Anderson v. Clemens Mobile Homes, Inc.

• Decision Date: 06 May 1983
• Docket Number: No. 82-382,82-382
• Citation: 214 Neb. 283,333 N.W.2d 900
• Parties: Francis ANDERSON, Appellee and Cross-Appellant, v. CLEMENS MOBILE HOMES, INC., a corporation, and Jerald E. Clemens, individually Appellants and Cross-Appellees.
• Court: Nebraska Supreme Court

Page 900

333 N.W.2d 900

214 Neb. 283

Francis ANDERSON, Appellee and Cross-Appellant, v. CLEMENS MOBILE HOMES, INC., a corporation, and Jerald E. Clemens, individually Appellants and Cross-Appellees.

No. 82-382.

Supreme Court of Nebraska.

May 6, 1983.

Syllabus by the Court

1. Accounting: Equity. An action for an accounting may, under one set of circumstances, find its remedy in an action at law and, under another, find it within the jurisdiction of equity.

2. Accounting: Equity. Where the intimate relationships of the parties are involved, an adequate remedy is available only within the equitable jurisdiction of the court.

3. Accounting: Equity. The relationships between the minority and majority shareholders of a two-shareholder corporation are such that an adequate accounting remedy is available only within the equitable jurisdiction of the court.

4. Equity: Appeal and Error. In an equitable proceeding we review the record de novo and reach an independent conclusion without being influenced by the findings of the trial court, except, however, that where credible evidence is in conflict, we must give weight to the fact that the trial court saw the witnesses and observed their demeanor while testifying.

5. Equity. Where a situation exists which is contrary to the principles of equity and which can be redressed within the scope of judicial action, a court of equity will devise a remedy to meet the situation.

6. Corporations: Actions. As a general rule, a shareholder suing on behalf of a corporation for wrongs done to it must first seek to persuade the officers and directors to bring the action; however, he is not required to make such an effort if it would have been unavailing.

7. Corporations. Although an officer or a director of a corporation is not necessarily precluded from entering into a separate business because it is in competition with the corporation, his fiduciary relationship to the corporation and its stockholders is such that if he does so he must prove by a preponderance of the evidence that he did so in good faith and did not act in such a manner as to cause or contribute to the injury or damage of the corporation, or deprive it of business; if he fails in this burden of proof, there has been a breach of that fiduciary trust or relationship.

8. Corporations. A director or other corporate officer cannot acquire an interest adverse to that of the corporation while acting for the corporation or when dealing individually with third persons.

9. Corporations: Accounting. Although the burden is ordinarily upon the party seeking an accounting to produce evidence to sustain the accounting, where another is in control of the books and has managed the business, that other is in the position of a trustee and must make a proper accounting.

10. Corporations. Generally, no corporate opportunity exists if the corporation is by itself financially unable to undertake such.

11. Corporations. A corporate officer has no specific duty to use or pledge his personal funds to enable the corporation to take advantage of a business opportunity.

12. Corporations. In order to be a corporate opportunity, the business must generally be one of practical advantage to the corporation and must fit into and further an established corporate policy.

13. Corporations. Corporate ratification of unauthorized acts may be inferred from inaction.

James R. Hancock of James R. Hancock, P.C., Scottsbluff, for appellants and cross-appellees.

Rick L. Ediger of Raymond, Olsen, Ediger & Ballew, P.C., Scottsbluff, for appellee and cross-appellant.

KRIVOSHA, C.J., and BOSLAUGH, McCOWN, WHITE, HASTINGS, CAPORALE, and SHANAHAN, JJ.

CAPORALE, Justice.

This action was instituted by appellee, Francis Anderson, the minority shareholder of Clemens Mobile Homes, Inc., a Nebraska corporation, against the corporation and its majority and only other shareholder, Jerald E. Clemens, the defendants-appellants. The action sought an accounting and liquidation of the corporation. The trial court decreed that Anderson was a 20-percent owner of the corporation, that as such he was entitled to a judgment of $88,746, and terminated Anderson's ownership in the corporation. The corporation and Clemens appeal from that decree. Anderson cross-appeals, claiming the decree should have included an accounting for additional properties and transactions. We affirm the decree of the trial court and dismiss the cross-appeal.

It is necessary that we first determine the scope of review available to the parties in this case. An action for an accounting may, under one set of circumstances, find its remedy in an action at law and, under another, find it within the jurisdiction of equity. Where the intimate relationships of the parties are involved, an adequate remedy is available only within the equitable jurisdiction of the court. Philip G. Johnson & Co. v. Salmen, 211 Neb. 123, 317 N.W.2d 900 (1982) (finding an action for an accounting between partners to be equitable in nature). We determine that the relationships between the minority and majority shareholders of a two-shareholder corporation are such that an adequate remedy is available only within the equitable jurisdiction of the court. See Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 328 N.E.2d 505 (1975) (holding that stockholders in a close corporation owed one another the same fiduciary duty as that owed by one partner to another in a partnership). Having resolved that this proceeding is equitable in nature, we review the record de novo and reach an independent conclusion without being influenced by the findings of the trial court, except, however, that where credible evidence is in conflict, we must give weight to the fact that the trial court saw the witnesses and observed their demeanor while testifying. Craig v. Kile, 213 Neb. 340, 329 N.W.2d 340 (1983); Barry v. Wittmersehouse, 212 Neb. 909, 327 N.W.2d 33 (1982); Philip G. Johnson & Co. v. Salmen, supra; Doyle v. Union Ins. Co., 202 Neb. 599, 277 N.W.2d 36 (1979), appeal as to other issue 209 Neb. 385, 308 N.W.2d 322 (1981); Neb.Rev.Stat. § 25-1925 (Reissue 1979).

The appellants' seven assignments of error may be summarized as follows: The trial court erred in (1) failing to give effect to a buy-sell agreement among the shareholders and corporation; (2) permitting Anderson to maintain the action in his own name; (3) determining that Anderson owned 20 percent of the capital stock of the corporation; and (4) determining that the corporation and Clemens personally owed money to Anderson.

The corporation was organized by Clemens as its sole shareholder in April of 1971. Its primary business was the sale of mobile homes, although from time to time other ventures were also undertaken. In the fall of that year Anderson, Clemens' brother-in-law, became an employee and, although no stock certificates were ever issued to him, a one-sixth owner of the corporation. Although Anderson and Clemens' wife served as officers and directors, the evidence establishes that Clemens, as the controlling shareholder, was at all times the corporation's chief operating officer and operated the corporation as though it were his own personal business. Anderson remained an employee of the corporation until May 1973, when he resigned as such. After Anderson resigned his employment he was removed, without his knowledge, as an officer and director.

Appellants' first assignment of error is based upon the buy-sell agreement entered into among the two shareholders and the corporation shortly after Anderson became employed by and invested in the corporation. In Clemens Mobile Homes, Inc. v. Anderson, 206 Neb. 58, 291 N.W.2d 238 (1980), we held that the subject agreement became operative during Anderson's lifetime only if he elected to sell his stock. Appellants contend that the institution of the instant action by Anderson triggered operation of the buy-sell agreement. In their answer appellants allege that the corporation ceased functioning as such, had no assets, had its affairs wound up and the creditors discharged, and had gone out of business. Notwithstanding those allegations, Clemens testified the corporation has a bank account and has been kept alive because of...