News-Journal Corp. v. Gore

• Court: United States State Supreme Court of Florida
• Writing for the Court: Author: Thomas
• Citation: 147 Fla. 217,2 So.2d 741
• Decision Date: 13 May 1941
• Parties: NEWS-JOURNAL CORPORATION et al. v. GORE.

2 So.2d 741

147 Fla. 217

NEWS-JOURNAL CORPORATION et al.
v.
GORE.

Florida Supreme Court

May 13, 1941

Rehearing Denied June 18, 1941. [2 So.2d 742]

[147 Fla. 218] Appeal from Circuit Court, Volusia County; C. E. Chillingworth, judge.

[147 Fla. 219] Green & West, of Daytona Beach, for appellants.

McCune, Hiaasen & Fleming, of Fort Lauderdale, for appellee.

THOMAS, Justice.

In 1928, Julius Davidson and his son, Herbert M. Davidson, became the owners of six hundred shares of the thousand shares of stock then outstanding of News-Journal Corporation, which was engaged in the publication and circulation of newspapers in the city of Daytona Beach. At the time the remaining shares, four hundred in number, were owned by T. E. Fitzgerald. About three years later the appellee, R. H. Gore, himself a newspaper man of wide experience, was importuned by a group of citizens to establish a newspaper, rival to the one then published by the appellant corporation, and as a consequence appellee became a competitor of the appellant.

This competition between the two papers was lively from its inception and as time progressed it grew into bitterness. We [2 So.2d 743] offer no comment on the practices of the competitors for fear that it would obscure the real issues involved in this litigation, and to the end that the controversy may not thus become beclouded will confine our observations as nearly as possible to the relative rights of the litigants in their eventual position as stockholders in a common corporation, namely, the appellant.

In May, 1936, the stockholder Fitzgerald resigned his directorship, a position held by him theretofore continuously from the time the Davidsons became interested in the enterprise and in July of the following year he sold all of his stock to the competitor, R. H. Gore.

Three years passed when the plaintiff, appellee here, filed his bill of complaint against the defendants seeking [147 Fla. 220] relief from alleged mismanagement on the part of the Davidsons. The pleadings are quite extensive and it does not appear necessary to prolong this opinion by giving the substance of them in order to dispose of the questions which have been presented to the court for solution as they will develop from the discussion of the attacks on the chancellor's findings of fact and conclusions of law.

Generally, we will deal with the conduct of the affairs of the corporation by the Davidsons, the propriety of the purchase by one of them of certain property used by the corporation and the correctness of the chancellor's ruling on the principal issues as well as the assessment of certain costs incurred in producing the testimony of a certified public accountant.

The final decree was very far reaching in its effect, and it is criticized by the defendant who insists that the relief afforded was entirely too harsh under the circumstances unfolded by the witnesses and the documentary evidence, while plaintiff contends that it fell short of granting the full relief justified.

Having found that the equities were with the plaintiff, and that the assets of the defendant 'should be liquidated and distributed over some reasonable length of time', the chancellor ordered that these assets be sold on or before June 1, 1941, at private sale on a basis that would afford an equal opportunity to the litigants as well as any other person to purchase them, and that upon failure to accomplish liquidation in this manner the court would entertain an application for enforcement of the final decree to effect a sale upon just and equitable terms and conditions. We will refer hereafter more in detail to the various findings in the decree forming the foundation for this vital provision [147 Fla. 221] with reference to liquidation and attempt to group them as we dispose of the questions in the order given at the outset.

The chancellor held the conviction that the Davidsons had enriched themselves at the corporation's expense by drawing salaries for their labors which they did not properly earn and which were especially out of proportion to the services rendered when considered in connection with the income from the corporation. This finding of the chancellor that they received excessive compensation was, in view of all the circumstances reflected by the record, eminently correct. He concluded, however, that because their remuneration had been approved by all of the stockholders 'at least until July, 1937' (the time when plaintiff secured Fitzgerald's interest) it would not be just to award a money decree in favor of the corporation and against the Davidsons for the difference between amounts actually earned and those paid.

It is the general rule 'that stockholders have no standing to attack mismanagement of the corporation prior to the acquisition of their stock.' 6 Thompson on Corporations, 3rd Ed., Sec. 4509. Fitzgerald as a director approved the salaries established and therefore his successor in ownership could not complain about amounts paid therefor prior to the transfer, but the purchaser had the right to contest salaries fixed and paid after he became a stockholder. 13 Am.Jur., Corporations, Sec. 456 et seq.

The Chancellor decided that inasmuch as no protest had been made by the plaintiff against salaries paid to the Davidsons after he bought his stock there should be no money decree...