Robbins v. Sanders

• Decision Date: 21 October 2005
• Docket Number: 1040437.
• Citation: 927 So.2d 777
• Parties: Pete M. ROBBINS v. Terrill W. SANDERS, as administrator of the estate of Mary C. Bailey, deceased; and as administrator of the estate of James B. Bailey, deceased.
• Court: Alabama Supreme Court

Page 777

927 So.2d 777

Pete M. ROBBINS v. Terrill W. SANDERS, as administrator of the estate of Mary C. Bailey, deceased; and as administrator of the estate of James B. Bailey, deceased.

1040437.

Supreme Court of Alabama.

October 21, 2005.

Barnes F. Lovelace, Jr., of Harris, Caddell & Shanks, P.C., Decatur, for appellant.

Kay L. Cason of Gorham & Cason, Birmingham, for appellee.

HARWOOD, Justice.

This is the second appeal resulting from an action brought by the respective personal representatives of the estates of the two minority stockholders in Corridor Enterprises, Inc., against Pete M. Robbins, the majority shareholder in the corporation. The plaintiffs asserted individual claims on behalf of the estates and shareholder-derivative claims on behalf of the corporation. For a full discussion of the factual and procedural history of the lawsuit, the details of the order of the Jefferson Circuit Court entered following a bench trial awarding damages to the shareholder estates and Corridor Enterprises against Robbins and the seven issues Robbins raised on his appeal, see our opinion in Robbins v. Sanders, 890 So.2d 998 (Ala.2004) ("Robbins I"). We will hereinafter discuss the facts and procedural events only as necessary for our discussion of the issues presented on this second appeal.

In Robbins I we agreed with Robbins that any tort claims the husband and wife minority stockholders, James B. Bailey and Mary C. Bailey, were entitled to assert against Robbins during their lifetime, but which were not the subject of any action filed by them during their lifetimes, were extinguished at the time of their deaths, pursuant to the "survival" provisions of § 6-5-462, Ala.Code 1975. We explained, however, that this case actually involved no such tort claims:

"[W]e do not read the complaint as stating a claim on behalf of James and Mary Bailey individually; we read the complaint as asserting those claims on behalf of the estates of James Bailey and Mary Bailey. When this action was filed, James Bailey and Mary Bailey were deceased; the estates of James Bailey and Mary Bailey were the minority shareholders in Corridor Enterprises. It is the estates that alleged that Robbins had breached the fiduciary duties owed them as minority shareholders in the corporation and that Robbins was liable for the tort of oppression and trying to squeeze them out of the corporation; therefore, § 6-5-462, Ala.Code 1975, does not bar the tort claims brought by those estates."

890 So.2d at 1011.

We then noted:

"However, components of the damages awards described in the trial court's order relate to activities that occurred before the decedents died. To the extent that those damages arise from tort injuries sustained by the individual decedents before their deaths and for which no action was commenced during their respective lives, those damages are not recoverable. As stated above, the tort claims of the decedents were extinguished upon their deaths because no action was then pending. § 6-5-462, Ala.Code 1975. If the claims are extinguished, then all possibility of recovering damages for those claims is also extinguished. Thus, the trial court's judgment insofar as it awards damages must be reversed and this cause remanded for a new determination of damages. On remand, we instruct the trial court to determine the extent, if any, to which any damages awarded to the corporation or to the estates in its order . . . arose from tort injuries sustained by the individual decedents before their respective deaths and are, therefore, not recoverable in this action."

890 So.2d at 1011-12.

Our opinion in Robbins I also disposed of Robbins's contention that "the claims asserted by the estates that are not derivative claims are barred by the two-year statute of limitations found in § 6-2-38, Ala.Code 1975." 890 So.2d at 1012. Robbins argued that the undisputed evidence revealed that the Baileys knew enough facts during their lifetimes, and more than two years before the action was filed, to trigger the running of the two-year statute of limitations. Quoting Jefferson County Truck Growers Ass'n v. Tanner, 341 So.2d 485, 488 (Ala.1977), Robbins argued that "the Baileys had `such knowledge . . . sufficient to provoke inquiry in reasonable minds which would have led to the facts on which the claims in this action are based.'" 890 So.2d at 1012. We answered that contention as follows:

"As previously noted, James Bailey and Mary Bailey have not asserted personal claims against Robbins. The claims of breach of fiduciary duty and squeeze-out/oppression asserted in this action were asserted by the estate of James Bailey and the estate of Mary Bailey, not by James Bailey and Mary Bailey. Thus, the issue to be considered is when the minority shareholders had knowledge of, or had reason to know of, the activities that resulted in their alleged injuries.

