Ex parte Brown

• Decision Date: 02 March 1990
• Citation: 562 So.2d 485
• Parties: Ex parte Bradley BROWN, Jr., et al. (In re J.O. BANKS, et al. v. Paul W. BRYANT, Jr., et al.) Ex parte Bradley BROWN, Jr., et al. (In re Bradley BROWN, Jr., et al. v. Paul W. BRYANT, Jr., et al.) Bradley BROWN, Jr., et al. v. Paul W. BRYANT, Jr., et al. J.O. BANKS, et al. v. Paul W. BRYANT, Jr., et al. 88-98, 88-99, 88-120 and 88-121.
• Court: Alabama Supreme Court

Page 485

562 So.2d 485

Ex parte Bradley BROWN, Jr., et al.

(In re J.O. BANKS, et al. v. Paul W. BRYANT, Jr., et al.)

Ex parte Bradley BROWN, Jr., et al.

(In re Bradley BROWN, Jr., et al. v. Paul W. BRYANT, Jr., et al.)

Bradley BROWN, Jr., et al. v. Paul W. BRYANT, Jr., et al.

J.O. BANKS, et al. v. Paul W. BRYANT, Jr., et al.

88-98, 88-99, 88-120 and 88-121.

Supreme Court of Alabama.

March 2, 1990.

As Modified on Denial of Rehearing May 4, 1990.

Frank M. Bainbridge and Bruce F. Rogers of Bainbridge, Mims & Harper, Birmingham, for appellants-petitioners.

James J. Jenkins and Sam M. Phelps, of Phelps, Owens, Jenkins, Gibson & Fowler, Tuscaloosa, for respondents.

PER CURIAM.

These cases involve a dispute between the minority and majority stockholders of Greene Group, Inc., a corporate holding company that controls the Greene County greyhound racing track known as "Greenetrack." This Court first heard the dispute over the manner in which the majority stockholders, who are also corporate officers-directors, obtained a contract to manage a newly formed greyhound racing track in Macon County for their wholly-owned entity Pari-Mutuel Management ("PMM"), in Banks v. Bryant, 497 So.2d 460 (Ala.1986). We held in Banks v. Bryant that the majority stockholders had impermissibly acted in their individual capacities in contracting for the Macon County greyhound track. We ordered an accounting and directed the circuit court to impress a constructive trust in favor of Greene Group, Inc., consistent with the results of the accounting.

The named plaintiffs are minority stockholders and they collectively own 19% of the stock of Greene Group, Inc., a holding company owning all of the stock of its subsidiary, Greene County Greyhound Park, Inc. ¹ The defendants, Paul W. Bryant, Jr., Sam M. Phelps, and Dr. A. Wayne May, are the majority stockholders and they collectively own 81% of the outstanding stock. In addition, Bryant is president and chief executive officer of both corporations, Phelps is secretary and general counsel of both corporations, and May is a director and an officer and veterinarian for Greenetrack.

On December 12, 1985, while Banks v. Bryant was on appeal, the minority stockholders filed a second stockholders' derivative action in Greene County, Alabama, styled Brown v. Bryant, against Bryant, Phelps, and May and their newly formed Iowa corporation, Alabama Iowa Management, Inc. ("AIM, Inc."). The minority asserted in this suit that the defendants had obtained for themselves another contract to manage a newly formed dog track in Council Bluffs, Iowa, and that they had again utilized for their own advantage the corporate facilities, expertise, assets, and resources of Greene Group, Inc.

The minority stockholders also sued the law firm of Phelps, Owens, Jenkins, Gibson & Fowler ("the Phelps firm"), alleging a conflict of interest in that the firm had represented both Greene Group, Inc., and Bryant, Phelps, and May individually, in Banks v. Bryant, and that there was a direct conflict of interests between Greene Group, Inc., and the individual defendants. The minority shareholders sought a recovery An amended complaint was subsequently filed in Brown v. Bryant alleging that the majority stockholders were attempting to "squeeze out" the minority stockholders. As an alternative to direct relief for the minority stockholders claimed from the "squeeze out," the amended complaint sought the appointment of a custodian-special master-conservator to prevent stockholder abuse and for the purpose of fixing fair and reasonable salaries and fair and reasonable dividends for the stockholders. The majority stockholders filed an answer denying that the plaintiffs are entitled to relief. However, the defendants conceded the Iowa opportunity and repaid some of the AIM, Inc., fees to Greene Group, Inc., in connection with the repayment of the Macon venture. ² The loan fees paid to Bryant, Phelps, and May are a subject of dispute.

of $279,362.64 in fees and expenses charged to and paid by Greene Group, Inc., for representing the corporation through trial. The minority alleged that, because of the conflict of interests, the Phelps firm had forfeited its right to compensation from Greene Group, Inc.

