Dawson v. Dawson

• Decision Date: 23 November 1982
• Docket Number: No. WD,WD
• Citation: 645 S.W.2d 120
• Parties: W. Max C. DAWSON, Appellant, v. John P. DAWSON, John L. Allison, Donald Hughes, Hale Sanders, and Wayne Eighmy, Members of the Board of Directors of the Citizens Bank of Grant City, and Citizens Bank of Grant City, Respondents. 32,833.
• Court: Missouri Court of Appeals

Page 120

645 S.W.2d 120

W. Max C. DAWSON, Appellant, v. John P. DAWSON, John L. Allison, Donald Hughes, Hale

Sanders, and Wayne Eighmy, Members of the Board of

Directors of the Citizens Bank of Grant

City, and Citizens Bank of

Grant City, Respondents.

No. WD 32,833.

Missouri Court of Appeals,

Western District.

Nov. 23, 1982.

As Modified Jan. 4, 1983.

Motion for Rehearing and/or Transfer to

Supreme Court Overruled and Denied

Jan. 4, 1983.

Application to Transfer Denied

Feb. 23, 1983.

Russell S. Jones, Jr. (argued), William E. Quirk, Shughart, Thomson & Kilroy, Kansas City, for appellant.

Don R. Lolli (argued), Theodore C. Beckett, Beckett & Steinkamp, Kansas City, Jerald L. Drake, Stephens & Drake, Grant City, for respondents.

Before NUGENT, P.J., and TURNAGE and LOWENSTEIN, JJ.

NUGENT, Presiding Judge.

W. Max C. Dawson, a stockholder of defendant Citizens Bank of Grant City, appeals from the trial court's dismissal with prejudice of his second amended petition seeking an accounting by Citizens Bank particularly in regard to transfers made to Chairman of the Board John Dawson, recovery of past unauthorized transfers to John Dawson, and an injunction preventing further unauthorized transfers to John Dawson. Defendants' motion to dismiss or alternatively, to stay further proceedings, alleged plaintiff failed to state a cause of action, failed to state with particularity the factual basis for the action, and lacked standing. We reverse the trial court's dismissal and remand for further proceedings.

Max Dawson owns twenty-five of the 4,750 outstanding shares of Citizens Bank, acquired by bequest from his mother in June, 1978. She held the stock continuously from at least 1969. His first amended petition filed on July 16, 1980, named John Dawson and three other members of the board of directors as defendants, and sought an accounting and injunction. Defendants moved to dismiss or alternatively to make the petition more definite and certain. The trial court sustained the alternative motion.

The second amended petition, filed November 10, 1980, named as defendants the Citizens Bank and the entire board of directors. ¹ In Count I, plaintiff sought an accounting of "all property, assets and business affairs of the bank", specifically as to all transfers to John Dawson from January 1, 1972, to the present, as well as an accounting by John Dawson of all payments received by him "in any way related to his employment by the bank". In Count II, he sought a complete restitution of all assets "dissipated, lost, alienated, misapplied or wasted" by payments to John Dawson, and a cancellation of a transfer on the bank's books in June, 1980 of 1,850 shares to John Dawson from Wheaton M.C. Dawson, Sr. (father of both John Dawson and Max Dawson). In Count III, he sought an order temporarily and permanently enjoining: (1) any transfers to John Dawson not directly related to the "lawful and legitimate day-to-day business" of the bank and to the "actual value of the services rendered" by him; (2) any future "misapplication, misappropriation or waste" by the bank; and (3) any voting by John Dawson of the 1,850 shares transferred to him by his father.

In all three counts, Max Dawson alleged that John Dawson was the recipient of a series of unauthorized, illegal and ultra vires payments and transfers of bank assets including but not limited to:

(a) Payment by the Bank of substantial annual salaries, bonuses and directors' fees to defendant Dawson which were far in excess of the actual value of services rendered to the Bank by defendant Dawson;

(b) A purported transfer by the Bank during 1975 of at least 1000 shares of the Bank's stock to defendant Dawson for inadequate consideration and in violation of the preemptive rights of the remaining shareholders of the Bank;

(c) A purported transfer on the Bank's books in June, 1980, of in excess of 1850 shares of the Bank's stock to defendant Dawson from Wheaton M.C. Dawson, Sr., which shares were transferred for inadequate consideration and at a time when Wheaton M.C. Dawson, Sr., was incapable of selling such shares by reason of incompetency .... At the time of said purported transfer, the incompetency of Wheaton M.C. Dawson, Sr. was known to defendant Dawson, as evidenced by defendant Dawson's Petition For Appointment of Guardian of the Person and Estate....

