Nelson v. Phoenix Resort Corp.

• Decision Date: 06 September 1994
• Docket Number: Nos. 1,CA-CV,s. 1
• Citation: 888 P.2d 1375,181 Ariz. 188
• Parties: Larry NELSON and Dixie Lee Nelson, Plaintiffs-Appellees, Cross-Appellants, v. The PHOENIX RESORT CORPORATION, a Delaware corporation; Crescent Holdings, Inc., a Delaware corporation, Defendants-Appellants, Cross-Appellees. 92-0067, 1 92-0081.
• Court: Arizona Court of Appeals

Page 1375

888 P.2d 1375

181 Ariz. 188

Larry NELSON and Dixie Lee Nelson, Plaintiffs-Appellees, Cross-Appellants, v. The PHOENIX RESORT CORPORATION, a Delaware corporation; Crescent Holdings, Inc., a Delaware corporation, Defendants-Appellants, Cross-Appellees.

Nos. 1 CA-CV 92-0067, 1 CA-CV 92-0081.

Court of Appeals of Arizona,

Division 1, Department E.

Sept. 6, 1994.

Review Denied Feb. 22, 1995.

[181 Ariz. 190] The Langerman Law Offices, P.A. by Amy G. Langerman, Phoenix, for plaintiffs-appellees/cross-appellants.

Morrison & Hecker by Mark A. Nadeau, David L. Abney, Stephen B. White, Phoenix, and W. Dennis Cross, Kansas City, MO, for defendants-appellants/cross-appellees.

OPINION

JACOBSON, Presiding Judge.

Appellants Phoenix Resort Corporation (PRC) and Crescent Holdings, Inc. (CHI, or, collectively, defendants) appeal from judgment in favor of appellees Larry and Dixie Lee Nelson (collectively, plaintiff) for breach of a written employment contract, and from the trial court's denial of defendants' motion for judgment notwithstanding the verdict, or, in the alternative, motion for a new trial. ¹ Defendants' appeal on the contract claim raises two issues 1. Should the trial court have denied summary judgment on plaintiff's contract claim because the contract was unenforceable as violative of PRC's bylaws and CHI's shareholder agreement?

2. Should the trial court have vacated summary judgment on the contract claim when defendants raised allegations that Charles H Keating's signature on the contract was forged and that plaintiff committed perjury during trial?

Plaintiff has cross-appealed from the trial court's pretrial order granting summary judgment in favor of defendants on plaintiff's tort claims for breach of the implied covenant of good faith and fair dealing in the employment contract and intentional infliction of emotional distress. ²

STANDARDS OF REVIEW

In this case, we deal with differing standards of review, depending on the procedural status of each issue raised.

In reviewing a trial court's ruling on cross-motions for summary judgment, we have de novo review of a question of law. Aldabbagh v. Arizona Dep't of Liquor Licenses & Control, 162 Ariz. 415, 418, 783 P.2d 1207, 1210 (App.1989). However, when reviewing entry of summary judgment, we view the facts in a light most favorable to the party opposing the motion. Wagner v. City of Globe, 150 Ariz. 82, 83, 722 P.2d 250, 251 (1986). Summary judgment is inappropriate where the facts, even if undisputed, would allow reasonable minds to differ. Orme School v. Reeves, 166 Ariz. 301, 310, 802 P.2d 1000, 1009 (1990). We review denials of motions for judgment notwithstanding the verdict and for new trial on an abuse of discretion standard. Mammo v. State, 138 Ariz. 528, 533-34, 675 P.2d 1347, 1352-53 (App.1983).

FACTUAL AND PROCEDURAL BACKGROUND

Defendant PRC, a wholly-owned subsidiary of CHI, was the former owner and operator of the Phoenician Golf and Tennis Resort (Phoenician). Through a limited partnership made up of wholly-owned subsidiaries of Lincoln Savings and Loan Association (Lincoln), which was in turn a subsidiary of American Continental Corporation (ACC), defendants controlled 55% of the stock of CHI; the other 45% of the stock was owned by the Kuwait Investment Office (KIO).

On April 14, 1989, the Federal Home Loan Bank Board placed Lincoln in conservatorship, and appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as conservator, with the Federal Deposit Insurance Corporation (FDIC) acting as managing agent. On August 9, 1989, the Resolution Trust Corporation (RTC) became the conservator of Lincoln. See Financial Institutions Reform, Recovery, and Enforcement Act, 103 Stat. 183 (1989). The RTC retained the FDIC agent who had been acting as managing agent of the conservatorship. The conservatorship included control of 55% of the stock of PRC.

