Opinion ID: 1825740
Heading Depth: 1
Heading Rank: 10

Heading: Liability of Burton Dull.

Text: We have deferred consideration of the liability of Burton Dull, attorney for Le Mars, until last because his status is unique and presents problems unlike those of the other defendants. Dull became a director of Le Mars at the fateful April 21, 1970 meeting of Le Mars' policyholders. Until then, although he had represented Le Mars for many years, he had never attended a meeting of its board of directors. The trial court held him liable under a general finding that the incoming directors of Le Mars owed that corporation a fiduciary duty which he, along with others, had violated. We agree that Dull must share responsibility for the illegal sale of control of Le Mars, but we do not base that conclusion on his duty as an incoming director of the corporation. We have already pointed out all who assist or cooperate in the breach of fiduciary dutieswhether directors or notare liable for the resulting damage. This is particularly true of one who acted as attorney. His duty is to the entire body of shareholders, or, in this case, policyholders. His obligation, indeed, is similar to, if not identical with, that of a director. 30 Bus.Law. 41, 59-60 (1975). Relating this principle to the case at hand, we find Dull actively assisted and cooperated in accomplishing the illegal sale of control of Le Mars to Iowa Mutual. He must be held liable for that conduct. Before discussing the evidence bearing on Dull's liability, we put to rest one circumstance he relies on to show his good faith and to negate liability on his part. He insists he made full disclosure to the insurance commissioner and secured his approval of the Alesch, Inc.Iowa Mutual transaction. We do not believe the record bears him out on this, but even if it did, such disclosure and resulting approval would not save him. See our decision in the first appeal of this case, Rowen v. Le Mars Mutual Insurance Co. of Iowa, 230 N.W.2d at 911. See also Dogle v. Union Insurance Co., 277 N.W.2d at 40-41. Mr. Dull testified he knew it was illegal to sell a corporate directorship; but he further testified that isn't what happened. We have already decided that is what happened, but we nevertheless consider Mr. Dull's testimony in the light of his insistence it did not. Much of this defense depends on Dull's testimony he assumed the value of Alesch, Inc. stock was $500,000.00. Further, he says he was justified in reaching this conclusion from representations made by John H. Alesch, whom he had no reason to doubt. He asserts he had no duty to make an independent investigation or appraisal to determine the actual value of the stock. He concludes from the above there was nothing to make the deal suspect and that there was no reason for him to explain the circumstances of the proposed sale to the Le Mars' board. We are unable to agree with this proffered defense. It is true plaintiffs' whole case depends upon the payment of an amount in excess of the actual value of Alesch, Inc. stock for the purpose of buying the resignation of Le Mars' directors. It is equally true Dull would not be liable unless he assisted or cooperated in bringing this illegal plan to fruition. Although he minimizes the part he played, Dull was active from the very beginning in the negotiations leading up to the sale of Alesch, Inc. He attended meetings with Employers Mutual of Des Moines before Iowa Mutual entered the picture. When the Employers Mutual proposal fell through, Dull continued to play a role as the Iowa Mutual offer developed. It is interesting to note that Dull insists he represented only Le Mars, but nevertheless he was zealously engaged in the on-going discussions dealing with the sale of Alesch, Inc. to Iowa Mutual. Despite claims to the contrary, the circumstances strongly suggest Dull not only represented Le Mars during this period but also Alesch and Alesch, Inc. He attended a number of conferences, exchanged letters with Iowa Mutual, and prepared at least some of the instruments necessary to complete the sale. He says he attended the conferences only as a bystander and that he had no input. However, the facts belie this. His attendance at the meetings, during which he made notes and, in some cases, followed up with letters or telephone calls confirming what had occurred are not the actions of a bystander. He prepared the controversial contract between Iowa Mutual and Alesch, Inc.neither one, he says, his clientand several related contracts. He admits, too, Alesch gave him $2,500.00 after the deal was completed for what he had done down through the years without being paid. We find it hard to believe he was not representing the Alesch interests as well as Le Mars. This question of dual representation in a matter involving such potential conflict of interest is important to our consideration. Even that doesn't tell the whole story. At the same time, Dull knew he was being slated by Iowa Mutual to become a Le Mars director. It is apparent Mr. Dull's loyalty was spread pretty thin. We are unable to accept Dull's insistence that he was unaware any consideration was paid for the en masse resignations of Le Mars' directors. This goes back to his claim he relied on the representations of John H. Alesch, a practice born of experience over many years. We reject the claim Dull did not know the real nature of the Iowa MutualAlesch, Inc. sale. He knew the deal was contingent on the resignation of Le Mars' directors. He knew, we believe, that the purchase price substantially exceeded the value of the stock. He knew of the unprecedented (according to witnesses) action in awarding pensions to the retiring directors, apparently to speed them on their way. He knew of the favorable management and consultant contracts awarded to Alesch and Alesch, Inc. by Le Mars. The parties devote much of their argument to Mr. Dull's duty to fully advise the Le Mars board of the details of the transaction by which Iowa Mutual was to take over control. Dull says, first, that the board knew the full details; and, second, he believed John H. Alesch had informed the board of the circumstances. This gets us back again to the fundamental factual dispute: was there a premium paid for control of Le Mars? If, as we have decided, there was, Dull's argument vividly illustrates the impasse he now faces. He says he justifiably assumed Alesch would make full explanation to the board. Yet Dull must know that if he had, the transaction would have been even more palpably illegal, for then the directors would have had actual knowledge of the illegality. The most damaging single bit of evidence against him is the hotly disputed recoupment letter to R. A. Brown of Iowa Mutual. In that letter Dull referred to the management contract under which Le Mars was to pay Alesch, Inc. $2,500.00 per month (later one per cent of Le Mars' gross) as management fees as the means by which Iowa Mutual would recoup its investment in Alesch, Inc. Dull admits this letter, taken at face value, is damaging to his defense. He says the choice of words was unfortunate, but insists the real meaning, which both he and Brown understood, was that Le Mars should pay only a reasonable amount for management services actually rendered. We are unable to put any construction on this letter except what we believe it clearly saysthat Iowa Mutual was to get back its payment for Alesch, Inc. stock by the simple expedient of having Le Mars (which it controlled) pay management fees to Alesch, Inc. (which it owned). Thus Le Mars, not Iowa Mutual, would really be paying for the Alesch, Inc. stock. More than any other evidence, this clearly shows not only Iowa Mutual's scheme to redeem the purchase price but also demonstrates Dull's knowledge that this was being done. We conclude Burton Dull was active in assisting John H. Alesch and others in accomplishing the illegal sale of control of Le Mars. We accordingly affirm the trial court decree holding him liable to plaintiffs.