Medlin v. Carpenter, 69625

• Decision Date: 13 February 1985
• Docket Number: No. 69625,69625
• Parties: MEDLIN v. CARPENTER, et al.
• Court: Georgia Court of Appeals

Page 159

329 S.E.2d 159

174 Ga.App. 50

MEDLIN v. CARPENTER, et al.

No. 69625.

Court of Appeals of Georgia.

Feb. 13, 1985.

Rehearing Denied March 20, 1985.

Certiorari Denied April 24, 1985.

Lee R. Grogan, Columbus, for appellant.

Mark R. Youmans, S. Davis Laney, Columbus, for appellees.

BEASLEY, Judge.

Appellant Medlin, a former employee and a minority shareholder of appellee Globe Continental Corporation (Globe), filed this multi-count suit against Globe and appellee Carpenter, who was its president, chairman of the board, and majority shareholder. For approximately four years, Medlin had served as president of Globe and its predecessor corporation, Columbus Insulating Company.

Prior to the present suit, Globe had filed an action in Harris County against Medlin to recover monies it alleged Medlin owed from his employee receivable account. Summary judgment was granted to the corporation as to portions of that suit, and the propriety of the grant was appealed. Following this court's determination in the prior suit, which we will discuss in a moment, the present appellees sought to add by amendment additional defenses in the action at bar. Medlin filed a motion to strike, which was denied by the trial court. The court also granted summary judgment to the appellees as to eight counts of Medlin's amended eleven-count complaint. Medlin appeals from the denial of his motion and from the grants of summary judgment. Held:

1. Count one of Medlin's complaint alleges that due to the actions of Carpenter, the corporation did not pay to Medlin a reasonable bonus to which he was entitled, and as a result Medlin incurred $150,000 damages plus the right to seek punitive damages and attorney fees due to the bad faith of appellees. Appellant claims that the grant of summary judgment as to this count was improper.

In the prior suit filed by Globe against Medlin to recover corporate assets and monies which were allegedly diverted for his personal use and that of his family, Medlin filed a counterclaim in which he contended that he was "entitled to a reasonable bonus of not less than $150,000.00." The court granted partial summary judgment as to Globe's claim in the amount of $36,737.29 and granted summary judgment to the corporation with respect to Medlin's counterclaim.

On the appeal from the grant of summary judgment on the counterclaim, this court held that Medlin's evidence as to an alleged oral contract with the corporation to pay him a bonus at the end of fiscal 1982 was too vague to be enforced and that therefore the grant of summary judgment was proper as to that portion of the counterclaim which represented the claimed percentage of profits for fiscal 1982. This court further found that there was a jury question as to Medlin's entitlement to a bonus of $11,400 for 1981, which he allegedly lent to the corporation as additional working capital for the following fiscal year. Medlin v. Globe Continental Corp., 171 Ga.App. 103, 104, 318 S.E.2d 807 (1984).

Medlin's claim of entitlement to a bonus in count one of the present suit is the same bonus that was claimed and adjudicated in the earlier action and Medlin is estopped to relitigate this same issue in the present suit. OCGA § 9-12-42; Firestone Tire etc., Co. v. Pinyan, 155 Ga.App. 343, 270 S.E.2d 883 (1980). To hold otherwise would create the possibility of double recovery or inconsistent judgments.

2. In count two of appellant's complaint, he alleges that he is due a dividend from Globe proportionate to that supposedly paid to Carpenter, as well as punitive damages and attorney's fees. Grant of summary judgment to appellees as to this count is claimed as error.

First, a party may not raise issues arising out of the same transaction which should have been pleaded as a compulsory counterclaim in another separate suit. First Fed. Savings & Loan Assn v. I.T.S.R.E., Ltd., 159 Ga.App. 861, 285 S.E.2d 593 (1981). A cause of action is barred by the doctrine of res judicata even if some new factual allegations have been made, some new relief has been requested, or a new defendant has been added. See Caswell v. Caswell, 162 Ga.App. 72, 290 S.E.2d 171 (1982).

Inasmuch as this claim for a proportionate dividend from Globe arose out of the same employment relationship which was the basis of both Globe's main claim and Medlin's counterclaim in the earlier action, which would not have required for its adjudication the presence of parties of whom the court could not have acquired jurisdiction, and since a logical relationship exists between the claim for a pro-rata dividend and the respective claims asserted by the parties in the Harris County suit, Medlin's present claim for the dividend should have been raised by way of counterclaim in the prior suit. OCGA § 9-11-13(a); Myers v. United Services Auto. Assn., 130 Ga.App. 357, 203 S.E.2d 304 (1973); P & J Truck Lines v. Canal Ins. Co., 148 Ga.App. 3, 251 S.E.2d 72 (1978); Schoen v. Home Fed. Savings etc., Assn, 167 Ga.App. 644, 307 S.E.2d 72 (1983).