In April 1989, ACC and eleven of Lincoln's subsidiaries filed bankruptcy proceedings and actions in federal court challenging the rights of the FDIC and FSLIC to manage the Lincoln subsidiaries. On April 17, 1989, the FDIC's managing agent, Mark Randall, attempted to remove the officers and directors of CHI and PRC, including the president and chief executive officer, Charles H Keating, Jr., by asserting the conservator's right, as majority shareholder, to change the management of the wholly-owned subsidiaries. On April 24, 1989, ACC's corporate counsel informed Randall that this action would violate defendants' corporate documents, which required a three-quarters vote of the shareholders and approval of the board of directors to effect such a change. The FDIC did not obtain the consent of the KIO until November 1989, and the former corporate management, including Keating, remained in control until then.

In April 1989, Keating offered plaintiff Larry Nelson, who was then employed by ACC, a position as chief financial officer (CFO) of PRC. Although plaintiff first refused because of the uncertainties surrounding control of the management of the Phoenician, he subsequently agreed to a temporary employment at the resort to develop a five-year operating budget. During that project, plaintiff was in contact with Jane Ashton, who had power of attorney for the KIO. Plaintiff eventually agreed to accept the CFO job offered by Keating, and the parties negotiated and executed the following written employment contract:

EMPLOYMENT AGREEMENT

This agreement between Larry Nelson and the Phoenix Resort Corporation (PRC) employs Nelson for a period of two (2) years at an annual salary of not less than $100,000 payable not less frequently than semi-monthly.

PRC employs Nelson as its Chief Financial Officer (CFO). Nelson shall perform such duties as is normally required of the CFO and such additional duties as PRC may reasonably assign from time to time.

This contract for employment may not be terminated for any cause except only a commission of a felony or other major financial malfeasance by Nelson, and in such event, only after arbitration or litigation provides affirmation of such activity.

In witness whereof the parties have read and executed this agreement this 30th day of June 1989.

PHOENIX RESORT

CORPORATION

By: /S/______

Charles H Keating, Jr.

President

/S/___

Larry Nelson

(Emphasis added.) One copy of this contract indicates it was acknowledged by notary Lynn L. Polkinghome on June 30, 1989.

Plaintiff served as CFO of the Phoenician until November 16, 1989, when he and several other employees of the PRC management team, including Keating, were notified by letter from Herbert Chin, an FDIC agent acting as Vice President and Treasurer of CHI and PRC, that by unanimous consent of the CHI shareholders, they had been removed from all positions with the corporation, and that employment was terminated effective immediately. Defendants admitted that an important factor in plaintiff's termination was his perceived loyalty to Keating because of a longstanding relationship as an employee of ACC and its subsidiaries since 1984.

The RTC takeover team hired security officers to supervise the takeover by accompanying those terminated employees present on the premises out of the Phoenician in the middle of the night to avoid disruption to guests and to prevent any potential sabotage of the computer system and files. A public relations team was also hired to deal with the media attention likely to be attracted by the management takeover. Several press releases were drafted to explain the takeover; among the explanations for the termination of the affected management employees were statements that they were concerned about Keating loyalists who were capable of sabotaging the plans of the new management.

Plaintiff first learned of his termination on November 16, 1989. At approximately 2:00 a.m., he received a phone call at home from the director of the resort's computer systems, advising him that FDIC officials were requesting computer passwords. Plaintiff authorized the release of the requested information and then went to the resort to assist with the management change. While in his office, plaintiff was approached by two security persons who requested that he accompany them to the lobby. When he stopped on the way at a restroom, the men followed him into the bathroom stall. After they escorted him to the lobby, he was given a termination letter, and was told to leave the resort without going back to his office to remove any personal belongings.

The media reports for the following few days had extensive news coverage of the removal of Keating and his perceived loyalists from the Phoenician, though plaintiff was not mentioned by name or shown in any of the coverage.

Plaintiff subsequently sued defendants for breach of contract, false light invasion of privacy, defamation, emotional distress, and loss of consortium. On plaintiff's motion for partial summary judgment, the trial court found that defendants had breached a valid and enforceable contract, but left the issue of damages for trial. On defendants' motion for partial summary judgment, the trial court granted summary judgment in favor of defendants on plaintiff's claims for tortious wrongful discharge, defamation, and intentional infliction of emotional distress.

After trial to a jury on the remaining claims, plaintiff was awarded $163,426.66 in lost wages and $19,608.70 for other damages on his breach of contract claim, and $358,318.05 in damages on his false light invasion of privacy claim, with punitive damages of $1,000,000, plus attorneys' fees and prejudgment interest on the liquidated contract claim. The trial court denied defendants' motion for judgment notwithstanding the verdict or, in the alternative, motion for new trial.

Defendants timely appealed from that portion of the final judgment that incorporated summary judgment on the contract claim, and plaintiff timely appealed from that portion of the judgment...