Freeman v. King Pontiac Co., 17653

• Decision Date: 05 May 1960
• Docket Number: No. 17653,17653
• Citation: 114 S.E.2d 478,236 S.C. 335
• Court: South Carolina Supreme Court
• Parties: Annie W. R. FREEMAN, Executrix of the Will of E. L. Freeman, Respondent, v. KING PONTIAC COMPANY, Appellant.

Page 478

114 S.E.2d 478

236 S.C. 335

Annie W. R. FREEMAN, Executrix of the Will of E. L. Freeman Respondent, v. KING PONTIAC COMPANY, Appellant.

No. 17653.

Supreme Court of South Carolina.

May 5, 1960.

Ramon Schwartz, Jr., Sumter, W. Cannon Matthews, J. Bratton Davis, Columbia, for appellant.

Robinson, McFadden & Dreher, Columbia, Clifton G. Brown, George D. Levy, Sumter, for respondent.

OXNER, Justice.

This action was brought to recover damages for alleged breach of a contract of employment made by E. L. Freeman with King Pontiac Company, Inc. While other issues are raised by the pleadings, the primary question is whether Freeman was wrongfully discharged. Both the master, to whom the case was referred, and the Circuit Judge found that King Pontiac breached the contract but differed as to the measure of damages. This appeal by the employer followed.

King Pontiac Company, Inc., a South Carolina Corporation, was organized in 1950. It operates the Pontiac agency in Columbia. The original stockholders and directors were F. B. Davis, Jr., Winchester Graham and E. L. Freeman. In late 1951 or early 1952 Graham sold his interest to Bray's Island Plantation, Inc., a corporation owned by Davis. C. W. Pratt was then elected a director in the place of Graham. In August, 1955, the 40 shares of stock in the corporation were held as follows: 38 shares by Bray's Island Plantation, Inc., 1 share by F. B. Davis, Jr., and 1 share by E. L. Freeman.

Davis was formerly the president of the United States Rubber Company and of certain DuPont and General Motors subsidiaries. Since his retirement he has lived on a plantation in South Carolina. He has been president of King Pontiac since its organization. Freeman, a friend of Davis, was a machinery dealer at Sumter, South Carolina. He was made vice-president and secretary of King Pontiac and was later elected treasurer, assistant to the president and general manager. He was not as active in the affairs of the corporation as his titles would indicate. He made his home in Sumter and had no office at the place of business of the King Pontiac Company. There is some dispute in the testimony as to the time he devoted to the business. Most of the witnesses said he gave very little of his time and that his visits to the office of king Pontiac were very infrequent. C. W. Pratt of New York, a business associate of Davis, was made assistant treasurer, although it is conceded that he was very inactive. W. R. Matthews has been operating manager of the corporation since it was formed and in general charge of the business. In 1952 he was named assistant secretary. The principal other employees at the times pertinent here were W. H. Moore, Jr., who was office manager, and B. J. Moser, bookkeeper.

The contract involved in this controversy was executed on February 15, 1952. Under the terms of this instrument, which superseded all previous agreements, King Pontiac employed Freeman as 'general manager' at an annual salary of $10,000.00, payable monthly. He was also to be paid his expenses not to exceed $5000.00, 'plus 10% bonus on the profits of the company before taxes and bonuses.' As general manager Freeman was empowered, 'subject to the general supervision of the President and the Board of Directors', to 'manage the affairs of the Corporation in the regular course of its business.' He was required to make reports to the president, the board of directors and to 'perform any and all of the duties which may be properly assigned to him by the President of the Board of Directors.' Paragraph 5 of this agreement was as follows: 'This agreement shall become effective on the date of its execution and shall remain in force until cancelled. This agreement may be cancelled upon twelve (12) months written notice signed by the President, a majority of the Board of Directors of the Company or by the Employee.'