The trial judge in Banks v. Bryant consolidated Banks v. Bryant and Brown v. Bryant over the objection of the minority stockholders. The issues in dispute in these consolidated cases were tried in the fall and winter of 1987, concluding on December 16, 1987. The trial judge entered a final judgment on May 25, 1988, which was subsequently withdrawn and replaced by a final judgment dated September 21, 1988, from which the minority stockholders appeal.

The minority stockholders also have filed a petition for a writ of mandamus to compel the trial judge to enter an order consistent with this Court's holding in Banks v. Bryant. This Court authorized the parties to address the petitions for writ of mandamus and the appeals in one set of briefs.

I.

We first address the petitions for writ of mandamus. We have previously held that a petition to this Court for a writ of mandamus is the proper method for bringing before us the question of whether a trial judge, after remand, has complied with our mandate:

"We have also held, however, that a petition to this Court for a writ of mandamus constitutes a proper method for reviewing the question of whether a trial judge, after remand, has complied with our mandate. Town of Daphne v. City of Fairhope, 284 Ala. 556, 226 So.2d 383 (1969); Ex parte Utility Service Corp. of Huntsville, 435 So.2d 1259 (Ala.1983). In fact, this Court, on at least two occasions, has granted writs of mandamus to compel a trial judge to enter an order in conformity with a prior decision of this Court. Ex parte Utility Service Corp. of Huntsville; Ex parte Jim Walter Corp., 283 Ala. 295, 216 So.2d 183 (1968)."

Ex parte Ins. Co. of North America, 523 So.2d 1064, 1068-69 (Ala.1988).

The minority stockholders contend that the trial court did not follow the mandates of this court in Banks v. Bryant and that a writ of mandamus should issue. They state that they seek to compel the trial court's compliance with Banks v. Bryant as follows:

"(i) Impose the constructive trust in favor of Greene Group, Inc. (and not a company known as Greene Resources, Inc.).

"(ii) Impose a constructive trust over the defendants Bryant's, Phelps' and May's shares of stock in Pari-Mutuel Management, Inc. (and AIM, Inc., as controlled by the opinion of this Court in Banks v. Bryant ).

"(iii) Strike that portion of the trial court's Order that rewards and profits the defendants Bryant, Phelps and May for their wrongdoing, and direct the trial court to restore to Greene Group, Inc., the full 'net value of the proceeds earned by ...' Bryant, Phelps and May from the Macon venture and the Iowa venture."

(Minority shareholders' petition, page 6.)

This Court held in Banks v. Bryant as follows:

"We hold, therefore, under the undisputed facts of this case, that the majority stockholders impermissibly acted in their individual capacities in contracting with the Macon County group for the construction and operation of the Macon County track. Consequently, the judgment is reversed and this cause is remanded for further proceedings to include an accounting with respect to Defendants Bryant's Phelp's and May's shares of stock in Pari-Mutuel Management, Inc. and the net value of the proceeds earned by these Defendants from the Macon County venture, including salaries, dividends, or other distribution of profits earned as officers of the operating corporation. The court is further directed to impress a constructive trust in favor of Greene Group, Inc. consistent with the results of the accounting. As a condition for the imposition of a constructive trust, as herein ordered, the trial court in its discretion may direct these Plaintiffs, or the corporation for whose benefit they seek relief, to assume certain obligations commensurate with the relief granted, as equitable principles and good conscience may require."

497 So.2d 460 at 465. Accordingly, the judgment was reversed and the case was remanded to the trial court with instructions.

We must determine, from the evidence presented, whether the trial court has followed the mandates of this Court on remand. To do so, we must consider our holding stated above against the trial judge's order of September 21, 1988, which reads in pertinent part:

"1. ISSUE OF CONSTRUCTIVE TRUST:

"The Supreme Court ordered imposition of a constructive trust consistent with the results of the accounting made to the trial court. The Court finds that Greene Resources, Inc. is a wholly-owned subsidiary of Greene Group, Inc. For business and corporate planning reasons, defendants have requested that the constructive trust be imposed so that funds flow to Greene Resources, Inc. This Court is of the opinion that imposition of a constructive trust in favor of Greene Resources, Inc. will enable plaintiffs to receive the same benefits of the constructive trust which the plaintiffs would receive if the trust were imposed in favor of Greene Group, Inc., and the defendants' request that the trust be imposed for the benefit of Greene Resources, Inc. is a reasonable request. Therefore, a constructive trust is hereby imposed in favor of and for the benefit of Greene Resources, Inc. upon the following:

"(1) The management agreement dated the 28th day of September 1983 by and between Pari-Mutuel Management, Inc. (hereinafter PMM, Inc.) and Macon County Greyhound Park, Inc. and any renewal or renegotiated contract between these parties, which said management agreement shall inure in favor of and to the benefit of Greene Resources, Inc.

"(2) The management agreement dated the 11th day of December, 1984 and the amendment thereto dated November 15, 1986 by and between AIM, Inc., and Iowa West Racing Association, a non-profit corporation, and any...