Trieweiler v. Sears

Decision Date17 December 2004
Docket Number No. S-02-134, No. S-02-135
Citation268 Neb. 952,689 NW 2d 807
CourtNebraska Supreme Court
PartiesDANNY J. TRIEWEILER, INDIVIDUALLY AND ON BEHALF OF VARSITY INVESTMENTS, INC., A NEBRASKA CORPORATION, APPELLEE, v. DON M. SEARS, APPELLANT. DANNY J. TRIEWEILER, INDIVIDUALLY AND ON BEHALF OF VARSITY INVESTMENTS, INC., A NEBRASKA CORPORATION, APPELLEE, v. DAVID J. CAMPAGNA, APPELLANT.

James B. Cavanagh, of Lieben, Whitted, Houghton, Slowiaczek & Cavanagh, P.C., L.L.O., for appellants.

Aimee J. Haley, of Fullenkamp, Doyle & Jobeun, and Amy Sherman Geren, of Geren Law Office, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

GERRARD, J.

NATURE OF CASE

Danny J. Trieweiler, the appellee, brought these corporate derivative actions in the district court on behalf of Varsity Investments, Inc., a closely held corporation, against the other two shareholders of the corporation, David J. Campagna and Don M. Sears, the appellants. Generally, Trieweiler alleged that Campagna had breached a fiduciary duty by misappropriating money from the corporation, that Sears breached a fiduciary duty by failing to exercise reasonable care in the performance of his duties as a corporate director, and that both of the appellants had breached fiduciary duties by usurping a corporate opportunity. After a bench trial, the court found for Trieweiler on each of these claims and entered judgment accordingly. Although this appeal involves many issues, the fundamental questions presented are whether Trieweiler presented sufficient evidence to prove that the appellants breached their respective fiduciary duties to the corporation and, if so, whether the corporation's damages were proved with reasonable certainty.

FACTS

The following factual narrative is intended to provide the reader with the information necessary to understand our disposition of this appeal. Additional facts will be examined, in detail, in later sections of this opinion, as necessary for our analysis. The record in this case is extensive, containing thousands of pages of testimony and exhibits, and was difficult to review. We have conducted a comprehensive examination of the record, but a complete summary of all the evidence would be both impractical and unwieldy. Our election to not expressly mention each piece of relevant evidence should not be read to mean that we have not reviewed the record thoroughly, and carefully considered all the pertinent facts.

Because this case involves several business entities with similar names, we pause at the outset to explain, generally, how those entities are denominated. The first business at issue in this case is the "Varsity Sports Café," a bar, which opened in downtown Omaha in 1994. The Varsity Sports Café was owned and operated by "Varsity Investments" until 1997, when it was sold for an original purchase price of $200,000. The other business at issue in this case is the "Varsity West," also a bar, which opened in 1995. The Varsity West was owned and operated by "JVI, Inc.," or "Junior Varsity." Varsity West was sold later in 1995 for $186,000.

Business Operations

Trieweiler testified that he moved to Omaha in 1990 and worked at the Three Cheers bar as owner and manager. Trieweiler assisted with construction and remodeling projects at Three Cheers. Trieweiler was introduced to Campagna in 1993 by Campagna's cousin, because Campagna wanted to open a sports bar. The business plan was to start out with a sports bar, "get it going," and open up a string of sports bars.

Trieweiler testified that Sears, Campagna's father-in-law, was to handle the financing for the venture. Trieweiler was to be a 30-percent shareholder in the business, Campagna a 60-percent shareholder, and Sears a 10-percent shareholder. Trieweiler was to be responsible for handling the design work, carpentry, and tile work. Campagna was responsible for "putting the whole deal together" and "it was his idea." Sears had no day-to-day responsibilities in the opening or operation of the business.

Varsity Investments was formed to run the resulting venture, the Varsity Sports Café, in March 1994. According to Trieweiler, before the bar opened, he was to negotiate the lease and act as the general contractor. Trieweiler testified that he was actually involved in the labor related to construction and that he "did most of the construction." After the bar opened, Trieweiler was manager during the day. He handled the banking in the morning, balanced the cash register drawers, helped with cleaning and during lunch, then continued construction on the second level of the building later in the day. Trieweiler held the position of day manager between June and November.

