Bentz v. Vardaman Mfg. Co., 44682

• Citation: 210 So.2d 35
• Decision Date: 06 May 1968
• Docket Number: No. 44682,44682
• Parties: John J. BENTZ and Jackson Manufacturing Company of Mississippi v. VARDAMAN MANUFACTURING COMPANY.
• Court: Mississippi Supreme Court

Page 35

210 So.2d 35

John J. BENTZ and Jackson Manufacturing Company of Mississippi v. VARDAMAN MANUFACTURING COMPANY.

No. 44682.

Supreme Court of Mississippi.

May 6, 1968.

Woodrow W. Brand, Jr., Houston, Mitchell & Rogers, Tupelo, Smith & Smith, Corinth, for appellants.

John C. Satterfield, Jackson and Yazoo City, Satterfield, Shell, Williams & Buford, Kenneth G. Perry, Jackson, Gilder & Cook, James S. Gore, Houston, Lawrence Chandler, Calhoun City, for appellee.

JONES, Justice:

Appellee, Vardaman Manufacturing Company, sued appellants, John J. Bentz and Jackson Manufacturing Company, in the Circuit Court of the First Judicial District of Chickasaw County, and obtained a joint and several judgment for $53,203.03. The appellants appeal and appellee cross-appeals.

For the sake of brevity, we will refer hereafter to appellant John J. Bentz as 'Bentz', appellant Jackson Manufacturing Company of Mississippi as 'Jackson', and Vardaman Manufacturing Company, Inc., as 'Vardaman.'

Vardaman's declaration alleged that Bentz, who was executive vice-president and general manager of Jackson, became a director of Vardaman, and violated his fiduciary responsibilities which he owed Vardaman by using his position as director of Vardaman to the advantage of Jackson and to the injury of Vardaman. It further alleged that he, as such director in conjunction with his position as executive vice-president of Jackson, dominated Vardaman so that Vardaman did not receive a fair and May 24, 1961

reasonable price for articles sold to Jackson. Appellees also sued upon a letter which stated as follows:

Mr. G. Gilder

Vardaman Manufacturing Company

Vardaman, Mississippi

Dear Mr. Gilder:

This will confirm our telephone conversation of the 23rd concerning increased costs in making our frames for us due to the wage and hour law going into effect on September 3, 1961.

We agreed to a 10% increase on prices we are now using.

When you figure new costs for us on new numbers you are to quote us on the basis of your costs which will be in effect on September 3rd.

On lumber you are able to purchase and get on yard prior to the increase we hope that you will give us the benefit of such reduction. We will try between now and that time to give you some cutting orders which will enable you to make up frame stock for us during July and August.

Yours very truly,

JACKSON MANUFACTURING COMPANY OF MISS.

John J. Bentz /s/

JOHN J. BENTZ

JJB:AR

CC: Roland Oswalt

Vardaman charged that appellants failed to pay the increase promised for several months.

We are affirming the case on both the direct and cross-appeals.

The allegation as to acts of Bentz requires a resume of the proof on that issue which the jury by its verdict accepted as true.

Jackson, located in Chickasaw County, was a manufacturer of chairs, and Vardaman, located in Calhoun County, manufactured frames for chairs. Business relationships between Jackson and Vardaman began about 1956. In June 1957 Jackson agreed to lend Vardaman the sum of $30,000 so as to enable it to expand and produce all frames required by Jackson. The loan was to be repaid in three annual installments. For additional security to that pledged, the two majority stockholders of Vardaman executed an agreement reciting that Jackson had been the principal customer of Vardaman and 'a great boon to the development of this Company.' It also stated the signers desired Jackson, in its own name or in the name of a legal representative, to purchase stock in Vardaman and have John J. Bentz, or some other person chosen by Jackson, become a director of Vardaman. It was agreed that at the next election Bentz, or whoever was designated by Jackson, would be elected as director and would continue as director until the debt was paid. The agreement, however, did not provide for cessation of the directorship when the debt was paid. This obligation was part of the contract for the loan of $30,000 and provided any default therein could be treated by Jackson as a default in the promissory note and pledge. Until the stock was purchased by Jackson, the majority stockholders who signed the agreement, appointed Jackson their attorney-in-fact with power to inspect any and all books, records, and accounts of Vardaman.

On June 17, 1957, the attorney for Jackson wrote the president of Vardaman requesting Vardaman to take note that the loan agreement gave Jackson a power of attorney, acting through any of its executive officers, to inspect the books, accounts, and records of Vardaman. Carbon copies of this letter were also sent to the secretary of Vardaman and to Mr. Bentz.

