Wallad v. Access BIDCO, Inc., Docket No. 207585.

• Decision Date: 08 October 1999
• Docket Number: Docket No. 207585.
• Parties: Michael L. WALLAD, Plaintiff-Appellant, v. ACCESS BIDCO, INC., Joseph D. Reid, Lee W. Hendrickson, Capitol Bancorp, Ltd., Access Capital Partners, L.C., Onset BIDCO, Inc., and Access Venture Fund, L.P., Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

600 N.W.2d 664

236 Mich. App. 303

Michael L. WALLAD, Plaintiff-Appellant, v. ACCESS BIDCO, INC., Joseph D. Reid, Lee W. Hendrickson, Capitol Bancorp, Ltd., Access Capital Partners, L.C., Onset BIDCO, Inc., and Access Venture Fund, L.P., Defendants-Appellees.

Docket No. 207585.

Court of Appeals of Michigan.

Submitted May 5, 1999, at Lansing.

Decided June 25, 1999, at 9:00 a.m.

Released for Publication October 8, 1999.

Charles F. Glass and Wulfmeier & Ottenwess, PLC (by Daniel J. Dulworth), Detroit, for the plaintiff.

Abood, Abood & Rheaume, P.C. (by William E. Rheaume), Lansing, for the defendants.

Before GRIBBS, P.J., and MICHAEL J. KELLY and HOOD, JJ.

PER CURIAM.

The trial court granted summary disposition to defendants with regard to plaintiff's claims, which included a shareholder derivative claim and a breach of employment contract claim. Subsequently, the trial court granted defendant Capitol Bancorp, Ltd. (Capitol), sanctions against both plaintiff and his counsel, and granted defendants Joseph Reid and Lee Hendrickson sanctions against plaintiff. Plaintiff appeals as of right, and we affirm in part, reverse in part, and remand for further proceedings.

Plaintiff first argues that the trial court should not have granted summary disposition of his claims against defendant Access BIDCO, Inc. (Access). We disagree. The trial court properly held that plaintiff, a member of Access' board of directors, was estopped from challenging transactions that he approved at meetings of the board of directors. A shareholder who acquiesces or participates in a corporate transaction may not later challenge the validity of the transaction in court. Burch v. Norton Hotel Co., 261 Mich. 311, 246 N.W. 131 (1933). Plaintiff was a minority shareholder and a director of Access during all but one of the transactions he now challenges, and he conceded that he voted in favor of provisions that allowed the transactions to occur, including the amount of salaries paid and the bonus pool. Although plaintiff contends that he objected to the practices at issue when he spoke privately to defendants Reid and Hendrickson, the Burch Court indicated that even if objections are made outside stockholder or directors' meetings, a plaintiff who has not objected during such meetings has no judicial recourse. Id. at 314, 246 N.W. 131. Plaintiff never raised his concerns at board meetings or requested that the directors act differently with regard to the alleged improper transactions.¹

We do not agree that plaintiff should be excused for failing to object to or vote against the proposals by which the transactions were effected. Plaintiff claims that he acquiesced in Reid's proposals under threat of termination of plaintiff's employment. In other words, his employment would have been terminated if he had openly opposed those proposals at the board meetings. He argues that because he only acquiesced under threat of losing his job, he should not now be precluded from bringing his claims. While we agree that a plaintiff may maintain an action if he demonstrates that complaining to the directors or requesting them to act differently would have been futile, id. at 314-315, 246 N.W. 131, plaintiff here did not demonstrate that it would have been useless to challenge the actions at issue. Moreover, the directors of a corporation owe fiduciary duties to stockholders and are bound to act in good faith for the benefit of the corporation. Production Finishing Corp. v. Shields, 158 Mich.App. 479, 486, 405 N.W.2d 171 (1987); Wagner Electric Corp. v. Hydraulic Brake Co., 269 Mich. 560, 564, 257 N.W. 884 (1934). A "fiduciary duty" is "[a] duty to act for someone else's benefit, while subordinating one's personal interests to that of the other person." Black's Law Dictionary (6th ed.) (emphasis added). If plaintiff failed to act for the benefit of Access because of his personal interest in his job, he himself has breached his fiduciary duty to Access' shareholders. We will not reward plaintiff for failing to uphold his fiduciary duties in order to protect his personal interest, i.e., his job. His inaction at the board meetings is not excusable.

