PRESENT: Lemons, C.J., Goodwyn, Millette, Mims, McClanahan and
Powell, JJ., and Lacy, S.J.

ROBERT B. FISHER, ET AL.
                                                OPINION BY
v.     Record No. 140444                JUSTICE S. BERNARD GOODWYN
                                             January 8, 2015
TAILS, INC.

              FROM THE CIRCUIT COURT OF HENRICO COUNTY
                     Catherine C. Hammond, Judge

     In this appeal, we consider whether a shareholder in a

Virginia corporation is entitled to appraisal rights under

Virginia law when a Virginia corporation changes its state of

incorporation prior to a sale of its assets.

                             Background

     On August 29, 2013, Robert B. Fisher, Carla L. Fisher,

Bradley G. Rhodes and James D. Schwartz (Minority Shareholders)

filed a complaint in the Circuit Court of Henrico County to

demand shareholder appraisal rights concerning the sale of

Tails, Inc. (Tails).   The Minority Shareholders sought a

declaratory judgment regarding whether the transaction by which

Tails sold all of its assets, after changing its state of

incorporation from Virginia to Delaware, gave rise to appraisal

rights for the Minority Shareholders.     The Minority Shareholders

also requested monetary damages for various violations

predicated upon the existence of the alleged appraisal rights.

Tails filed a demurrer to the complaint.
     The circuit court entered a final order sustaining the

demurrer without leave to amend.    The circuit court noted that

changing the Tails corporate domicile from Virginia to Delaware

did not trigger appraisal rights, and that “[t]he complaint

fail[ed] to state facts sufficient to support the asserted

causes of action.”   The Minority Shareholders appeal.

                              Facts

     Tails was organized as a Virginia corporation to operate as

a regional franchisee of RE/MAX LLC, a Delaware limited

liability company (RE/MAX).   Tails held franchise rights for the

District of Columbia, Maryland, Virginia and West Virginia.

Officers, directors or employees of RE/MAX or its affiliates

owned a majority of the outstanding shares of Tails.     The

Minority Shareholders held approximately 21% of the outstanding

shares.

     On August 9, 2013, Buena Suerte Holdings, Inc. (Buena

Suerte), another affiliate of RE/MAX, and Tails signed a “Plan

of Reorganization and Purchase Agreement” in which Tails would

be sold to Buena Suerte in four steps.   First, Tails would

become a Delaware corporation, changing its state of

incorporation from Virginia to Delaware pursuant to Virginia

Code § 13.1-722.2 and title 8, § 265 of the Delaware Code

(reincorporation step).   Second, Tails would merge with and




                                2
into a newly-formed Delaware limited liability company, Tails,

LLC (merger step).    Tails, LLC would be a subsidiary of a newly-

formed holding company, Tails Holdco, Inc. (Holdco), and Holdco

would hold all of Tails, LLC’s membership interests.    Third,

Holdco would cause Tails, LLC to amend and restate its LLC

agreement to remove certain limited liability company provisions

(amendment step).    Finally, Holdco would sell Buena Suerte all

of its membership interests in Tails, LLC (the sale).

     On August 12, 2013, each of the Minority Shareholders

received a “Notice and Proxy/Information Statement” stating that

there was a proposal for a cash sale of all of the business

assets held by Tails to Buena Suerte.   A shareholder meeting was

scheduled to take place on September 4, 2013.   Before the

September 4, 2013 shareholder meeting, each of the Minority

Shareholders served Tails with a “Notice of Intention to Demand

Payment for Shares.”

     On September 4, 2013, Tails held a special shareholders’

meeting where the shareholders voted on several proposals

including the four steps addressed above.   The Minority

Shareholders voted against each of the proposals, but the

proposals were passed by a majority vote.   Tails undertook each

of the four steps discussed above between October 7 and October

9, 2013.




                                 3
                             Analysis

     The Minority Shareholders argue they were entitled to

appraisal rights because a series of transactions starting with

a change in corporate domicile ultimately resulted in an asset

sale, and an asset sale triggers appraisal rights for

shareholders in a Virginia corporation.    The Minority

Shareholders assert that the circuit court erred in sustaining

the demurrer because it failed to recognize the “step

transaction” doctrine or the “equitable substance over form”

doctrine in determining that their appraisal rights were not

triggered under Virginia law.    We disagree with the Minority

Shareholders.   Virginia statutory law settles this matter, and

the circuit court did not err.