On September 17, 1957, Jackson wrote Vardaman advising that it wished to purchase two shares of stock at $100 each. Jackson was advised by the then president Gilder testified that after Vardaman borrowed money to expand and placed Bentz on the board of directors, Bentz from then on was kept informed of everything in connection with the business. Gilder said that he told Bentz what was being done. Gilder testified that from time to time Bentz would ask about the affairs of the company, such as the financial condition and its present operational status. Gilder further testified that when he was buying new equipment or anything, he would ask Bentz about it. Bentz would want to know the price of the equipment, the price being paid for lumber, the costs of labor, and whether or not the small business loan was current.

of Vardaman (who had not signed the agreement) that none was available. On December 5, 1957, Jackson wrote Gilder and Ivy, the signers of the agreement heretofore mentioned, enclosing a check for $400 and requesting four shares of their personal stock. On December 27 Jackson again wrote Gilder and Ivy reminding them of their contractual obligation to sell Vardaman stock at $100 per share and demanding that it be done. These letters were signed by Bentz as executive vice-president. The stock was issued and was held to the date of the trial. Bentz was elected to Vardaman's board of directors at its next annual meeting. He continued to be re-elected each year until 1964. The loan was paid in three annual installments immediately following its consummation, but Bentz continued to be elected to the board of directors and Jackson continued as a stockholder to the date of the trial. G. G. Gilder, a signer of the agreement mentioned above, was a majority stockholder of Vardaman, the principal operator, and, for some time prior to the trial, Vardaman's president. Bentz was notified of his election to the board by Gilder and also was notified of the regular date of meetings of the board, although he did not as a matter of fact attend a meeting. He signed a waiver of the stockholders' special meeting on January 19, 1960, which was held for the purpose of acting upon a loan of not less than $100,000 and authorizing the execution of chattel notes and mortgages. He received notice of the meeting of the stockholders in January 1958, when he was first elected as director.

In addition to Gilder's testimony, a personal memorandum made by Bentz and dated May 26, 1960, was introduced which described a conference with Gilder the day before. The memorandum detailed Bentz's familiarity with and participation in the business of Vardaman. It recited that Gilder had come to Bentz's office to secure a check for the week's production. They had had a frank discussion about the situation and about Vardaman's involvements with other businesses. Bentz had asked whether or not Vardaman had borrowed any money from one Gus Ballard. He was told that Vardaman had but that the loan had been repaid. Bentz put in his memo that he knew Gilder called Gas Ballard the day that Jackson was paid the last $10,000 due on the note dated 1957. The memorandum says that the discussion covered the situation. It also indicated that Gilder had disclosed that Vardaman had borrowed in January $100,000 from Walter Heller Company at six percent and had given a mortgage on the machinery to be paid off at $3,000 a month including interest.

The memorandum recited that Vardaman also had made a loan with St. Louis Terminal Warehouse for about $20,000 through the Bank of Pontotoc on an eighty percent loan basis on lumber in their own yard. It further noted that Gilder had purchased all the interest of Ivy (the other signer of the agreement) and his wife, that Vardaman had become the sole owner of the new house erected for Ivy and the house occupied by Wayne Terrell, that Gilder had told him there was no mortgage on the property or improvements on the seventy-six acres on which the plant was located, and that later Gilder said that there was a $2,000 mortgage on the Terrell house. The memorandum listed various stockholders and noted that Gilder had said he had put $50,000 of his own money into the business in addition to his stock. The memo noted that Gilder had Mr. Bentz testified he was familiar with Vardaman's stock ownership, its loans, its methods of handling business, its physical plant, and its equipment. Further, he admitted his knowledge and interest and participation in that connection continued through 1963. He further stated that Vardaman had lived up to its agreement that Jackson, or anyone authorized by it, would have the same rights and privileges with reference to the books, accounts, etc. as Vardaman's own stockholders. He said that he had never inspected the ledgers, cashbooks, and bank accounts, but he did remain familiar with the matters in general terms.

advised Bentz that Vardaman was building a large burner for waste sawdust. Bentz said in the memo that he had told Gilder it was about time Vardaman stopped adding to the plant and started paying off its indebtedness.

On October 17, 1963, Bentz wrote to Branyan Machinery, Inc., at Memphis, reciting that he had discussed by telephone on October 3 the planing machine purchased from Branyan by Gilder. The letter noted that a copy of the bill was sent to...