Bedsole v. Goodloe

• Decision Date: 06 May 2005
• Docket Number: 1021356.
• Citation: 912 So.2d 508
• Parties: M. Palmer BEDSOLE, Jr. v. J. Russell GOODLOE, Jr., et al.
• Court: Alabama Supreme Court

Page 508

912 So.2d 508

M. Palmer BEDSOLE, Jr. v. J. Russell GOODLOE, Jr., et al.

1021356.

Supreme Court of Alabama.

May 6, 2005.

COPYRIGHT MATERIAL OMITTED

Wesley Pipes, Mobile; and Ronnie E. Keahey, Grove Hill, for appellant.

Andrew P. Campbell and Caroline Smith Gidiere of Campbell Waller & Poer, LLC, Birmingham; and Joseph C. McCorquodale III of McCorquodale & McCorquodale, Jackson, for appellees.

HARWOOD, Justice.¹

M. Palmer Bedsole, Jr. ("Bedsole"), appeals from an order of the Clarke Circuit Court enjoining him from pursuing an action filed in the Mobile Circuit Court. We reverse and remand.

Facts and Procedural History

Bedsole Land Company, Inc. ("Bedsole Land"), owns and manages several thousand acres of timberland in Alabama. Bedsole Land is organized under the laws of Alabama. Its articles of incorporation are filed in Clarke County but, Bedsole asserts, its principal place of business is located in Mobile County. From 1976 until September 2002, Bedsole served as the president of Bedsole Land. He owns approximately 41 percent of the outstanding stock of Bedsole Land.

On July 26, 2002, several other shareholders, whose combined ownership interests amounted to approximately 55 percent of the outstanding stock of Bedsole Land, sued Bedsole and Bedsole Land in the Clarke Circuit Court. The shareholders — J. Russell Goodloe, Jr., James G. Bedsole III, James L. Goodloe, Mary Ann Bedsole, and T. Massey Bedsole (hereinafter referred to collectively as "the plaintiffs") — alleged that Bedsole, as "chief operating officer and president" of Bedsole Land and owner of 41 percent of the company stock, was oppressing and "squeezing out" the plaintiffs by manipulating corporate earnings and depreciating Bedsole Land's corporate stock and that Bedsole had breached his fiduciary duty to the plaintiffs. Asserting that the directors were deadlocked in the management of the company's affairs and that the shareholders had been unable to break the deadlock, the plaintiffs also sought to have the court order a judicial dissolution of Bedsole Land pursuant to § 10-2B-14.30(2)(i) and (ii), Ala.Code 1975. In August, the complaint was amended to add Travis B. Goodloe and Mary Ellis Gazaway as plaintiffs raising the percentage of aggregate stock ownership represented by the plaintiffs to approximately 59 percent.

On September 12, 2002, Bedsole filed an answer to the complaint,² denying all material allegations, asserting various affirmative defenses, and contending that the plaintiffs could not prevail on any of the claims asserted in the complaint because they had at all times held three of the five positions on the board of directors and had voted in favor of the very actions about which they were now complaining.

On September 16, 2002, the shareholders met and adopted numerous amendments to Bedsole Land's bylaws. Among those amendments was a new "Article VII" granting the board of directors ("the board") power to propose, and the shareholders the power to approve by majority vote, a dissolution of Bedsole Land. Bedsole argued at the meeting that this action was improper, contending that the articles of incorporation ("the articles") controlled over the bylaws and that "any attempt to reduce the voting requirements for dissolution would be contrary to the legal rights of the minority shareholders." Nevertheless, all shareholders except Bedsole approved the amendment. At that meeting, T. Massey Bedsole resigned as a director and his son, Travis M. Bedsole, Jr., was elected to replace him on the board. The five-member board thereby remained split 3-2 in favor of the plaintiffs, with Bedsole and his daughter holding the other two directorships. On that same date, the board met and voted to replace Bedsole as both chairman of the board and president of Bedsole Land. J. Russell Goodloe assumed the chairmanship of the board and his son, John R. Goodloe III, assumed the presidency of Bedsole Land ("President Goodloe").

On February 26, 2003, the plaintiffs filed a second amended complaint. Adding a "Count VI" and "repeat[ing] and realleg[ing] each and every allegation in the preceding paragraphs [from the earlier complaint] as if set forth fully [t]herein," the plaintiffs stated that the shareholders had elected new officers and directors, including President Goodloe. The remainder of their averments are of such importance to our ensuing analysis that we set them out at length:

"Since [the election of new officers and directors], the president has acted and managed the affairs of the company at the direction of the Board of Directors and in accordance with the Bylaws of [Bedsole Land] and Alabama law. Specifically, the Board and the president have handled all affairs of [Bedsole Land] in a prudent and reasonable manner adhering to their fiduciary duty owed to both the shareholders and the corporation itself.

