Turner v. Wilson, 89-CA-1210

• Decision Date: 10 June 1993
• Docket Number: No. 89-CA-1210,89-CA-1210
• Citation: 620 So.2d 545
• Parties: George TURNER and Robin Carter v. Howard WILSON and Fred James.
• Court: Mississippi Supreme Court

Page 545

620 So.2d 545

George TURNER and Robin Carter v. Howard WILSON and Fred James.

No. 89-CA-1210.

Supreme Court of Mississippi.

June 10, 1993.

Orbie S. Craft, Brandon, for appellant.

Bobby L. Shoemaker, Bay Springs, for appellee.

En Banc.

PRATHER, Presiding Justice, for the Court:

I. INTRODUCTION

The issue raised by this appeal is whether corporate directors are personally liable when the corporate manager of an agricultural grain warehouse wrongfully converts the farmers' grain and applies the proceeds to the debts of the insolvent corporation. Since the evidence against all directors sued was insufficient to demonstrate that all of them authorized, directed, or actively participated in the wrongful conversion, or that all of them had knowledge of the conversion amounting to acquiescence, or that they all breached any duty owed to the farmer plaintiffs, this Court holds that there is no liability as to the appellants here.

George Turner and Robin Carter were unpaid corporate directors of South Central Mississippi Farmers, Inc., a grain warehouse. Two farmers, Howard Wilson and Fred James, sued six of the directors in the Circuit Court of Smith County for wrongful conversion of their soybeans and received a $45,589.81 judgment against George Turner and Robin Carter. The third director, G.A. Henderson, against whom judgment was rendered, did not appeal.

Turner and Carter present two issues for our consideration.

First, they contend the trial court erred in submitting jury instructions which articulated no standard of care or duty owed to creditors of a corporation by the corporate directors for tortious acts committed by the corporation or its employees.

Second, Turner and Carter assail the sufficiency of the evidence establishing their individual liability as corporate directors for the tortious acts of James Overby, their general manager. This Court holds that the trial court should have granted a directed verdict for two of the three directors, the appellants Carter and Turner, on the insufficiency of the evidence as to these two appellants.

II. FACTS

Between October of 1981 and January of 1982 Howard Wilson, a Jasper County farmer, and Fred James, a farmer in Smith County, delivered their soybeans to South Central Mississippi Farmers, Inc. (South Central), an agricultural supply and grain business in Taylorsville that, among other things, purchased, stored, and sold soybeans. The soybeans were delivered with instructions from Wilson and James to store the beans until they were ready to sell them.

James Overby, South Central's agent and general manager, accepted the soybeans and gave receipts to both plaintiffs. In February of 1982 the plaintiffs advised South Central they were ready to sell their beans at the current market price. They learned their soybeans had been sold by Overby, South Central's manager, and that there was no money left in the corporate accounts with which to pay them. It is undisputed that Robin Carter and George Turner served on the seven (7) member Board of Directors for the corporation at the time in question. It is, likewise, undisputed that Overby, without the permission or knowledge of Wilson or James, used the proceeds of the sale to pay corporate debts.

Wilson, James, and five other farmers aggrieved over the loss of their soybeans thereafter brought suit against South Central, Overby, and several others for the wrongful conversion of their beans. A jury verdict entered against the corporation for the value of the beans was affirmed by this Court in Wilson, et al. v. South Cent. Mississippi Farmers, Inc., et al., 494 So.2d 358 (Miss.1986). Directed verdicts entered by the trial court in favor of Overby and another not implicated in the present appeal were reversed by this Court in the same case. At the time of the lawsuit providing a basis for this appeal, separate suits against Overby and others were pending.

On February 6, 1986, Wilson and James, seeking both actual and punitive damages, initiated an action against the individual directors of South Central. A money judgment for the value of the beans was entered against three of them, Turner, a resident of Simpson County, Carter a resident of Rankin County, and G.A. Henderson of Smith County, who has not joined in the appeal to this Court.

III. ANALYSIS

A. JURY INSTRUCTIONS

1. FACTS

Appellants contend that jury instructions P-5, P-6, and P-10, given at the plaintiffs' request, were erroneous and that the jury was not fully and properly instructed as to the applicable law. Basically, they complain the instructions were legally incorrect because they permitted the jury to hold Turner and Carter personally liable for the tort of other directors, officers, and agents of the corporation and because they failed to provide adequate guidance to the jury as to the standard of care and the duty owed by directors of a corporation to its customers and creditors or to explain how Turner and Carter may have breached that duty.

