Centrella v. Morris
| Decision Date | 12 July 1979 |
| Docket Number | No. 5097,5097 |
| Citation | 597 P.2d 958 |
| Parties | Louis R. CENTRELLA and Teewinot Broadcasting, Inc., a Wyoming Corporation, Appellants (Plaintiffs), v. Newbold MORRIS and Teewinot Broadcasting, Inc., a Wyoming Corporation, Appellees (Defendants). |
| Court | Wyoming Supreme Court |
Robert N. Williams, Jackson, and P. Richard Meyer, Phoenix, Ariz., signed the brief; and Mr. Meyer appeared in oral argument on behalf of appellants.
Floyd R. King and W. Keith Goody, Jackson, signed the brief; and Mr. King appeared in oral argument on behalf of appellees.
Before RAPER, C. J., and McCLINTOCK, THOMAS, ROSE and ROONEY, JJ.
This case is concerned with the propriety of the grant of a motion for summary judgment in a shareholder's derivative action. 1 The appellants-plaintiffs, Louis R. Centrella and Teewinot Broadcasting, Inc. (appellants), on August 2, 1978, brought suit against the defendants-appellees, Newbold Morris (appellee) and Teewinot Broadcasting, Inc. (Teewinot), 2 by means of a complaint which alleged five causes of action. 3 Appellee moved for summary judgment. The district court granted the appellee's motion for summary judgment as to the first, second, third, and fourth causes of action, 4 all of which are a part of or related to appellant's basic shareholder's derivative action. The district court made an express determination that there was no just reason for delay and expressly directed the entry of the partial summary judgment, pursuant to Rule 54(b), W.R.C.P. Appellant asserts:
1. Summary judgment is improper because there are genuine issues of material fact.
2. The beneficiary of a voting trust agreement has a cause of action against a voting trustee who is also a corporate officer when the trustee wrongfully charges his personal living expenses to the corporation as business expenses.
3. A trustee who is also a corporate officer may not defeat a cause of action by the corporation and beneficiary against him by causing the corporation to redeem the beneficiary's stock.
We will affirm.
Appellant became an employee of Teewinot in April of 1976. At that time appellee was the sole shareholder of Teewinot and served as its secretary-treasurer. In late 1977, appellee decided that he wanted the working managers of Teewinot to own stock in the corporation. Appellee informed appellant that he was going to charge $57,000.00 in expenses to Teewinot that he had paid over the years 1973-1977.
Appellee had paid these expenses, because Teewinot did not have the money to pay them. The $57,000.00 was charged to Teewinot in late 1977 and as a result Teewinot was indebted to appellee for a total of $299,000.00. 5 The $57,000.00 charged to Teewinot in 1977 consisted of: (1) lunch, dinner, and entertainment expenses, presumably paid by appellee in his role as corporate secretary-treasurer; (2) expenses of housing in Jackson, Wyoming, for members of the board of directors and their families at various times; (3) corporate, legal, and accounting expenses; and (4) expenses incurred by appellee in attending various broadcasting conventions and seminars. Appellee claimed these were all legitimate business expenses. Appellant claimed they were primarily personal living expenses of the appellee or were business expenses grossly disproportionate to Teewinot's annual cash flow position. 6 In any case, appellant admits that in December, 1977, before he became a stockholder, appellee informed him that the $57,000.00 would be added to Teewinot's indebtedness.
On January 1, 1978, 7 appellee transferred 15,000 shares of Teewinot stock to appellant for which no consideration was paid. However, as a result of this stock transfer, appellant was no longer to be a salaried employee but rather was to receive periodic dividend payments. The stock certificate issued to appellant, which he did not read, appeared thus:
The stock was in turn transferred by appellant to appellee as trustee:
Appellee was to vote the stock pursuant to a Voting Trust Agreement. 8
Appellant became dissatisfied with the new arrangement set up by appellee and so informed appellee by letter dated March 24, 1978. By the letter appellant proposed a new arrangement and stated that if appellee did not accept it, appellant would resign as of April 30, 1978. As it actually happened, appellant left his job on April 13, 1978, for his annual vacation and never returned to work. When asked in deposition if he had resigned, he said "No." He preferred to characterize what he had done as, "I stopped going to work," but in his deposition confessed that he considered that a resignation. On April 15, 1978, the board of directors of Teewinot redeemed appellant's 15,000 shares of Teewinot stock at the price of $.01 per share. Actually, appellant was paid nothing for the redemption, as it was the board of directors' contention that appellant owed Teewinot more than the amount due him for the stock as more clearly appears in the counterclaim, yet to be tried in connection with the fifth cause of action.
The record discloses no specific basis upon which appellee sought or was granted summary judgment. Appellee simply made the motion, attached affidavits, supplemented them with references to appellant's deposition, asserted there were no material fact issues, and claimed that he was entitled to judgment as a matter of law. We assume the district court had a reason for granting the motion for summary judgment and we would prefer that he had entered his reasons into the record. Absence from the record of a specific basis upon which summary judgment was sought or granted is a handicap to the reviewing court, although specific bases are not mandatory under the rule. Park County Implement Co. v. Craig, Wyo.1964, 397 P.2d 800, 801; Rule 56, W.R.C.P. We consider a motion for summary judgment as though originally before us because we are presented with the same materials as the district judge. Meuse-Rhine-Ijssel Cattle Breeders of Canada Ltd. v. Y-Tex Corporation, Wyo.1979, 590 P.2d 1306.
Assuming the positions of the litigants to have been consistent throughout the proceedings, we perceive that appellee sought his summary judgment based on several alternative theories. First, appellant presented no evidence whatever in any form (e. g. affidavit, deposition, interrogatories) that showed any of the $57,000.00 in expenditures was improper, as is required by Rule 56, W.R.C.P. and furthermore the corporation suffered no damage because it never in fact paid the bill or even acknowledged it to be a debt of the corporation. Second, appellant knew of the $57,000.00 charge off in late 1977 and made no complaint about it at or before the time he consummated the agreement through which he received the 15,000 shares of stock, thus waiving any complaint and he should be estopped. Third, appellant was not a shareholder at the time the transaction of which he complains took place and therefore could not maintain a shareholder's derivative action. Fourth, appellant was not a shareholder at the time he filed his shareholder's derivative action and, therefore, cannot maintain a shareholder's derivative action. Appellee also raised other questions about the sufficiency of the affidavits submitted by appellant in opposition to the motion for summary judgment.
This court has had before it little if any litigation involving shareholder's derivative suits. The closest is Smith v. Stone, 1912, 21 Wyo. 62, 128 P. 612, involving a dispute between minority and majority stockholders with respect to the sale of corporate assets, alleged to be fraudulent. While the case does not involve the same questions as those before us, it does describe, generally, the nature of a shareholder's derivative action, quoting from the early work of Pomeroy's Equity Jurisprudence (3d Ed.):
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