"The estates of James Bailey and Mary Bailey became minority shareholders in Corridor Enterprises in 1997, after James and Mary died."¹

890 So.2d at 1012.

We went on to explain that the evidence established that Robbins had engaged in tortious conduct toward the minority shareholders "after the estates became the minority shareholders in Corridor Enterprises." Id.

"The minority shareholders filed their complaint on August 4, 1998, within approximately a year of becoming shareholders and in the same year that many of the above-described activities occurred. Therefore, the estates' claims of breach of fiduciary duty and squeeze-out/oppression were not time-barred to the extent those claims sought to recover damages for injuries occurring to the estates and not to the decedents. However, as discussed above, the estates are not entitled to recover any damages based on claims that Robbins breached his fiduciary duty to the Baileys or on claims that Robbins attempted to squeeze out or oppress the Baileys while they were minority shareholders."

890 So.2d at 1012-13.

We also addressed the "survivability" issue and the statute-of-limitations issue "in the context of the shareholder-derivative claim asserted by the estates on behalf of Corridor Enterprises." 890 So.2d at 1013. Our analysis and determinations on those issues were as follows:

"That derivative claim was not defeated by the Baileys' deaths, but any derivative claim that arose during the Baileys' lives and asserted by the estates in this action must be one that the Baileys could have enforced, were they alive to do so.¹⁵ See § 6-5-464, Ala.Code 1975, providing for survival of unfiled equitable claims when `but for their [deceased persons'] death, [they] could have enforced such claims.' . . .

"In its order, the trial court does not specifically address whether the Baileys, during their lifetimes, had notice of all or some of the wrongful acts directed at the corporation and attributed to Robbins more than two years before they died. However, Robbins argued the limitations bar in support of his motion for a new trial; the trial court denied the motion. The trial court heard ore tenus evidence. Thus, any conflicting evidence as to the extent of the Baileys' knowledge of Robbins's activities during their lifetimes was resolved by the trial court in favor of the estates, as shareholders. The trial court was in the best position to weigh the evidence. Every presumption will be indulged in favor of the trial court's findings; those findings were not palpably wrong, and they will not be disturbed on appeal. Jefferson County Truck Growers Ass'n v. Tanner, 341 So.2d 485, 490 (Ala.1977); Lockett v. Coleman, 293 Ala. 613, 308 So.2d 689 (1974).

"¹⁵ Shareholder-derivative actions are historically equitable in nature. Finance, Inv. & Rediscount Co. v. Wells, 409 So.2d 1341, 1341 (Ala.1981). All equitable claims upon which no action has been filed survive in favor of the personal representative of a decedent who, but for death, could have enforced such claims. § 6-5-464, Ala.Code 1975. Therefore, the shareholder-derivative claim asserted by the estates in this action does not present a survivability problem."

890 So.2d at 1013.

On another point, we agreed with Robbins's contention that minority shareholders are not entitled to recover damages in a shareholder-derivative action. "[A]n award of damages directly to the minority shareholders on a shareholder-derivative claim is improper" because "the individual shareholders may not share in the corporation's recovery on the shareholder-derivative claims." 890 So.2d at 1014. Consequently, because "every award of damages as made by the trial court was `in favor of Corridor Enterprises, Inc. and the plaintiffs'" we held that "the manner in which the trial court structured its damages award is improper." 890 So.2d at 1014.

"We are unable to determine whether the trial court intended all or some portion of the awards made `in favor of Corridor Enterprises, Inc. and the plaintiffs' to represent a recovery for the estates on their claims or whether all of those awards were made on the basis of the shareholder-derivative claims. We point out that we find no error in the trial court's determination that Robbins is liable on the shareholder-derivative claims and no error in the trial court's determination that Robbins is liable for oppression and attempting to squeeze out the minority shareholders (the estates). We simply find that the trial court's order, as it pertains to damages, is improper.

"As noted earlier, we reverse the judgment and remand this cause on the issue of damages. On remand, we instruct the trial court to clarify its order and, if necessary, to correct the amount of damages awarded. The trial court should consider whether awards should be made to the estates and Corridor Enterprises separately, or, alternatively, whether only the language of the order need be altered. We express no opinion on these issues; we simply point them out for the trial court's consideration."

890 So.2d at 1014.

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