At trial, Trieweiler described the process of balancing the cash register drawers. Every cash register contained a "Z-tape," which totaled out and broke down what had been rung into the register that day. Each morning, Trieweiler would take the Z-tape; count the cash, checks, and credit card payments; subtract the money that had been in the register initially; and see if it balanced out. The bartenders also handed in a sheet of any cash paid out, which amount Trieweiler included in the calculations. That process generated a "daily work sheet," which was attached to the Z-tape and kept in a filing cabinet on the premises. Trieweiler said that sometimes during the week the registers would have more credit card payments than cash, but receipts were mostly cash, and the bar was essentially a cash-based business.

According to Trieweiler, Campagna's day-to-day duties after the bar opened were to work nights and weekends. But Trieweiler also testified that before the bar opened, Campagna wrote checks to himself for unknown reasons. Trieweiler said that he did not have access to the company checkbook, which was controlled by Campagna. However, Campagna testified that while Trieweiler was at the Varsity Sports Café, Trieweiler wrote most of the checks.

Financial Irregularities

According to Trieweiler, he and Campagna had agreed to receive $500 per week as salary once the bar opened; Trieweiler testified that his $500 salary did not change from the time the bar opened until it was fully staffed. Campagna testified that in 1994, he received $15,000 in salary through Varsity Investments' payroll service. Campagna apparently received $34,700 in salary in 1995, although his testimony on that subject was evasive and inconsistent, and it appears that his income may have been underreported in his tax filings for that year. Campagna received $36,250 in salary in 1996. Campagna testified that in 1997, he went "off payroll" and paid himself as it could be afforded, by writing himself a check. However, that income was not reflected in Campagna's tax records. Campagna claimed that his salary income from Varsity Investments in 1997 was $11,861.04.

Campagna also admitted at trial to taking an extra $10,000 from Varsity Investments in 1994 as a "bonus," although his trial testimony was not consistent with testimony given during his deposition, when he had said that the money was spent on business expenses. Pretrial interrogatories directed Campagna to identify money or assets received from Varsity Investments from 1993 to 1997, but the $10,000 "bonus" was not revealed in Campagna's answers to those interrogatories.

Varsity Investments never had a corporate credit card. Bank records indicate that Varsity Investments' funds were used to pay Campagna's personal credit cards, but Campagna testified that these payments were reimbursements for business expenses that Campagna had charged to his personal credit cards.

Trieweiler's Departure

Trieweiler left his employment with the Varsity Sports Café on November 2, 1994. Trieweiler testified that he left on that date due to a number of concerns. He testified first that a $500 check for a beer distributor "bounced." Trieweiler was notified that he and his own company were being sued personally by a subcontractor. Furthermore, a final notice was posted for disconnection of the bar's electricity; Trieweiler said that he found two unopened utility bills in the office. Finally, a band that had played at the bar called and reported that the $1,200 check with which they had been paid had "bounced," but Trieweiler thought that band was to have played for door money and was not supposed to have been paid by the bar at all. Trieweiler found that the $1,200 "bounced" check was entered in the checkbook as payment to the Nebraska Department of Revenue.

Trieweiler testified that Campagna was responsible for paying the business' bills. Trieweiler confronted Campagna on November 2, 1994, with all of his concerns and then took a 2-week leave of absence. Trieweiler returned on November 15, and according to Trieweiler, Campagna told Trieweiler that he was being replaced as manager, the locks on the doors had been changed, and he was to be replaced on the board of directors. Trieweiler testified that he never received a share of corporate profits or any distribution as a shareholder and that he had not been paid for his shares of Varsity Investments. Campagna denied telling Trieweiler that his shares of Varsity Investments would not be honored. However, the Varsity Sports Café's liquor license renewal form for 1996, submitted by Campagna, stated that Trieweiler's shares had been transferred to Campagna.

Business Records

Campagna was in charge of the books and records of Varsity Investments during 1995 to 1997. Trieweiler asked Campagna to allow Trieweiler to review the books and records of the business in January 1995. According to Trieweiler, Campagna replied, "We'll give it to you later." Trieweiler testified that he never received all the records. Trieweiler received incomplete check stubs, but never received daily report sheets, Z-tapes, invoices, or state tax returns.

Trieweiler testified that he notified Sears of his concerns about the business...

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