Case Title: Bovee v. Lyndonville Savings Bank & Trust

Citation: 174 Vt. 507, 811 A.2d 143

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2002-08-19T00:00:00Z

Document:
Bovee v. Lyndonville Savings Bank & Trust Co. (2001-346); 174 Vt. 507;
811 A.2d 143

[Filed 19-Aug-2002]

                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 2001-346

                               MAY TERM, 2002


  Madeline R. Bovee, et al.	       }	APPEALED FROM:
                                       }
                                       }
       v.	                       }	Caledonia Superior Court
                                       }	
  Lyndonville Savings                  }
  Bank & Trust, et al.	               }
                                       }	DOCKET NO. 357-11-00 Cacv

                                                Trial Judge: Alan W. Cheever 

             In the above-entitled cause, the Clerk will enter:

       Plaintiff shareholders of Lyndonville Savings Bank & Trust Company
  appeal from a superior court judgment dismissing their complaint against
  the bank and several of its officers and  directors.  Plaintiffs contend
  the trial court erroneously: (1) failed to address their breach of contract
  claim; (2) failed to address their civil conspiracy claim; (3) ruled that
  they lacked standing to bring a direct action against the bank; and (4)
  found that they had failed to state a derivative claim against the bank. 
  We affirm.

       This case is one of several resulting from the recent troubles of
  Lyndonville Savings. In December 1993, plaintiff Roger Lussier was
  convicted in federal district court on a variety of criminal charges,
  including bank fraud, money laundering, and receipt of illegal commissions,
  committed during his tenure as the bank's president and chairman of the
  board. Lussier was sentenced to a prison term of forty-six months, ordered
  to pay a fine of $100,000, and ordered to pay restitution of over $426,000.
   
       In September 1995,  following Roger Lussier's conviction, the bank
  filed a civil suit in federal district court against Lussier and his wife
  Evelyn, seeking immediate payment of the restitution award, damages based
  on Roger Lussier's status as an officer and director of a bank in the
  Federal Reserve System, and recovery under several state law theories,
  including breach of fiduciary duty and fraudulent conveyance of certain
  bank shares to Evelyn Lussier.  In February 1996, the district court
  dismissed Evelyn Lussier as a defendant based on her agreement with the
  bank to reverse the allegedly fraudulent conveyance by returning the stock
  to its pre-transfer status.  In July 1997, the bank abandoned that portion
  of the complaint based on Roger Lussier's status as a federal bank officer
  because the bank was not a member of the Federal Reserve. Trial proceeded
  on the remaining claims, resulting in a judgment for the bank on the state
  law claims totaling over $8 million.  The district court denied a
  subsequent motion to set aside the judgment for lack of subject matter
  jurisdiction, but the Second Circuit Court of Appeals vacated and
  dismissed, holding that federal law 

 

  did not entitle the bank to seek a separate civil judgment on the
  restitution award, and that - since the bank had abandoned its claim based
  on Federal Reserve membership - the district court lacked pendent
  jurisdiction over the state law claims.  Lyndonville Sav. Bank & Trust Co.
  v. Lussier, 211 F.3d 697, 703-05 (2d Cir. 2000).

       In June 2000, following dismissal of the federal action, the bank
  filed a new civil suit against Roger Lussier in Caledonia Superior Court,
  seeking, inter alia, an attachment of the bank shares transferred back to
  Roger as part of the agreement dismissing Evelyn Lussier from the federal
  action.  The trial court granted Evelyn Lussier's motion to intervene in
  the new lawsuit, noting that her earlier agreement reversing the transfer
  of stock in return for her dismissal from the federal action was void due
  to the district court's lack of subject matter jurisdiction, and ordered
  the bank to issue new certificates reflecting the percentage of the
  Lussiers' ownership interests as of 1995.

       Shortly thereafter, plaintiffs - comprised of various bank
  shareholders including Roger and Evelyn Lussier - filed this action against
  the bank and several of its officers and directors. (FN1.)  The amended
  complaint alleged that defendants had: erroneously failed to prosecute bad
  faith actions against its various insurance companies, instead blaming the
  losses on Roger Lussier; filed the federal lawsuit against Roger and Evelyn
  Lussier knowing that there was no reasonable basis for the assertion of
  federal jurisdiction or the fraudulent conveyance claim; engaged in lending
  practices that did not comport with federal regulations; and failed to
  provide them with requested information on bank operations and expenses
  related to the federal litigation.  Based on these allegations, the
  complaint stated claims for breach of contract, which "depriv[ed] them of
  the full value of their investment"; negligence in failing to provide
  information to plaintiffs, and in failing adequately to supervise bank
  officers, resulting in "pecuniary loss"; breach of an affirmative duty to
  "discharge their responsibilities in regard to [the bank's] conduct of its
  banking and corporate business"; violation of the Vermont Securities Act;
  wrongful deprivation of Evelyn Lussier's ownership interest in her stock;
  and a shareholder derivative claim based on defendants' alleged failure
  adequately to discharge their duties to the bank. 

       Defendants moved to dismiss the complaint, asserting that plaintiffs
  lacked standing to bring direct claims against the bank, and that the
  derivative claim was procedurally barred.  The trial court agreed, granted
  the motion to dismiss, and entered judgment for defendants.  This appeal
  followed.

        
       Plaintiffs contend the court erred in failing specifically to address
  the breach of contract claim, and in concluding that plaintiffs lack
  standing to state a direct claim for breach of contract against the bank.
  The general principles governing shareholder suits are well settled.  In a
  derivative suit, the shareholder sues on behalf of the corporation for harm
  done to the corporation; in a direct action, 

 

  the shareholder brings suit individually, or on behalf of a class of
  shareholders, for injuries done to them in their individual capacities. 
  Kramer v. W. Pac. Indus., Inc.,