Opinion ID: 1799426
Heading Depth: 2
Heading Rank: 4

Heading: Principal Fenestra Cases Distinguished.

Text: In Turner v. Calumet & Hecla Mining Co., 187 Mich 238, this Court upheld an injunction restraining Calumet & Hecla from voting for directors who were common to both Calumet & Hecla and a servient corporation, where Calumet & Hecla's purpose was clearly shown to be that of domination of the servient corporation for the sole benefit of Calumet & Hecla. Distinguishing facts are, among others, that Calumet & Hecla had installed its own directors as directors of the servient corporation; that the servient corporation was also a mining corporation and a competitor in general; also, it was clearly shown that the purpose of Calumet & Hecla was to provide profitable employment for its mining equipment in the event of decline in Calumet & Hecla's business. Even though this case is clearly distinguishable on the facts, it is important to note that only the remedy of injunction was granted but no divestiture was ordered. Also, the trial court refused, and we affirmed, the request to enjoin Calumet & Hecla from voting its stock for other legitimate purposes in meetings of the so-called servient corporation. Of similar import, is the companion case of Hyams v. Calumet & Hecla Mining Co. (CA 6), 221 F 529, which was tried in the Federal jurisdiction. In the case of Peoples Savings Bank v. Stoddard, supra , the illegal purpose, furtively advanced, was admitted on trial and there was (p 339) ample proof of impending damage in the planned dissolution of the bank so as to warrant the injunctive relief. In that case, the Michigan National Bank by the use of its employees' trust fund (which had directors in common with the bank itself), operating through a straw party, obtained control of the stock of a banking competitor in Port Huron. It was admitted that the purpose of obtaining control was to dissolve the competitor bank which would then leave the Michigan National branch in Port Huron the only bank in that city. This was in violation of both Federal antitrust law and Michigan anti-monopoly law. Means used to gain control were also found to be unlawful in that the straw party who became the figurehead president executed a false oath and made numerous other deceptions. In that case, both illegal purpose and illegal means were clear and the equitable relief was proper, in view of the imminency of irreparable injury, that is, dissolution of the Peoples bank, which had already been agreed upon by the directors serving the Michigan National interest. Clearly distinguishable also is the case of Ashman v. Miller (CA 6, 1939), 101 F2d 85. In that case, Ashman, the holder of a voting trust certificate in Federated Publications, Inc., brought suit against defendant directors and voting trustees of Federated, claiming a violation of fiduciary obligations. Director McFarland borrowed money from Federated to purchase stock in Federated. Miller and Weil, who were directors and voting trustees, borrowed money for the purchase of stock in Federated from the International Paper Company, the largest seller of newsprint to Federated. It was held that it was a violation of public policy for a director to borrow money from a corporation or from one of its largest sources of supply to purchase stock in the corporation of which they are directors. The Federal court reasoned that the directors who borrowed money from the corporation's largest supplier placed the directors in a position where there would be a direct and powerful inducement to disregard their fiduciary obligations to the corporation. In Ashman, other distinctions could be made, but the essential problem was one of a fiduciary obligation already assumed as a director as against the backdrop of a clearly spelled-out transaction, neither of which is a present factor in the instant case. Maggiore v. Bradford (CA 6, 1962), 310 F2d 519, certiorari denied, 372 US 934 (83 S Ct 881, 9 L ed 2d 766), involved the violation of a fiduciary obligation of a majority stockholder alleged to be in actual control of the corporation. Due to the fact that the essential factual elements of this case are poorly stated, together with the fact that the transaction in question was rescinded before the court had an opportunity to pass upon it (leaving only minor questions such as attorney fees to be passed upon), the Maggiore Case cannot be said to be of any value as precedent for the issues before us in the instant case. The case of Dale v. Thomas H. Temple Co., 186 Tenn 69 (208 SW2d 344), is what is known in the financial world as a looting or raiding case. [5] In that case, action was brought to recover company funds which had been wrongfully diverted and misappropriated by officers and directors. In the instant case, there is no claim by plaintiff Fenestra that Gulf has misappropriated funds or that it intends to do so. By contrast with the Dale Case, the present case is one in which Gulf is accused of having generally improper motives which are alluded to no more clearly than that of an intent to arrange a loan, merger, or otherwise. This is supposed to mean that in some inexplicable way Gulf will acquire, through improper means, assets of Fenestra for Gulf's purposes alone. As already indicated, to support the kind of relief granted by the trial court there must be some reasonably specific showing of the wrong done or its imminency. Another case relied upon by plaintiff is Insuranshares Corporation v. Northern Fiscal Corp. (DC ED Pa), 35 F Supp 22. This was an action against former officers, directors, and certain stockholders to recover damages incurred by the corporation as the result of the sale of control of the corporation to a group who proceeded to rob it of most of its assets. This also was a typical looting case which manifestly was based upon clear proof of a completed scheme which resulted in the corporation being deprived of most of its assets. The distinction between Insuranshares Case and the instant case is obvious. We have not discussed in this opinion the question of whether or not the means allegedly employed by defendants were unlawful (as claimed by Fenestra) for the reasons which follow. First, the trial court made no specific finding as to means, choosing rather to plant decision on a finding of unlawful purpose coupled with overt acts done in pursuance thereof. Thus, we are denied the always helpful fact analysis of the trial bench, which is invaluable to any appellate court. Second, although Fenestra claims both unlawful means and unlawful purpose, it is unnecessary in a decision of the case to discuss unlawful means, because whether the means were unlawful (and the purpose lawful) or the means were lawful (and the purpose unlawful), in order to succeed in this civil action (where both legal and equitable relief are sought) it is incumbent upon plaintiff to prove damages, either actual or imminent or both, and plaintiff has done neither.