Opinion ID: 2417354
Heading Depth: 1
Heading Rank: 4

Heading: Conversion of Corporate funds

Text: MSU's final argument is that the trial court erred in not awarding judgment in the amount of the Rakes' day care expenses, Dennis Rakes' personal income taxes, and Dennis Rakes' health insurance premiums paid without proper authorization from corporation funds. We first note that the trial court reduced the judgment for back wages awarded to Karen Rakes by $4171, the exact amount of child care expenses paid from corporate funds. The order stated that as a matter of equity, [the judgment] should be reduced by $4,171 for unpaid wages.... It is clear that the day care expenses were deducted from the sum awarded Karen Rakes and we need not further consider the point. There is no dispute that corporate funds were used to pay for the $21,000.00 in tax withholdings for Dennis Rakes, and the premiums on Dennis Rakes' insurance. However, MSU alleges that it did not know of these payments, while the Rakes allege that Young and Blevins consented to payment of these expenses. Faced with two versions the trial court makes a credibility decision of which witness to believe. Riddick v. Streett, 313 Ark. 706, 858 S.W.2d 62 (1993). We cannot say that the trial court's determination was clearly erroneous. The Rakes contend that no objections were made to any of the expenses until after Rakes was removed as President and manager of MSU. They further contend that the $21,000 personal income taxes are actually the employment and withholding taxes on Mr. Rakes' salary while President and manager of MSU. The Rakes assert that the corporation agreed to pay him a gross salary of $3200, while MSU argues that the corporation agreed to pay Rakes a gross salary of $2500 and the $700 per month difference amounted to a conversion of corporate funds. Rakes actually received a gross salary of $3200, with $700 withheld as taxes; the $700 per month is the amount in dispute. The minutes of MSU's October 12, 1992 emergency meeting state that it is agreed that Dennis should continue to receive his $2500 net salary, as before. We cannot say that the trial court erred in determining the Rakes were not liable to MSU for conversion of the $21,000.00. MSU contends that $1998.72 paid for the premiums on Mr. Rakes' health insurance policy also amounted to a conversion of corporate assets. Once again, MSU argues that it did not know of this expenditure, while Rakes argues that MSU was fully aware of the payments. The trial court determined that MSU did not produce sufficient evidence to warrant an award for conversion. Again we cannot say that the trial court was clearly erroneous in making this finding. Affirmed as modified.