(d) Payment by the Bank of numerous personal expenses of defendant Dawson, including personal travel expenses, meals, lodging, gasoline for personal travel, and other personal transportation expenses, all of which were completely unrelated to the normal, day-to-day business affairs of the Bank, and all of which constituted remuneration far in excess of the actual value of the services rendered to the Bank by defendant Dawson;

(e) Purchase and maintenance by the Bank of various automobiles for the personal use of defendant Dawson, which use was and is completely unrelated to the normal day-to-day business affairs of the Bank. The use of said automobiles, together with the other payments and transfers made to defendant Dawson, constituted remuneration far in excess of the actual value of the services rendered to the Bank by defendant Dawson.

In addition, plaintiff asserted, among other things, that: (1) he brought the suit both on his own behalf and derivatively on behalf of Citizens Bank; (2) all the members of the board named as defendants are "under the control and domination" of John Dawson; (3) the board owns 98% of the bank's shares, with John Dawson holding 97% himself; (4) any demand made on the board or the shareholders to obtain the relief sought would be futile; (5) a demand was made, nevertheless, in a letter dated October 17, 1980, and defendants failed to afford the requested relief; (6) plaintiff was denied access to the bank's books and records; (7) defendants breached their fiduciary duty to the shareholders by refusing to provide an accounting; (8) the alleged transfers constituted misapplication, misappropriation and waste; and (9) plaintiff has no adequate remedy at law.

On December 5, 1980, defendants filed a motion to dismiss with prejudice or alternatively to stay further proceedings, citing three grounds for dismissal: (1) failure to state a cause of action; (2) failure to state with particularity the factual basis of the cause of action; and (3) lack of legal capacity or standing to sue.

The trial court heard the motion on March 5, 1981. On April 27, 1981, with "good cause having been found", it dismissed with prejudice plaintiff's petition. Because the grounds on which the dismissal was granted were not specified, plaintiff challenges on appeal each of the grounds raised by defendants.

We must assume that the trial court dismissed the petition on the grounds specified in defendants' motion. Johnson v. Great Heritage Life Ins. Co., 490 S.W.2d 686, 690 (Mo.App.1973); Saigh ex rel. Anheuser- Busch, Inc. v. Busch, 396 S.W.2d 9, 18 (Mo.App.1965), cert. denied, 384 U.S. 942, 86 S.Ct. 1465, 16 L.Ed.2d 541 (1966). If any of the grounds raised by defendants support their motion, the dismissal must be affirmed. Pizzurro v. Estate of Hichew, 568 S.W.2d 263, 264 (Mo.1978) (en banc).

1. Standing

Plaintiff claims standing to bring this action both individually and derivatively. His claim of individual standing is based on his characterization of the directors as fiduciaries owing a duty to each shareholder.

Although the fiduciary relationship of a director or officer of a corporation to the shareholders is well-recognized, Ramacciotti v. Simpkins, Inc., 427 S.W.2d 425, 431 (Mo.1968); State ex rel. Moore v. State Bank of Hallsville, 561 S.W.2d 722, 724-25 (Mo.App.1978), that relationship is generally held to be between the directors and the shareholders as a whole. Corporate shareholders cannot in their own right and for their own personal use and benefit maintain an action for the recovery of corporate funds or property improperly diverted or appropriated by the corporation's officers and directors. The injury is to the corporation--to the shareholders collectively--and not to the shareholders individually. The right to maintain the suit is a right of the corporation, and therefore, suit must be brought derivatively. ² Punch v. Hipolite Co., 340 Mo. 53, 67, 100 S.W.2d 878, 884 (1936); Saigh ex rel. Anheuser-Busch, Inc. v. Busch, supra, at 16; Schick v. Riemer, 263 S.W.2d 51, 54 (Mo.App.1953).

Plaintiff's allegations of improper payments and transfers of corporate assets to John Dawson, therefore, cannot be brought individually.

Where a complaint relates to the direct injury of the plaintiff, however, a derivative action may not be necessary. In Gieselmann v. Stegeman, 443 S.W.2d 127 (Mo.1969), plaintiff was deprived of 14,000 shares of stock when defendant cancelled plaintiff's ownership of the shares and reissued them to himself. The court held that the outstanding stock, already issued to plaintiff, was not corporate property and therefore, plaintiff was not required to sue on behalf of the corporation. The injury was his and not the corporation's.

Only two allegations in plaintiff's petition could conceivably relate to rights held individually by him and not by the corporation: (1) that stock was transferred on the bank's books from Wheaton Dawson to John Dawson in June, 1980 when Wheaton Dawson was incompetent to make the transfer ³; and (2) that plaintiff was deprived of his right to inspect the corporate books and records.

The allegation of a transfer from plaintiff's father, Wheaton Dawson, to John Dawson is of no assistance to plaintiff on this point. Although a director cannot deal with the property of the corporation for his own personal advantage, that duty does not extend to outstanding stock which is the individual property of shareholders. A director may purchase such stock just as may any other shareholder. Yax v. DIT-MCO, Inc., 366 S.W.2d 363 (Mo.1963). Here, we have a transfer from one...