"Included with these management duties is the contract of the Board to sell the property of [Bedsole Land] located in the State of Tennessee. This acreage has been contracted for sale pursuant to an appraisal done by Resource Management Services, Inc., a leading appraisal firm in the State of Alabama. In accordance with the appraisal, the Board and John R. Goodloe, III have contracted for the sale of said property for the appraised value.

"In addition, the Board of Directors and John R. Goodloe, III have managed [Bedsole Land] correctly in accordance with the Bylaws passed by the Board and shareholders from previous meetings.

"Defendant Bedsole has accused present management of mismanagement of [Bedsole Land] and its assets and has suggested that management by John R. Goodloe, III and the Plaintiffs as majority shareholders has not been proper. As a result, under the Alabama Declaratory Judgment Act, a justiciable case [or] controversy has been created over whether the management by the Plaintiffs as majority shareholders and Goodloe has been in accordance with Alabama law and the Articles and Bylaws of [Bedsole Land].

"Plaintiffs submit that Defendant Bedsole's accusations are nothing but a last ditch effort to interfere with the ongoing management of [Bedsole Land] by the majority of the shareholders. However, the Plaintiffs are entitled after trial under the Alabama Act to a declaratory judgment that the Plaintiffs, as the majority shareholders, and John R. Goodloe, III, as the president of [Bedsole Land], have managed [Bedsole Land] in accordance with Alabama law and the Articles of Incorporation and ByLaws.

"WHEREFORE, premises considered, Plaintiffs pray that this Court, after a trial, shall enter an Order (1) declaring that Plaintiffs and John R. Goodloe, III have managed [Bedsole Land] properly, prudently, and in accordance with both Alabama law and the Articles of Incorporation and Bylaws of [Bedsole Land]; (2) that all acts taken in management of the business by Plaintiffs and President Goodloe have been in the best interest of [Bedsole Land] and its shareholders; and (3) for such other further additional relief to which the Plaintiffs may be entitled, premises considered."

Bedsole filed a motion to dismiss the second amended complaint, contending, among other things, that it did not present a justiciable controversy and therefore sought an advisory opinion.

On March 10, 2003, the shareholders held a meeting at which they approved several actions that would dramatically affect Bedsole Land. Among other things, the shareholders moved to approve the board's recommendation to amend the articles to allow the board to propose the dissolution of Bedsole Land, which proposal the shareholders could then approve by a "majority of shares entitled to vote." Bedsole objected to the proposal that dissolution be effective on a majority vote, stating that "[t]he state law is that two-thirds of the vote are required. I think that I am personally damaged, really, to have the articles amended." Bedsole's attorney, who was in attendance, expressed the opinion that "the statutory standard for dissolution is two-thirds shareholder vote" and that any attempt to reduce the voting requirements for dissolution "would be contrary to the legal rights of minority stockholders" and "in the circumstances of this corporation would be unlawful." Counsel for the plaintiffs countered that any requirement for two-thirds vote was subject to the right of the shareholders to amend the articles to allow otherwise, and that "no vote is being taken on this issue today, whether to dissolve or not to dissolve." During those discussions, Bedsole remarked that "I don't think the assets are being managed as they should be managed." The motion passed, with only Bedsole voting in opposition. Next, a motion was made "to ratify the sale of the Tennessee property" for a specified amount. Bedsole stated, "I vote against this because I think it is not the best thing for the company. I think that it's been poorly handled." He further expressed the opinion that the directors favoring the proposal to sell the Tennessee property "did not analytically come up with this decision" and that the underlying reason for the proposal, which had not been expressed, "is penalizing me and my family, and I object to it for that reason." That motion passed with only Bedsole voting against it. A motion was made to satisfy all of the debt of Bedsole Land out of the proceeds of the eventual sale, after which the balance of the proceeds would then be distributed to the shareholders based on their ownership interest in Bedsole Land. Bedsole simply stated, "I think after I had opposed the sale that I shouldn't participate in the vote" and abstained. The motion otherwise passed unanimously. Other matters, not pertinent to disposition of the issues raised in this appeal, were raised, discussed, and voted upon.

On April 17, 2003, Bedsole wrote a letter to President Goodloe stating that Bedsole desired to transfer 11 of his shares to a limited-liability company wholly...