Instruction P-5 instructed the jury that the appellants, as directors of the corporation, were liable for the torts of the manager of the corporation if the manager acted within the scope of his duty ¹. According to Turner and Carter, the vice of this instruction is that it required no finding of complicity on the part of the directors in the manager's tort before holding them liable.

Instruction P-6 instructed the jury that the directors, even though they acted on behalf of the corporation and even though the corporation itself is liable, could be held liable if it found they converted the beans without authority from the plaintiffs ². Turner and Carter contend this instruction lacks evidentiary support and that the charge conflicts with other instructions.

Instruction P-10 predicated liability of all or any one or more of the defendants on the jury's findings that Wilson and James delivered their soybeans to South Central for storage, that the beans were sold by Overby without the consent of Wilson or James, and that neither Wilson nor James had been paid for the beans ³. Turner and Carter contend the charge was erroneous because there was no legal requirement holding them to such a standard of conduct.

Wilson and James argue that each of the criticized instructions correctly recited the applicable law, but if not, the instructions, when taken collectively and viewed as a whole, correctly advised the jury of the applicable rules of law.

2. LAW

This case questions the liability of corporate directors to creditors of the corporation. As has been held in Wilson v. Stevens, 129 Ala. 630, 29 So. 678 (1901), "[d]irectors may be liable to stockholders for mismanagement of the business of the corporation or waste of its assets. Not so as to its creditors. A creditor must show actual fraud in order to hold directors liable." Wilson, 29 So. at 679. Ordinary principles of agency apply to officers of a corporation and their liability to third persons. This state follows the rule that an authorized agent for a disclosed principle cannot be liable for the acts of the agent's corporate principal. Thames & Co. v. Eicher, 373 So.2d 1033 (Miss.1979).

Mississippi follows the general rule that individual liability of corporate officers or directors may not be predicated merely on their connection to the corporation but must have as their foundation individual wrongdoing. This Court observed in Mississippi Printing Co., Inc. v. Maris, West & Baker, Inc., 492 So.2d 977, 978 (Miss.1986) that "the general rule is well established that when a corporate officer directly participates in or authorizes the commission of a tort, even on behalf of the corporation, he may be held personally liable." See also Wilson v. South Cent. Mississippi Farmers, Inc., supra, 494 So.2d at 361 ["(A)ny officer or agent of a corporation who actively participates in the commission of a tort [conversion] is personally liable to third persons injured thereby."]; First Mobile Home Corp. v. Little, 298 So.2d 676 (Miss.1974); Grapico Bottling Co. v. Ennis, 140 Miss. 502, 106 So. 97 (1925); Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 174 (5th Cir.1985) ["The thrust of the general rule is that the officer to be held personally liable must have some direct, personal participation in the tort, as where the defendant was the guiding spirit behind the wrongful conduct or the central figure in the challenged corporate activity."] Our sister state of Alabama also adheres to the general rule. Ex Parte Charles Bell Pontiac-Buick-Cadillac-GMC, Inc. v. Bell, et al., 496 So.2d 774, 775 (Ala.1986) ["(T)he general rule is that officers or employees of a corporation are liable for torts in which they have personally participated ..." ]

In Wilson, supra, this Court quoted with approval the applicable rule to be:

The rule that directors, officers, or agents of a corporation are liable for their torts to a person injured thereby, ... is applicable where they are guilty of conversion. This is true even though they act in behalf of the corporation and although the corporation may also be liable, as where money or property of a third person is in the hands of the corporation and the officers in control knowingly and intentionally convert it by refusing to give up possession, or by applying it to the uses of the corporation; and it is also true even though the directors, officers, or agents act in good faith, and do not personally benefit or profit from the conversion. All who are concerned or participate in the wrong are personally liable. [emphasis supplied]

19 C.J.S. Corporations Sec. 849, p. 276.

The liability of corporate directors to creditors and third persons is also addressed in 19 C.J.S. Corporations Sec. 544, p. 175 (1990) as follows:

A director, officer, or agent is liable for the torts of the corporation or of other directors, officers, or agents when and only when, he has participated in the tortious act, or has authorized or directed...