mo. App. E.D. 1990). "Whether by a surrender of the certificate evidencing the original number of shares for a certificate in the new amount of shares, or by receipt of an additional certificate reflecting added shares owned, the [stock split] transaction is an exchange of one number of shares for another." Bruske, 656 S.W.2d at 295.

         However, when a spouse acquires additional shares of stock during the marriage by a stock dividend issued on original shares of stock that were gifted to the spouse subsequent to the marriage, the additional shares do not fall within the statutory exception in section 452.330.2(2) but instead are considered income, and therefore, the additional shares are properly classified as marital property. Davis, 107 S.W.3d at 434-35; Welch, 821 S.W.2d at 561; Drikow, 803 S.W.2d at 127. "A stock dividend is a dividend paid in stock instead of cash, and is properly payable only out of surplus." Whetsel v. Forgey, 20 S.W.2d 523, 528 (Mo. 1929).

         2. Relevant Facts

         During the parties' marriage, and specifically on January 31, 2005, Husband acquired 15 shares of voting common stock in PPI and they were issued in Husband's individual name. Based on the evidence adduced at trial, the trial court found the 15 shares of voting common stock were gifted to Husband by his Mother, and therefore, the court classified the 15 shares as Husband's separate property. Wife does not challenge these findings on cross-appeal.

         On December 15, 2006, a date which occurred during the parties' marriage, PPI issued the PPI Consent, which is titled in full as "Unanimous Written Consent of the Sole Director [K.M.S.] of [PPI] in Lieu of a Special Meeting." The PPI Consent, which is part of the record on appeal, is signed by, (1) K.M.S. (Husband's Mother) as the sole director of PPI, and (2) all two shareholders of PPI: Husband and K.M.S., Trustee of the K.M.S. Living Trust dated October 6, 1993. Furthermore, the PPI Consent provides in pertinent part:

[K.M.S.], being the sole director of [PPI], a Missouri corporation . . ., acting pursuant to the General Business Corporation Law of Missouri, as amended, consents to the adoption of the following resolutions in lieu of holding a special meeting:
WHEREAS, [PPI] has authorized a class of [voting] common stock, $1 par value, and a class of non-voting common stock, no par value; and
WHEREAS, the undersigned has determined that a dividend in the form of shares of [PPI's] non-voting common stock should be declared on the issued and outstanding shares of [PPI's] common stock.
RESOLVED, that [PPI] shall issue to the shareholders Nine (9) shares of its non-voting common stock, no par value, for each one (1) share of voting common stock, $1 par value, held by such shareholder as of the date hereof, which shares of non-voting common stock shall be deemed fully paid and non-assessable upon such issuance, which shall be the 15th day of December 2006; and
FURTHER RESOLVED, that the proper officers of [PPI] are authorized, empowered, and directed to execute and deliver certificates for shares of [PPI's] common non-voting stock and to take all other actions necessary or convenient to effect the foregoing resolution.

(emphasis added).

         As of the date the PPI Consent was issued, which was December 15, 2006, Husband was the owner of 15 shares of voting common stock and 135 shares of non-voting common stock. Wife's expert, Frank Wisehart, testified the PPI Consent had the effect of "recapitalizing the shares" in PPI and resulted in Husband owning a total of 150 shares, which did not change Husband's percentage of ownership in PPI. Wisehart also testified the 135 shares of non-voting common stock were issued as a result of a "stock split" rather than a dividend, and the 135 shares were directly traceable to the 15 shares of voting common stock Husband had obtained as a gift from his Mother in 2005.

         Relying solely on the PPI Consent's mere usage of the word "dividend," the trial court classified the 135 shares of non-voting common stock as marital property on the basis they were acquired as a result of a "stock dividend." In addition, the trial court awarded Wife a cash payment of $736, 695 for what the court found to be her portion of the value of these shares, specifically finding: (1) "[t]he 135 shares of [PPI] non-voting stock are marital property and must be divided in an equitable manner"; (2) "the 135 shares of [PPI] non-voting stock are valued at $1, 473, 390 ([e]ach individual share of non-voting stock is worth $10, 914)"; and (3) "Wife requests a cash payment for her portion of the [PPI] stock. The [c]ourt grants Wife's prayer for relief and awards her 50% of the value, or $736, 695 for her portion of the 135 shares [of] [PPI] stock."

         3. Analysis of the Parties' Arguments on Appeal and the Trial Court's Judgment

         In this case, it is undisputed Husband acquired 15 shares of voting common stock in PPI during the parties' marriage, and the 15 shares are properly considered Husband's separate property because they were gifted to Husband by his Mother. See section 452.330.2(1) and Fike, 509 S.W.3d at 802 (property a spouse acquires by gift subsequent to the marriage is considered to be his separate property).