     This Court reviews a trial court’s ruling to grant a

demurrer de novo.   See Yuzefovsky v. St. John’s Wood Apts., 261

Va. 97, 102, 540 S.E.2d 134, 137 (2001).    A trial court will

grant a demurrer when the pleading fails to state a cause of

action upon which relief can be granted.    Code § 8.01-273.   For

the purposes of the proceedings on the demurrer, the movant

admits the truth of all material facts properly pleaded.

CaterCorp, Inc. v. Catering Concepts, Inc., 246 Va. 22, 24, 431

S.E.2d 277, 279 (1993).




                                 4
     Virginia Code § 13.1-722.2 concerns domestication of

corporations and in regards to a Virginia corporation becoming a

corporation in a foreign jurisdiction, states as follows:

       B. A domestic corporation not required by law
  to be a domestic corporation may become a foreign
  corporation if the jurisdiction in which the
  corporation intends to domesticate allows for the
  domestication. Regardless of whether the laws of the
  foreign jurisdiction require the adoption of a plan of
  domestication, the domestication shall be approved in
  the manner provided in this article. The laws of the
  jurisdiction in which the corporation domesticates
  shall govern the effect of domesticating in that
  jurisdiction.

     A Virginia corporation can “domesticate” by changing the

state where it is incorporated.       Va. Code § 13.1-722.2.

Virginia corporations that decide to domesticate in another

state are governed by the laws of that other state once the

domestication is completed.   Id.; see also Stockbridge v. Gemini

Air Cargo, Inc., 269 Va. 609, 613, 611 S.E.2d 600, 602 (2005).

Virginia law allowed Tails to become a Delaware corporation, and

it is undisputed that Tails properly changed its domicile to

Delaware.

     Virginia Code § 13.1-730 states that minority shareholders

are entitled to “appraisal rights” in the event of certain

corporate transactions.   Appraisal rights give “corporate

shareholders who oppose [certain] extraordinary corporate

action[s]” the right “to have their shares judicially appraised




                                  5
and to demand that the corporation buy back their shares at the

appraised value.”   Black’s Law Dictionary 122 (10th ed. 2014).

     Virginia Code § 13.1-730(A) provides:

          A shareholder is entitled to appraisal rights,
     and to obtain payment of the fair value of that
     shareholder’s shares, in the event of any of the
     following corporate actions:

          1. Consummation of a merger to which the
     corporation is a party (i) if shareholder approval is
     required for the merger by § 13.1-718, except that
     appraisal rights shall not be available to any
     shareholder of the corporation with respect to shares
     of any class or series that remain outstanding after
     consummation of the merger, or (ii) if the corporation
     is a subsidiary and the merger is governed by § 13.1-
     719;

          2. Consummation of a share exchange to which the
     corporation is a party as the corporation whose shares
     will be acquired, except that appraisal rights shall
     not be available to any shareholder of the corporation
     with respect to any class or series of shares of the
     corporation that is not exchanged;

          3. Consummation of a disposition of assets
     pursuant to § 13.1-724 if the shareholder is entitled
     to vote on the disposition;

          4. An amendment of the articles of incorporation
     with respect to a class or series of shares that
     reduces the number of shares of a class or series
     owned by the shareholder to a fraction of a share if
     the corporation has the obligation or right to
     repurchase the fractional share so created; or

          5. Any other amendment to the articles of
     incorporation, or any other merger, share exchange or
     disposition of assets to the extent provided by the
     articles of incorporation, bylaws or a resolution of
     the board of directors.




                                6
     Virginia Code § 13.1-730 tracks closely with the Model

Business Corporation Act (MBCA).    Compare Va. Code § 13.1-730

with MBCA § 13.02 (2014); see also Allen C. Goolsby & Steven M.

Haas, Goolsby & Haas on Virginia Corporations § 15.1 (5th ed.

