W & W Equipment Co., Inc. v. Mink

• Decision Date: 18 March 1991
• Docket Number: No. 49A02-8902-CV-55,49A02-8902-CV-55
• Citation: 568 N.E.2d 564
• Parties: W & W EQUIPMENT CO., INC., Frank D. Wraight, Albert B. Winter, and James M. Secrest, Defendants-Appellants, v. Donald W. MINK, Plaintiff-Appellee. 1
• Court: Indiana Appellate Court

Page 564

568 N.E.2d 564

W & W EQUIPMENT CO., INC., Frank D. Wraight, Albert B Winter, and James M. Secrest, Defendants-Appellants, v. Donald W. MINK, Plaintiff-Appellee.

No. 49A02-8902-CV-55. ¹

Court of Appeals of Indiana First District.

March 18, 1991.

Rehearing Denied May 10, 1991.

John F. Ittenbach, Sheeks & Ittenbach, Steven G. Cracraft, Stewart & Irwin, Indianapolis, for defendants-appellants.

John Van Winkle, Nana Quay-Smith, Bingham, Summers, Welsh & Spilman, Indianapolis, for plaintiff-appellee.

BAKER, Judge.

Defendant-appellants W & W Equipment Co., Inc., Albert Winter, James Secrest, and Frank Wraight appeal the trial court's judgment in favor of plaintiff-appellee Donald Mink in this action for involuntary dissolution of a corporation, and damages for breach of a fiduciary duty. We affirm.

ISSUES

Winter, Secrest, and Wraight present numerous issues for our review which we restate as follows ²:

I. Whether the trial court erred in amending its findings of fact and conclusions of II. Whether Wraight, as a director, owed a fiduciary duty to Mink as an individual shareholder.

law 224 days after the court entered its initial judgment.

III. Whether Winter, Secrest, and Wraight breached their fiduciary duties to Mink.

IV. Whether Wraight proximately caused Mink's damages.

V. Whether Mink should be denied a remedy under the doctrine of unclean hands.

VI. Whether the trial court properly resolved the case by dissolving the corporation and awarding damages to Mink.

FACTS ³

This case, about a small corporation and its demise, can best be understood by realizing that at the heart of the dispute we have a disagreement about who will receive the benefit of the corporation's assets. In particular, the question is whether it will be the retiring shareholder Winter who wants a large final return from his life-long investment, or the relatively new shareholder Mink, brought in to sustain the business, who wants the money to stay in the corporation for its continuation.

Winter and Wraight entered into a partnership in 1960, as manufacturers' representatives for waste water treatment equipment. The partnership was incorporated as W & W Equipment in the late 1960s. Winter had a business degree and experience in the waste water treatment field, and Wraight was an engineer. Mink, an engineer, was sought out and hired in 1977 when Wraight began to consider retirement. Wraight and Winter desired a new younger engineer to join the company to take Wraight's place.

In January of 1980, the new W & W Equipment Co., Inc. (W & W) was formed. Winter and Wraight each owned 40% of the stock of this new corporation, and Mink owned 20% of the stock. Each shareholder was both an officer and a director of W & W. Secrest, legal counsel for W & W, was named the fourth director and officer of W & W. W & W was capitalized in part by a loan from the old corporation, which continued to receive the income generated from accounts set up before W & W came into existence.

Wraight retired in 1984, and his shares of stock were redeemed by the corporation at book value. The price was established by a letter from Secrest, the corporate attorney, informing the shareholders the price for Wraight's shares was the stock's book value as of the date of the closing of the corporation's prior fiscal year, as provided for in the stock purchase agreement. Mink and Winter purchased these shares in a manner such that each became a 50% shareholder of the corporation. Wraight went off the payroll, and moved to California. He remained a member of the board of directors of W & W to protect his personal interest in the loan from the old corporation to W & W, and was to step down from the board upon repayment of the loan.

Winter indicated he would be retiring in 1987, and based upon this plan Mink entered into negotiations with Henry P. Thompson Co. (HPT) to establish a joint venture. In 1985, the joint venture was formed. Its board of directors consisted of Winter, Mink, and two individuals from HPT. The joint venture was established on the premise Winter would retire in 1987. Winter opposed but did not veto the joint venture, which was financially successful.

