By: A.J. Cook

Robert I. Ingalls Sr. said something like, "Son, you marry that woman and you're history." He did and he was.

Robert I. Ingalls Jr., president of Ingalls Iron Works Company in Alabama, fell in love and married against the wishes of his father, board chairman and founder of the family business.

Right after the wedding, the father fired the son, ordered him off company premises and stopped paying his salary. This started a long running battle involving the company board of directors, its stockholders and the courts.

Robert Jr. hired two lawyers to sue Senior to get back the job he held for seven years. His suit alleged the company board chairman, his father, did not have authority to fire the president. Robert Sr. countered: If he didn't have the authority, the board of directors certainly did. He called a meeting of the board. It fired Junior and removed him as a director -- retroactively. Then it elected Robert Sr. to replace his son as president.

The following year, the stockholders met at their regular annual meeting. Young Robert asked them to return him to the board of directors, making him eligible to be company president. It looked like an easy victory for the son. He and seven trusts, set up to benefit him and his children, owned more company stock than his father and mother combined. Doing the math, it's hard to see how Robert Jr. could lose. But he did. The trustees, who had the authority to vote the trusts' stock, weren't neutral parties: One worked for the company; the other was the local bank, where Robert Sr. was director, and where the company was a large depositor.

After they rejected young Robert's bid, he sued to have the trustees removed. He argued they weren't distributing income as the trust documents required. The court agreed and replaced them. The new Trustees paid Robert Jr. the money due him.

Then Robert Sr.'s wife filed a petition to have her son declared mentally incompetent.

At the same time, the company brought suit to buy the son's stock. Before the bickering started, it entered into a contract with shareholders allowing it to buy back stock when employees retired, at a price fixed in the agreement. The company offered that price, which was much less than the stock was worth. The case went to the Alabama Supreme Court, which ruled retiring meant leaving voluntarily, rather than being shown the door. Robert Jr. won again.

The conflict went on: 30 law suits were filed. Then one thing happened that settled this dissension: Robert Sr. died. In short order the family litigation ended, and young Robert became chairman of the board. But the new officer's litigation didn't end.

When Robert Jr. tried to deduct the expenses of this four year legal battle, the Internal Revenue Service proved as unreasonable as his father. But he won this case, also. The judge said, without his lawyers, Junior could not have returned to work for the company and wouldn't be receiving this income that enables him to pay substantial taxes.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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Released 3-27-00