Freeman was regularly paid his salary and expenses as provided by the above contract and the business was apparently operated without friction until August, 1955. On August 4th of that year, Matthews, the operating manager, left for New York on a week's vacation, leaving Moore, the office and sales manager, in charge of the business. Matthews testified that before leaving he had found some of the salesmen looking at the books and for this reason had instructed Moore not to permit anyone to inspect them during his absence. For a number of years prior to 1955, Freeman, as secretary and treasurer of the corporation, had selected an Atlanta firm to audit the business. His authority to employ auditors rather clearly appears. On August 6th, while Matthews was in New York, an auditor from the Atlanta firm came to Columbia, at the request of Freeman, to make a special audit of a certain part of the business. Later during that day Moore stated to this auditor that he had instructions not to permit anyone to look at the books. A controversy ensued. Finally late that night this auditor called Matthews in New York and told him that he had been denied access to the books. There is some dispute as to the attitude of Matthews. He claims that on August 9th he wrote Freeman a letter stating that he had not contemplated an auditor coming to Columbia during his absence and that he was entirely agreeable to making the books available for this purpose. Plaintiff contends that Freeman never received such a letter and that Matthews not only refused to let this auditor have the books but sent a very insulting message by him to Freeman.

On August 10, 1955, Freeman brought suit in the name of the King Pontiac Company against Matthews, Moore and Moser to get possession of the books and records. On the same day the late lamented Judge Eatmon issued an order temporarily restraining said defendants from interfering with Freeman in obtaining access to the books and records of the company and in conducting the business affairs of the corporation, and directing them to show cause of August 20th why said restraining order should not be made permanent. On the following day, on petition of defendants, the restraining order was modified in certain particulars and Matthews recognized as active general manager. When the friction developed between Matthews and Freeman, Davis, the president, was in Scotland. He had been there since June. Immediately after the suit was instituted Matthews contacted Davis and advised him of what had been done. On August 12th Davis sent to Freeman the following cablegram:

'I have been advised of action brought by you in name of King Pontiac Company against W. R. Matthews and other I have considered the matter and as president and chief executive officer and controller of 97 1/2% of KP stock am directing the defendant to open all records for examination Also I am directing you hereby to withdraw immediately legal action Stop I think it best for King Pontiac for you not to interfere with Matthews in the management of the King Pontiac Company and I so direct.'

Freeman was given access to the books and the audit proceeded. Although no further steps were taken in the litigation prior to the return of Davis to South Carolina about the middle of September, no effort was made by Freeman to withdraw his suit or terminate the litigation. Davis testified that this litigation was 'causing Billy be Damned with the business.' Matthews said that it 'completely demoralized the whole business'; that there was about a 50% drop in sales; that he, Moore and Moser had to be out of the office for a considerable length of time; and that they were 'constantly harrassed with lawyers and auditors.' He further testified: 'The auditors--four or five differnt sets of auditors that came in, and as soon as he (Freeman) fired one, another would come in and go around Kind Pontiac and make the employees sign statements as to their personal accounts; if you go around five different times to the employeeds, and five different auditors, checking up to see if their personal accounts are right--that in itself--five times in about five or six weeks period--is certainly enough to start rumors or spread fire or pour fuel on the fire. * * *' (The audit when completed disclosed no irregularities in the conduct of the business.)

A meeting of the stockholders of King Pontiac Company, Inc. was held on September 23, 1955. According to the minutes, there had been no meeting of the stockholders for a number of years and the directors had simply held over under the by-laws. The meeting was denominated as a 'deferred annual and special meeting.' All stock was represented by proxy except the one share held by Freeman. As to him, the minutes disclose the following:

'The chairman * * * presented to the meeting a written request for notice of said meeting directed to Mr. E. L. Freeman, as Secretary of the company, and signed by the holders of 97 1/2% of the issued and outstanding stock of the company. He also presented to the meeting an affidavit of mailing of such request for notice signed by Mr. F. B. Davis, Jr. * * *. The chairman said two telegrams addressed to Mr. F. B. Davis, Jr., purportedly from E. L. Freeman, had been received and that such telegrams alleged the calling of the meeting to be improper. He stated that in the light of the registered notice of the meeting sent by the holders of 97 1/2% of the outstanding stock and the fact that Mr. Freeman has actual notice of the meeting that the meeting duly convened at 12:05 o'clock P.M., September 23, 1955, at the office of the Company, in accordance with the by-laws and competent to proceed with the business of the meeting. '

At this meeting F. B. Davis, Jr., Jean Reybold Davis and C. W. Pratt were elected directors to hold office until the next annual meeting of the stockholders and until their successors were elected and qualified.

Later during the day a meeting of the newly elected Board of Directors was held at Bray's Island Plantation, South Carolina. All the directors waived in...