Assuming arguendo the propriety of raising this issue of entitlement to a dividend in the present litigation, appellees were still entitled as a matter of law to summary adjudication of this issue.

In his deposition, although Medlin stated that to his knowledge, neither Globe nor its precedessor, Columbia Insulating Company, ever paid a dividend to any stockholder, he asserted that he is entitled to a dividend because Carpenter received an amount equal to forty percent of the corporation's net profits after bonuses and before income taxes for its fiscal year ending September 30, 1982. Medlin readily acknowledges that this amount was not a dividend, rather a bonus, but that as a stockholder he felt he should get both a bonus and a dividend.

Medlin was present at the April 14, 1982, special meeting of Globe's board of directors, the minutes of which reflect that the board, including Medlin, unanimously approved the payment to Carpenter of the now disputed sum. There is no material issue of fact with respect to Medlin's participation in and vote on the approval of the payment to Carpenter.

At the time of such vote, Medlin was a shareholder in the corporation as well as president and member of the board of directors, and shareholders in a corporation who participate in the performance of an act or who acquiesce and ratify the same are estopped even in equity to complain thereof. Bloodworth v. Bloodworth, 225 Ga. 379, 169 S.E.2d 150 (1969); Pickett v. Paine, 230 Ga. 786, 792, 199 S.E.2d 223 (1973).

Medlin claims a right to a dividend by virtue of, inter alia, his minority shareholder status. Any profit of the corporation that might have been due and owing to Medlin because of his minority shareholder interests could only have been realized indirectly through the declaration of a dividend or other corporate agreement by which such a minority shareholder would be allowed a portion of the profits as perhaps related to his percentage interests in the corporation. A declaration of dividends is generally a matter of internal corporate discretion. See Pickett v. Paine, supra at 790, 199 S.E.2d 223. Moreover, this court earlier found that no definite amount or percentage of the corporate profits had been promised to Medlin. Medlin v. Globe Continental Corp., supra, 171 Ga.App. at 104, 318 S.E.2d 807. We are unable to find in the present record any corporate agreement to allow Medlin a portion of the profits relative to his percentage interests in the corporation.

3. Appellant's third enumeration of error complains of the granting of appellees' summary judgment as to count three. It alleges wrongful acts on the part of Carpenter in causing Globe to employ relatives and friends and in paying to them unreasonable sums as salaries and/or bonuses, such acts resulting in reduction of value of Medlin's stock.

Under the circumstances of the present case, such a claim for misappropriation or misapplication of corporate funds is properly brought as a derivative claim rather than as a direct action. See Pickett v. Paine, supra.

The general rule is that a shareholder seeking to recover misappropriated corporate funds may only bring a derivative suit. The reasons underlying this general rule are that 1) it prevents a multiplicity of lawsuits by shareholders; 2) it protects corporate creditors by putting the proceeds of the recovery back in the corporation; 3) it protects the interests of all shareholders by increasing the value of their shares, instead of allowing a recovery by one shareholder to prejudice the rights of others not party to the suit; and 4) it adequately compensates the injured shareholder by increasing the value of his shares. If there exists the possibility of prejudice to other interested parties, such as creditors or other shareholders, a direct recovery should not be allowed. Thomas v. Dickson, 250 Ga. 772, 301 S.E.2d 49 (1983).

The record contains unrebutted affidavits, attesting to various amounts of outstanding corporate indebtedness. The possibility of prejudice to parties interested by virtue of such indebtedness should preclude the direct claim in this count.

Even if we were to conclude that direct, rather than derivative, action would be proper here, the record, construed most strongly in favor of Medlin, does not support a finding of remaining material questions of fact as to the issue raised in count three. See inter alia, Eiberger v. West, 247 Ga. 767, 281 S.E.2d 148 (1981); Hanover Ins. Co. v. Nelson Conveyor & C. Co., 159 Ga.App. 13, 282 S.E.2d 670 (1981); Vizzini v. Blonder, 165 Ga.App. 840, 303 S.E.2d 38 (1983).

Further, inasmuch as derivative claims may be considered in one lawsuit with direct claims against a corporation (see Thomas v. Dickson, supra, 250 Ga. at 774, 301 S.E.2d 49), for the reasons we have cited in Division 2, the present derivative claim should have been brought by counterclaim in the prior litigation.

Summary judgment was...