In early 1986, a dispute arose between Mink and Winter concerning Winter's retirement, in particular concerning the valuation of Winter's stock. Mink initially proposed valuing Winter's stock at book value, which was approximately $15,000 at that time, and he eventually offered to pay Winter $50,000 for the stock. Winter wanted to be paid $250,000 for his shares, because he believed he should receive one half the On March 9, 1987, a Waiver of Notice and Consent to Action by the Board of Directors was prepared by Secrest for Wraight. The notice requested Wraight's consent to the removal of Mink as a director of the joint venture and his removal as an officer and signatory for W & W. Wraight signed the consent. Neither Winter nor Secrest, who communicated with Mink frequently during this time, mentioned the waiver to Mink. The notice of the board meeting for these purposes was sent to Mink's home while he was vacationing out of the state. Prior to the board meeting, checks for final payment of the loan from the old corporation were drafted, but Winter voided the checks. Wraight thus remained a director of the corporation.

value of the corporation upon his retirement. Secrest did not write the same letter regarding Winter's stock as he did with Wraight's stock, and instead informed the parties that the stock purchase agreement had no application to Winter's retirement. During the negotiations, Winter indicated that if Mink did not pay him the price he wanted, he would simply remove Mink from the business, open up a post office box to collect the accounts receivable, and receive the amount of money he wanted in that manner.

Winter informed the HPT members of the joint venture that he was going to take control of W & W. This information led to the termination of the joint venture by the HPT members. Nine days after the joint venture termination, the W & W board meeting was held. In a summary fashion with no discussion, Secrest and Winter voted to remove Mink as an officer and signatory for W & W and as director of the joint venture. Wraight's vote for Mink's removal, obtained by consent, was also counted. Mink cast the sole vote against his removal. Mink immediately filed the lawsuit which is the subject of this appeal.

After the lawsuit was filed, Winter terminated Mink as an employee of W & W. Mink continued to come to work for a period of time, and Winter sought and obtained a temporary restraining order without notice to prevent Mink from coming to work. This order was obtained from a different judge than was already assigned to the pending lawsuit, and the temporary restraining order judge was not informed by Winter or Secrest that there was a pending lawsuit involving these parties or that Mink was a 50% shareholder of W & W. Winter subsequently increased his own salary and began winding up the corporation. W & W never paid a dividend to its shareholders. As stated in Winter and Secrest's brief, Winter has received $113,015.97 from W & W and Mink has received $18,000 since the filing of this action, and as of May 31, 1988, W & W had $386,421.63 in remaining assets.

Mink's lawsuit sought compensatory damages from Winter, Wraight, and Secrest for breach of fiduciary duty, and sought dissolution of W & W. Mink also sought punitive damages against Winter and Secrest. Winter, Wraight, and Secrest filed a counterclaim against Mink alleging breach of fiduciary duty and conversion of corporate funds. After a bench trial, the trial court entered lengthy findings of fact and conclusions of law pursuant to Mink's request. The court found Mink had suffered a loss of $420,000. Mink was awarded W & W's remaining assets of $386,421.63, and a judgment in the amount of $33,578.37 against Winter, Wraight, and Secrest, for a total of $420,000. Punitive damages in the amount of $20,000 were imposed against Winter and Secrest. The court ordered that W & W be dissolved. Finally, the court found in favor of Mink on the counterclaim against him.

DISCUSSION AND DECISION

We first note the deferential standard of review we are to employ in this case. The trial court entered special findings of fact and conclusions of law upon Mink's motion. When the trial court enters special findings, this court applies a two-tier standard of review. Kaminszky v. Kukuch (1990), Ind.App., 553 N.E.2d 868, trans. denied. We first determine whether the evidence supports the findings, and then determine whether the findings support the judgment. Id. Special findings

                and the judgment flowing from the findings will be set aside only if they are clearly erroneous.  Id.;  Ind.Trial Rule 52(A).  In determining whether the findings and judgment are clearly erroneous, this court will neither reweigh the evidence nor judge the credibility of the witnesses.  Craig, supra.   We consider only the evidence in the record which supports the judgment along with the reasonable inferences to be drawn from the evidence.  Id.  This court will disturb the trial court's findings only if the record is devoid of facts or inferences to support the findings.  Id
                

I. Amendment of findings.

We first dispose of a procedural issue. Winter and Secrest contend the trial court erred in amending its findings of fact and conclusions of law. The court entered its findings, conclusions, and judgment on September 1, 1988. Winter, Secrest, and Wraight filed their motions to correct error on October 28, 1988, and the court heard argument on these motions on March 28, 1989. On April 27, 1989, the court entered corrected findings of fact and conclusions of law, but did not alter its previously entered judgment, and denied the motions to correct error.

Ind.Trial Rule 52(B) provides that in a case tried without a jury, the court may, at any time before a motion to...