2014).   However, unlike the MBCA, Virginia Code § 13.1-730 does

not include appraisal rights upon “consummation of a

domestication.”   Compare Va. Code § 13.1-730 with MBCA §

13.02(a)(6) (2014).

     In Virginia Code § 13.1-730(A), the General Assembly chose

to grant appraisal rights to minority shareholders in five

scenarios.   While the General Assembly has incorporated most of

the MBCA’s appraisal rights provisions into Virginia Code §

13.1-730, it has not incorporated the MBCA’s provision granting

appraisal rights to shareholders in the event of a change in

corporate domicile.   The General Assembly prescribed a limited

list of triggers for appraisal rights and did not include a

change in corporate domicile on that list.   Applying the

statutory canon of expressio unius est exclusio alterius (“the

express mention of one thing excludes all others”), we hold that

the General Assembly intended to exclude a change in corporate

domicile from this list.   See Smith Mtn. Lake Yacht Club, Inc.

v. Ramaker, 261 Va. 240, 246, 542 S.E.2d 392, 395 (2001).

Therefore, the circuit court did not err in ruling that the




                                7
domestication of Tails as a Delaware corporation did not entitle

the Minority Shareholders to appraisal rights.

     Once a corporation’s state of incorporation is transferred

to Delaware, it is subject to Delaware corporate law.   Del. Code

Ann. tit. 8, § 265(d); Va. Code § 13.1-722.2.    Delaware law does

not provide appraisal rights for a sale of corporate assets.

Del. Code Ann. tit. 8, § 262(b); see also, e.g., Hariton v. Arco

Electronics, Inc., 182 A.2d 22, 25 (Del. Ch. 1962) (noting that

while most state legislatures have “seen fit to grant the

appraisal right to a dissenting stockholder” in both merger and

“sale of assets” situations, the Delaware legislature has made

that right available “only under the merger statutes”), aff'd,

188 A.2d 123 (Del. 1963); Tanzer v. Int'l Gen'l Indus., 402 A.2d

382, 390 (Del. Ch. 1979) ("[A]ppraisal rights are not available

on a sale of assets.").

     The Minority Shareholders urged the circuit court to apply

the “step transaction” doctrine or the “equitable substance over

form” doctrine to find they were entitled to appraisal rights

under Virginia law.   On appeal they argue that the circuit court

erred by not doing so.

     The Minority Shareholders note that while it is a question

of first impression in Virginia, Delaware courts have applied

the equitable step transaction doctrine in interpreting

transactions.   See, e.g., Noddings Inv. Grp., Inc. v. Capstar


                                8
Commc’ns, Inc. (Noddings I), No. 16538, 1999 Del. Ch. LEXIS 56,

at *21, *23 (Del. Ch. March 24, 1999), aff’d, 741 A.2d 16 (Del.

1999).     The step transaction doctrine “treats the ‘steps’ in a

series of formally separate but related transactions involving

the transfer of property as a single transaction, if all the

steps are substantially linked.”          Bank of N.Y. Mellon Trust Co.,

N.A. v. Liberty Media Corp., 29 A.3d 225, 239-40 (Del. 2011)

(citing Noddings I, 1999 Del. Ch. LEXIS 56, at *21 (footnote and

internal quotation marks omitted)).         For example, in Noddings I,

the Delaware Court of Chancery applied the step transaction

doctrine when a company “spun off” part of its assets to start a

new company, and that new company immediately merged with

another company in a planned series of transactions.         Id. at *1-

2.   The plaintiffs in that case had a contractual right to

purchase shares of the company upon merging, but due to the spin

off, they lost that right.     Id.       The Noddings I court held that

because there was evidence the spin off and the merger were in

actuality one transaction, the court would grant the plaintiffs

the rights they would have had if a traditional merger had taken

place. *   Id. at *20.



      *
       Notably, on rehearing, the court ruled that the doctrine
of independent legal significance did not apply to this suit and
was not rejected because New York law applied, rather than
Delaware law, and because the case involved an issue of contract
interpretation, not corporate law. Noddings Inv. Grp., Inc. v.