Next, we acknowledge that one of the transactions that plaintiff challenges, the use of Access money to finance defendant Access Venture Fund, L.P., apparently transpired after plaintiff's employment with Access ceased. Thus, our prior ruling with regard to plaintiff's claims against Access does not extend to this particular transaction. Nevertheless, we also conclude that summary disposition was appropriate with regard to this transaction. Plaintiff claims that the Access Venture Fund transaction violated the Michigan BIDCO Act, M.C.L. § 487.1101 et seq.; MSA 23.1189(101) et seq., which provides that "[a] licensee shall not provide, directly or indirectly, financing assistance to an associate of the licensee." MCL 487.1809; MSA 23.1189(809). In Claire-Ann Co. v. Christenson & Christenson, Inc., 223 Mich.App. 25, 566 N.W.2d 4 (1997), this Court reiterated that a private party cannot maintain an action to enforce a statute if the statute sets up a public enforcement mechanism and creates new rights that did not exist at common law. Id. at 30-31, 566 N.W.2d 4. The BIDCO Act was designed to "[p]romote economic development by encouraging the formation of ... a new type of private institution...." MCL 487.1102(a); MSA 23.1189(102)(a) (emphasis added). It intended to set up its own methods of enforcement, M.C.L. § 487. 1102(b) and (c); MSA 23.1189(102)(b) and (c), and, in fact, did so. See M.C.L. § 487.1701; MSA 23.1189(701) to M.C.L. § 487.1719; MSA 23.1189(719). The enforcement provisions allow the commissioner of the Financial Institutions Bureau of the Department of Consumer and Industry Services to "bring an action in the name of the people of this state" to enjoin violations of the act and enforce compliance. MCL 487.1701; MSA 23.1189(701). The act further prescribes numerous other actions that may be taken by the commissioner upon finding violations of the act. Because there is a public enforcement mechanism to address the allegations at issue, plaintiff is not entitled to sue to enforce the BIDCO statute.

We also note that plaintiff argues that because discovery was not complete, the trial court's grant of summary disposition was premature and improper. This argument was not raised and decided by the trial court and, therefore, we will not review it. Adam v. Sylvan Glynn Golf Course, 197 Mich.App. 95, 98, 494 N.W.2d 791 (1992).

Plaintiff next argues that the trial court should not have granted summary disposition in favor of Capitol. We disagree. Because plaintiff was estopped from vindicating the corporate interests of Access through a suit against Access itself, he was likewise estopped from vindicating the corporate interests of Access through an action against Capitol. The claims asserted against Capitol involve the same allegations and facts as some of the claims alleged against Access, which claims plaintiff was unable to maintain. The purpose of estoppel in the context of a derivative shareholder suit is to prevent a shareholder from challenging transactions in which the shareholder participated. See Burch, supra at 314, 246 N.W. 131. Because we have held that plaintiff was not entitled to relief against Access, we hold that plaintiff is also barred from challenging those same transactions through his claims against Capitol. Plaintiff may not pursue claims based on conduct and transactions that he approved. In addition, we note that plaintiff could not have been attempting to sue Capitol as a shareholder because there was no evidence that he held shares in Capitol. Finally, we also note that plaintiff argues on appeal that he should have been allowed to amend his complaint with regard to Capitol. Plaintiff did not raise this issue in his questions presented and review is therefore inappropriate. Weiss v. Hodge (After Remand), 223 Mich.App. 620, 634, 567 N.W.2d 468 (1997).

Plaintiff next argues that the trial court erred in granting summary disposition of his breach of employment contract claim. We agree. There was a question of fact with regard to whether plaintiff's employment had been terminated or he had resigned, and, if his employment had been terminated, whether that termination was in violation of his employment contract.

Plaintiff's employment contract stated that "[t]he Employee's employment ... may be terminated at any time by the board of directors of Access, with or without cause...." The term "cause" is exclusively defined in the contract. Plaintiff testified during his deposition that Reid "made it clear that he didn't want me working at the BIDCO any longer and I agreed with that." He also stated, "I agreed that if [Reid] doesn't want me there, it's not working out, yeah, it's a good idea to part ways." In a subsequent affidavit, plaintiff claimed:

2. That to date, [plaintiff] has not resigned from Access BIDCO, nor has [plaintiff] been terminated in accordance with the terms of his employment agreement.

* * *

18. That following his repeated dissent and complaint, Joseph Reid told [plaintiff] that he was "50% of the way to firing you...." [Plaintiff] indicated that he would not change his course of dissent and criticism. Reid directed that he negotiate with Attorney Lasky and enter into a separation agreement. Such agreement was never achieved. Two days later, Hendrickson asked for [plaintiff's] keys to the Access office and told him that he did not have to come in again. Hendrickson caused him to be locked out of his telephone system, including voice mail. About one week later, [plaintiff] asked for and

...