Adams v. Farlow

• Citation: 516 So.2d 528
• Parties: Leland C. ADAMS, Jr., et al. v. Carl P. FARLOW, et al. Leland C. ADAMS, Jr., et al. v. AMERICAN CAST IRON PIPE COMPANY, et al. (Two Cases) Leland C. ADAMS, Jr., et al. v. Paul W. GREEN, et al. 85-300, 85-448, 85-888 and 85-1032.
• Decision Date: 18 September 1987
• Court: Supreme Court of Alabama

Page 528

516 So.2d 528

Leland C. ADAMS, Jr., et al. v. Carl P. FARLOW, et al.

Leland C. ADAMS, Jr., et al. v. AMERICAN CAST IRON PIPE COMPANY, et al. (Two Cases)

Leland C. ADAMS, Jr., et al. v. Paul W. GREEN, et al.

85-300, 85-448, 85-888 and 85-1032.

Supreme Court of Alabama.

Sept. 18, 1987.

Rehearing Denied Nov. 20, 1987.

W. Eugene Rutledge and Kay S. Kelly, Birmingham, for appellants.

A.J. Noble, Jr. of Burr & Foreman, Birmingham, for appellees.

BEATTY, Justice.

These four cases were consolidated on appeal. They arise from controversies between the two boards that comprise the board of trustees of the trust established by the codicil to the will of John J. Eagan. The two boards are the Board of Operatives and the Board of Management. ¹ The res of the trust is the American Cast Iron Pipe Company ("ACIPCo"). In a previous decision arising out of another controversy between these two boards, Farlow v. Adams, 474 So.2d 53 (Ala.1985), this Court set out a brief explanation of the components of the Eagan trust and ACIPCo, which we quote here in order to provide a backdrop for an understanding of the various bases for the present controversies:

"ACIPCo is a Georgia corporation with its principal place of business in Jefferson County, Alabama. ... All shares of common stock in ACIPCo are held in trust for the benefit of ACIPCo employees according to the provisions contained in the will of John J. Eagan.* Under the terms of the trust, the Board of Operatives, which consists of twelve elected ACIPCo employees, is charged, along with the Board of Management, with the duties of trustees. Two members of the Board of Operatives are elected to serve on the Board of Directors.

"The Board of Management consists of the corporate officers of ACIPCo. The Board of Management also constitutes the Executive Committee of the Board of Directors.

"According to the trust agreement, dividends are paid to the Board of Management and the Board of Operatives as the trustees of the employees, and the dividends are invested by the trustees to insure that each employee is provided an income which, together with the wage or salary, will insure a living wage to all employees.

"The Board of Operatives and the Board of Management have disagreed for several years over their respective roles, and the disputes have centered on the desire of the Operatives to establish a stronger voice in company decisions.

"* The relevant provisions of this trust are as follows:

"1. The voting stock of Acipco was left in trust to the Board of Trustees composed of the Board of Operatives and the Board of Management.

"2. The Board of Trustees was to do the following:

"(a) Receive dividends paid on the stock and use it, within their discretion, to insure a living wage to all employees.

"(b) Use the dividends, in their discretion, to aid employees and their wives and children in times of shutdown of the plant, illness, or unavoidable layoff of employees.

"(c) To vote the stock at stockholders meetings.

"(d) To be trustees for employees and persons requiring the product of the company. The codicil closes with this direction by Mr. Eagan:

" 'The trustees, appointed by this codicil, in accepting the trust and acting hereunder will be trustees both for said employees and said persons requiring the product of said company. It is my will and desire that said trustees in the control of said company, through the control of said common stock, shall be guided by the sole purpose of so managing said company as to enable said American Cast Iron Pipe Company to deliver the company's product to persons, requiring it, at actual cost, which shall be considered the lowest possible price consistent with the maintenance and extension of the company's plant or plants and business and the payment of reasonable salaries and wages to all employees of said company, my object being to insure "service" both to the purchasing public and to labor on the basis of the Golden Rule given by our Lord and Savior Jesus Christ.' "

474 So.2d at 54-55.

In Farlow v. Adams, this Court held that members of the Operatives could not be fired without cause. We explained "The ability of the Board of Directors of ACIPCo, dominated and controlled by the Board of Management, to arbitrarily and unilaterally discharge the employee trustees of the Eagan Trust, the Board of Operatives, would clearly result in the Board of Management's having unbridled and absolute power over the trust estate. We cannot construe the Eagan Trust to vest in management this power[,] ... [and] we must conclude that Mr. Eagan intended that the Board of Operatives could be discharged only for cause. A contrary holding would allow the Board of Management unlimited control and would totally disregard Mr. Eagan's intent and purpose in creating the trust. Consequently, we agree with the trial court's order which reinstated the employees who were members of the Board of Operatives."

