Opinion ID: 481717
Heading Depth: 2
Heading Rank: 3

Heading: The Claim to Liquidate World Wide Press

Text: 15 Sax also challenges the district court's conclusion that, under the facts alleged in his complaint, Mont. Code Ann. Sec. 35-1-921(1)(a) does not permit him to liquidate World Wide in a direct shareholder action. Sax argues that section 35-1-921(1)(a) permits a single shareholder [to] seek dissolution for acts by those in control of a corporation which are illegal, oppressive, or fraudulent and that the statute does not expressly require the suit to be brought derivatively. We agree with the district court's interpretation of section 35-1-921(1)(a) 3 and affirm the dismissal of the fourth count of Sax's complaint. 16 Mont. Code Ann. Sec. 35-1-921(1)(a)(ii) provides that a corporation can be liquidated in an action by a shareholder when it is established that the acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent. We agree with Sax's claim that section 35-1-921(1)(a)(ii) permits a shareholder to bring a direct action to liquidate a corporation but conclude that he must first allege acts that have injured him personally rather than acts that have injured the corporation. See Central Standard Life Ins. Co. v. Davis, 10 Ill.2d 566, 576, 141 N.E.2d 45, 51 (1957) (interpreting Illinois statute permitting liquidation in a direct shareholder action if the acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent, and stating that [w]e think that if a plaintiff is to be entitled to the drastic relief here sought, it is incumbent upon him to show that he is himself oppressed.). 17 The Montana Supreme Court has applied section 35-1-921(1)(a)(ii) in only two cases that involved direct actions by individual shareholders. See Fox v. 7L Bar Ranch Co., 198 Mont. 201, 645 P.2d 929 (1982); Skierka v. Skierka Bros., Inc., 629 P.2d 214 (Mont.1981). In both cases, the plaintiff alleged acts that injured him personally rather than acts that injured the corporation or the value of its outstanding stock. In Fox, the minority shareholder of a closely held, family-owned corporation brought a direct action as an individual shareholder under section 35-1-921(1)(a)(ii) to liquidate the corporation. 198 Mont. at 202, 645 P.2d at 930. The Montana Supreme Court affirmed the lower court's finding of oppressive conduct by the board of directors on the grounds that the board's conduct was designed to deprive the plaintiff of his share of corporate holdings and profits and he was denied any voice in the management of the corporation. Id. at 208-10, 645 P.2d at 933-34. In Skierka, minority shareholders of a closely held, family-owned corporation brought a direct action against the corporation and the majority stockholders alleging, among other things, that the defendants had acted oppressively toward them in the operation of the corporation. 629 P.2d at 217. The Montana Supreme Court affirmed the lower court's finding of oppression because the defendants had run the corporation to the exclusion of the plaintiffs, denying them any part or voice in the operation, either as directors or as minority stockholders, except for participation in the annual meeting. Id., 629 P.2d at 220-22. 18 Mont. Code Ann. Sec. 35-1-921(1)(a)(iv) provides that a corporation can be liquidated in an action by a shareholder when it is established that the corporate assets are being misapplied or wasted. 4 Because the misapplication or waste of corporate assets is a corporate injury, the district court correctly concluded that Sax would have to follow the procedure outlined in Fed.R.Civ.P. 23.1 to liquidate World Wide. 19 The district court's interpretation of Mont. Code Ann. Sec. 35-1-921(1)(a) will also reduce the volume of litigation in Montana courts by requiring a shareholder to establish personal injury and not just corporate injury in a direct shareholder action. Because, as discussed above, Sax does not allege conduct that injured him personally but rather conduct that injured the corporation, the district court did not err in dismissing Sax's claim to liquidate World Wide under section 35-1-921(1)(a). 20 For the reasons above, the district court's dismissal of Sax's complaint is AFFIRMED.