                                     9
      The Minority Shareholders also provide authority to support

their contention that Delaware courts have also used the

equitable doctrine of substance over form when there are unfair

but legal applications of a particular statute or breaches of

fiduciary duties while the transaction was technically compliant

with the law.   See, e.g., Gatz v. Ponsoldt, 925 A.2d 1265, 1280

(Del. 2006); Schnell v. Chris-Craft Indus., Inc., 285 A.2d 437,

439 (Del. 1971); Louisiana Mun. Police Emples. Ret. Sys. v.

Crawford (LAMPERS), 918 A.2d 1172, 1191-92 (Del. Ch. 2007).     For

example, in LAMPERS, the Delaware Court of Chancery ruled that

cash consideration characterized as a special cash dividend

would trigger dissenting shareholders’ appraisal rights because

the transaction, in substance, actually involved consideration

for a merger and not payment of a dividend.   918 A.2d at 1191-

92.

      The Minority Shareholders argue that applying the step

transaction doctrine or the substance over form doctrine, the

four transactions that took place on October 7 to 9, 2013 should

be viewed as one transaction, and the substance of that

transaction was the sale of all of Tails’ assets.   They conclude

that Tails’ change in corporate domicile should have been

disregarded under the step transaction or the substance over



Capstar Commc’ns, Inc., No. 16538, 1999 Del. Ch. LEXIS 89, at
*1, *3 (Del. Ch. Apr. 16, 1999).

                                10
form doctrine, and that application of those equitable doctrines

thus entitles them to appraisal rights, because the Code of

Virginia provides for appraisal rights in the event of a

disposition of all or substantially all of a corporation’s

assets.   See Code § 13.1-730(A)(3).   In essence, the Minority

Shareholders argue that Tails’ change in corporate domicile may

be ignored because it was just the first “step” in a series of

technically distinct but related transactions that should be

viewed together as components of a larger transaction and judged

under Virginia law.   We disagree.

     Assuming, arguendo, that Virginia corporation law allows

consideration of the step transaction doctrine and the substance

over form doctrine as articulated by Delaware courts, the

circuit court did not err in granting the demurrer filed in this

case because the purpose of the substance over form and the step

transaction doctrines is to prevent transactional formalities

from blinding the court to what truly occurred.    They allow a

court to look beyond form to the substance of a transaction to

equitably define what occurred in a transaction.    See Gatz, 925

A.2d at 1280; Noddings I, 1999 Del. Ch. LEXIS 56, at *21-24

(quoting Orr v. Kinderhill Corp., 991 F.2d 31 (2d Cir. 1993)).

However, Delaware courts have applied the doctrine of

“independent legal significance” as a rationale for not applying

equitable principles to recharacterize actions of defined legal


                                11
significance.    Under this doctrine, a transaction effected

pursuant to a statute will be subject to the requirements and

consequences of that statute alone.    See Orzeck v. Englehart,

195 A.2d 375, 378 (Del. 1963).    It is not within a court’s

purview to second-guess the legislature’s decision evidenced by

statute.     Hariton, 182 A.2d at 25; see also generally Ferguson

v. Board of Supervisors, 133 Va. 561, 569, 113 S.E. 860, 862

(1922) (“Equity . . . is not so inconsistent as to attempt the

revision or supervision of governmental action lawfully

exercised through the legislative department.”).

     There is no authority cited by the Minority Shareholders

that supports their assertion that a statutorily-sanctioned

domestication of a corporation may be considered a step in a

step transaction analysis or ignored in determining substance

over form.    Domestication of the corporation is not properly

considered a step in the step transaction or substance over form

analysis because domestication concerns the law that is

applicable to the transaction rather than an equitable

characterization of the transaction that took place.

Domestication is regulated by statute.

     Thus, recognition of the substance over form doctrine or

the step transaction doctrine would in no way change the legal

significance of the domestication of Tails as a Delaware

corporation.    Considering the various other transactions as one,


                                  12
and characterizing that transaction as a sale of all Tails’

assets, does not change the statutes which dictate that Delaware

law properly applied in determining whether the Minority

Shareholders were entitled to appraisal rights.   Under Delaware

law, they were not.   The circuit court did not err in granting

the demurrer.

                            Conclusion

     Accordingly, for the reasons stated, we will affirm the

judgment of the circuit court.

                                                        Affirmed.




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