474 So.2d at 58.

As the foundation for their various requests for relief in these consolidated cases, the Operatives contend that Management has attempted to ignore and circumvent this Court's decision in Farlow v. Adams, supra, and find other ways to dominate the trust. Additional facts specific to each appeal will be discussed in turn.

I. 85-300 Adams v. Farlow

The facts pertinent to this appeal are as follows:

In early December 1984, E.E. Langner, ACIPCo's works manager and also a member of Management and the Board of Directors, issued a memorandum addressed to the Operatives concerning the enforcement of Plant Rule 12, which prohibits ACIPCo employees from "quitting work, leaving assigned work area, ... or leaving during working hours without permission from immediate supervisor." In his memorandum to the Operatives, Langner stated the following:

"In order that we do not have any misunderstanding about Plant Rule # 12, I offer the following clarification.

"Any employee must have permission to leave the plant while on Company time. Merely telling your supervisor that you are going to town or going to see your lawyer does not mean that you are granted permission to leave. The reason for needing to leave the plant must be given in order for any supervisor to make a logical decision on whether permission should be granted or not.

"In the case of members of the Board of Operatives, if their supervisor or superintendent does not feel that he has sufficient reason to okay the Board Member leaving the plant, then the Board Member must obtain permission from Glenn Hicks, the Works Manager, or Assistant Works Manager.

"Plant Rule # 12 will be enforced in the future."

Apparently from the time of this memorandum and up until August 30, 1985, all of the Operatives abided by Plant Rule 12. The Operatives do not dispute Management's contention that the Operatives were never denied permission to leave the plant during their working hours to see their attorney; that no one ever inquired about the Operatives' reason or purpose for going to see their attorney; and that the Operatives were always able to perform their duties as Operatives and as trustees without violating this or other plant rules.

In August 1985, the Operatives learned that ACIPCo had hired, or was planning to hire, temporary contract labor from Manpower, Inc. Because the Operatives were of the opinion that the employment of contract labor was in violation of the Eagan trust, three of the members of the Operatives requested Carl P. Farlow, in his capacity as chairman of the board of trustees, to call a special trustees meeting for the purpose of discussing ACIPCo's use of contract labor. Farlow refused because he did not think that the use of Manpower, Inc., fell within the province of the board of trustees. Farlow also assured these Operatives that no Manpower, Inc., workers would work 40 hours a week if any ACIPCo employee was working less than 40 hours a week.

After Farlow refused to call a special meeting, several Operatives members orally requested the vice chairman of the board of trustees, Leland Adams, to call the meeting. The rules and regulations governing the board of trustees, which are included in the by-laws of ACIPCo as Article VII, provide at Section 3 the procedure for calling a special trustees meeting:

"Special meetings of the Board may be called at any time on three days' notice to all of the members of the said Board, which said notice may be verbal or in writing, and shall state the time and place of holding of the meetings. ... The call shall be made by the Secretary, at the instance of the Chairman, or, in his absence or inability to act, at the instance of the Vice Chairman. In the event that the Chairman should refuse or fail, or in his absence or inability to act, the Vice Chairman should be absent, or refuse or fail upon written request of a majority of the members of either the Board of Operatives or the Board of management to make the call, then the meeting may be called at the instance of a majority of the members of either of said Boards, but such call must be in writing, stating the time and place of meeting, and given to each member of the Board of Trustees at least ten days prior to the meeting, and no business other than that specified in the call shall be considered at such meeting."

(Emphasis added.)

On August 16, 1985, after Adams also refused to call the meeting, a majority of the Operatives, acting under the above provision, issued a written call for a special trustees meeting to be held on August 27, 1985. When Farlow received his notice of this meeting, he then instructed the secretary of the board of trustees to call a special meeting for August 23, 1985, four days prior to the meeting called by the Operatives. Upon receiving notice of the August 23 meeting, two of the Operatives, Adams and Bradford, went to the secretary, P.W. Green, and asked for an agenda of the meeting called by Farlow. Green explained that there was no agenda...