         However, the parties disagree as to whether the additional 135 shares of non-voting common stock Husband acquired during the marriage were issued as a stock split or stock dividend on the original 15 shares of voting stock gifted to Husband. Husband contends the additional 135 shares of non-voting stock were issued as a stock split, and therefore, should be properly classified as Husband's separate property. See Hoffmann, 676 S.W.2d at 822; Bruske, 656 S.W.2d at 295; section 452.330.2(2); see also Davis, 107 S.W.3d at 434; Welch, 821 S.W.2d at 561; Drikow, 803 S.W.2d at 127. Husband further asserts the trial court erred in classifying the 135 shares of non-voting common stock in PPI as marital property and awarding Wife half of the value of the shares on the basis the shares were acquired as a result of a stock dividend. In contrast, Wife asserts the additional 135 shares of non-voting common stock were issued as a stock dividend, and therefore, the trial court properly classified the 135 shares as marital property and properly awarded her half of the value of those shares to Wife. See Davis, 107 S.W.3d at 434-35; Welch, 821 S.W.2d at 561; Drikow, 803 S.W.2d at 127.

         Accordingly, in order to determine whether the trial court's classification of the 135 shares of non-voting stock in PPI as marital property on the basis the shares were acquired as a result of a stock dividend was erroneous, we must examine the differences between a stock dividend and stock split, which is an issue that has not been addressed by the parties and appears to be an issue of first impression in Missouri case law.

         a. The Determination as to Whether a Transaction is a Stock Dividend or Stock Split

         "Classifying a transaction as a stock dividend or a stock split often proves difficult." Barbara Black, Corporate Dividends and Stock Repurchases section 5:23 (November 2018 Update).[6] A corporation's mere use of the word "dividend" or "stock split" in denominating the issuance of stock to shareholders should not be controlling in determining whether the transaction is a stock dividend or stock split because "what is denominated by a corporation as a stock dividend may in truth be a stock split and vice versa." 18 C.J.S. Corporations section 192 (June 2019 Update)[7] (citing Anacomp, Inc. v. Wright, 449 N.E.2d 610, 617 (Ind. App. 1983)); see 18B Am. Jur. 2d Corporations section 979 (May 2019 Update)[8] (similarly providing and citing Anacomp, Inc., 449 N.E.2d at 617)); see also Matter of Estate of Dawson, 641 A.2d 1026, 1034 (N.J. 1994) (finding that "a corporation's mere use of the word 'dividend' should not be controlling" in determining whether a transaction is a stock dividend). Instead, courts look behind the corporation's denomination of the transaction to determine "the essence of the corporate transaction." See 18 C.J.S. Corporations sections 192 and 372 (citing Anacomp, 449 N.E.2d at 617).

         Our Court's review of instructive legal authority reveals the most important factor that evinces "the essence of the corporate transaction" and distinguishes a stock split from a stock dividend is whether the transaction resulted in an increase in the stated capital of the corporation. See, e.g., 25 Mo. Practice Series section 22.2 (2d ed.) (January 2019 Update)[9] ("A [stock] dividend affects the stated capital of the corporation. In contrast, a 'stock split' is simply the division of shares into a greater number without any change in the stated capital."); see also 18 C.J.S. Corporations sections 192 and 372 (similarly recognizing the distinction).

         Missouri case law and statutes collectively recognize the aforementioned distinction between a stock dividend and stock split. See Bruske, 656 S.W.2d at 295 ("a stock split accomplishes no change in the amount of capital contribution to the corporation . . ."); section 351.220(3)-(5) RSMo Supp. 2002[10] (providing that if dividends are declared payable in its own shares, whether or not those dividends have a par value or are without a par value, "there shall be [an amount of surplus] transferred to stated capital"); 25 Mo. Practice Series section 22.8 (explaining section 351.220(3)-(5) sets forth "principles for accounting for [stock dividends and stock splits] in the capital accounts of the corporation" including that for stock dividends, amounts are to be transferred to stated capital from surplus, whereas "[a] split-up or division of the issued shares of any class into a greater number of shares of the same class without increasing the stated capital of the corporation is not deemed to be a [stock] dividend"); see also Hoffmann, 676 S.W.2d at 827 (citing to a former version of 351.220 and indicating the statute applies to closely-held corporations such as PPI).

         Furthermore, instructive authority, including authority from Missouri, indicates that whether the issuance of stock resulted in an increase in the stated capital of the corporation is the most important distinguishing factor in determining whether the transaction is ...


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