ALEXANDRA KNOP, ET AL.
PETER J. KNOP, ET AL.
THE CIRCUIT COURT OF LOUDOUN COUNTY Jeanette A. Irby, Judge
PRESENT: Lemons, C.J., Goodwyn, McClanahan, Powell, Kelsey,
and McCullough, JJ., and Koontz, S.J.
STEPHEN R. McCULLOUGH, JUSTICE
Farms is a family company that owns nearly 1, 000 acres of
land in fast-growing Loudoun County. The shares in the
company are owned by Peter J. Knop ("Father") and
his three children. A dispute arose concerning what
percentage of shares the children owned. The trial court
concluded that -- although Mr. Knop intended to make gifts of
stock to his children for estate planning purposes -- those
gifts were never effectually made because they were never
delivered to the children in the manner required by law. The
trial court also rejected the children's estoppel
argument. The children appeal from this ruling. For the
reasons noted below, we agree with the trial court that the
shares were never delivered to the children. Thus, under the
law, the gifts were not completed. We further conclude that
the trial court did not abuse its discretion in denying the
children relief under equitable estoppel principles.
Accordingly, we will affirm the judgment below.
Ticonderoga Farms was incorporated, in 1982, Father owned
almost 80% of the company. His wife, Diana Knop, and the
three children, Alexandra, Peter R.Q., and William ("the
children"), who were minors at the time, owned the
remaining shares. Following a divorce, Diana transferred her
interests to her former husband. By 1987, due to
contributions by then adult children at the formation of the
company and later transfers by Father, the children each
owned 9.08% for a total of 27.24% of the company. Father
owned the remaining shares. The company's stock book
contains stock certificate stubs showing that the children
each have a 9.08% ownership interest in the company and that
such shares have been delivered to the children.
Cummings, the accountant for Ticonderoga Farms, prepared the
Virginia and federal income tax returns for the company for
tax years 1989-2007. He also prepared the tax returns for
Father and the children. He testified that Father instructed
him to make gifts of stock equivalent to the maximum gift tax
exclusion to the children to avoid estate taxes. Cummings
testified that he followed Father's directions and
prepared Schedule K-1s for the shareholders. These K-1s reflected
the children's increased ownership shares and
Father's decreased ownership share. The K-1s were filed
with the Virginia Department of Taxation and the IRS as part
of the company's income tax returns. Cummings relied on
these K-1s to prepare personal tax returns for Father and the
children. Father and the children filed their personal
returns based on these K-1s. Father offered similar
testimony, acknowledging that he intended to convey shares to
forms filed with Ticonderoga's federal taxes show this
rising percentage of ownership. Likewise, the forms filed in
connection with Virginia taxes showed a rising percentage of
ownership for the children and a decreasing ownership
proportion for Father. By 2004, if the gifts were effective,
the children's ownership interests in Ticonderoga had
risen to a total of 44.061%, or 14.687% for each child. These
ownership interests were recorded on the tax returns for that
year. The federal tax returns, which were also filed with the
Virginia returns, were signed under penalty of perjury.
children also introduced into evidence a variety of emails
and corporate documents authored or signed by Father in which
he acknowledged the transfers and the increases in the
children's ownership interests. The ownership interests
reflected in these emails and documents were consistent with
the interests shown in the tax returns for the corresponding
years. Compare Pl.'s Ex. 37 and Pl.'s Ex.
188A and B (1991 returns), with Pl.'s Ex. 47 and
Pl.'s Ex. 198A (2001 return), with Pl.'s Ex.
77 and Pl.'s Ex. 201A and B (2004 returns). The intended
gifts of shares, however, were never reflected in stock
certificates. Father testified that he never prepared the
stock certificates. No ledgers were produced showing
transfers of the shares.
later, Father decided to sell or give away some of the
property to create a scenic easement. The children opposed
this course of action. Under the then-existing corporate
bylaws, the sale of company's real property required the
approval of 90% of the ownership interests. To circumvent
this requirement, Father asserted that the gifts he made to
the children in the 1990s and early 2000s were not completed
because he did not prepare and deliver stock certificates to
the children. In other words, the children each owned the
same interests they held in 1987, i.e., 9.08% of Ticonderoga
each, for a total ownership share of 27.24%. Father claimed
an ownership share of 72.76% of the company. Under the
Virginia Stock Corporation Act, a shareholder owning more
than two-thirds of a corporation can convert the corporation
to another form. See Code § 13.1-722.11(A)(5).
If Father's assertion was correct, this would allow
Father to convert Ticonderoga from a corporation to an LLC
under the Act. In early 2015, Father noticed a series of
shareholder and board of directors meetings where, relying on
his claim to own 72.76% of Ticonderoga, he voted-over the
children's objections-to convert Ticonderoga to an LLC.
The operating agreement Father drafted for the LLC gave him
total control of the company, including the ability to
transfer its land without the 90% shareholder approval
required by the corporate bylaws.
children then filed a complaint in which they asked for a
declaration that they each own 14.687% of Ticonderoga and
that Father lacks the authority to sell Ticonderoga land
without their consent. Following a bench trial, the trial
court found that the children "did not testify or
present any evidence that they recalled ever actually
receiving a certificate, saw a certificate, or lost a
certificate." App. 2456. The court also observed that
the corporate stock book contains stubs indicating that there
were 227 shares for each child out of a total of 2500 shares.
The court noted that
At various times, all of the [children] and certainly the
[father] were in a position to update the corporate records
to reflect their appropriate ownership. They were, at a
minimum, at times, all officers, at times directors, and
[Peter R.Q. Knop] was actually the president for a number of
The defendant was always active in the company, but the
disarray of the company records cannot fall completely to the
court credited the testimony of Mr. Cummings indicating that
Father intended to give the children an ownership share
greater than 9.08%. The court concluded that the children had
failed to meet ...