Opinion ID: 1710610
Heading Depth: 2
Heading Rank: 5

Heading: should summers and haigh participate in judgment proceeds?

Text: The records as to stock ownership were conflicting. The chancellor directed the parties to file a stipulation of ownership, and, as to the parties whose ownership interest was in dispute, a hearing date was set to make such determination. The chancellor entered final judgment for purposes of MRCP 54(b), but expressly retained jurisdiction to determine shareholder status. Dr. Holly originally cross-appealed from any consideration of Summers or Haigh as possible shareholder beneficiaries of the judgment, arguing, particularly as to Summers, that, as the largest shareholder, he would be deriving the most benefit from the judgment, a manifestly inequitable result. However, on May 17, 1995, in an effort to expedite the appeals process following Summers' filing of a Chapter 7 petition in bankruptcy, Dr. Holly moved to voluntarily dismiss her cross-appeal against Summers. This motion was granted by this Court, even though we are of the opinion that said cross-appeal was well-taken. If an appellant should desire to dismiss an appeal filed with this Court, we will generally not bar said appellant from doing so, although we do have discretion to do so. On November 8, 1995, Summers was granted a discharge in his bankruptcy case, which had the result of lifting the automatic stay and making this case ripe for decision by this court. While this Court is of the opinion that the cross-appeal pursued by Holly against Summers and Haigh was well-taken, the voluntary dismissal of the cross-appeal as it relates to Summers leaves this Court to consider this issue on cross-appeal solely as it relates to Haigh. This Court agrees with Holly that Haigh should be precluded from recovering on the judgment in this case based upon his status as a shareholder. In Perlman v. Feldmann, 219 F.2d 173 (2nd Cir.1955), a derivative action was brought by minority stockholders of a steel company demanding an accounting for and restitution of profits accruing to a dominant stockholder, who was also chairman of the board and president of the corporation. In holding that the dominant stockholder had breached his fiduciary duty and should therefore be accountable to the minority stockholders, the Court held that the plaintiffs/minority stockholders were entitled to a recovery in their own right, instead of in right of the corporation (as in the usual derivative actions), since neither [the defendant who breached his fiduciary to minority stockholders] should share in any judgment which may be rendered. Id. at 178. In Abrams v. Occidental Petroleum Corporation, 20 Fed.R.Serv.2d 170, 178 (S.D.N.Y. 1975), the U.S. District Court held: There is substantial authority for awarding a personal rather than a corporate recovery in a [pure] derivative suit under exceptional circumstances. This may be done ... where the wrongdoing defendant owns substantial amounts of stock so that a corporate recovery would result in the defendants reimbursing themselves to the extent of the stock interest. [citations omitted] Haigh held a substantial number of IMT shares. If he were awarded a percentage of the damages award, the court would be reimbursing Haigh for his own wrongs and misconduct. The chancellor should have barred Haigh from recovering in the judgment as an IMT shareholder. We therefore reverse that part of the judgment which holds that Haigh is a possible beneficiary of any sums recovered by IMT. Upon remand, the chancellor, in making a determination as to the amount each shareholder shall be entitled to receive from the judgment proceeds, shall exclude Haigh. The remaining assignments of error on cross-appeal are without merit, and do not require discussion. Therefore, the judgment of the chancery court is affirmed on direct appeal, and is also affirmed on cross-appeal except insofar as Haigh was adjudged a possible shareholder beneficiary. Direct Appeal: Judgment is Affirmed. Cross Appeal: Judgment is Affirmed in Part; Reversed and Remanded in Part. SULLIVAN, P.J., and PITTMAN, BANKS, JAMES L. ROBERTS, Jr., SMITH and MILLS, JJ., concur. DAN LEE, C.J., and McRAE, J., concur in result only.