Opinion ID: 2030074
Heading Depth: 1
Heading Rank: 7

Heading: Initiation of Suit

Text: Bill's first assignment of error on cross-appeal is that the court erred in not dismissing Pennfield's petition because it was not authorized by Pennfield's board of directors. Andrew admitted that he initiated Pennfield's petition in this action without direction or authority from Pennfield's board of directors. Andrew contends that this court addressed and rejected Bill's argument that the case should be dismissed with our disposition of the prior appeal in this case, Pennfield Oil Co. v. Winstrom, 267 Neb. 288, 673 N.W.2d 558 (2004). Andrew's argument is without merit. In Pennfield Oil Co., supra, a law firm, selected by the board of directors to represent Pennfield, attempted to appeal from the denial of its motion seeking leave to appear on behalf of Pennfield and disqualification of the counsel which had been representing Pennfield on Andrew's authority. However, we concluded that the district court had not entered a final, appealable order. See id. [W]e [had] no jurisdiction over the appeal and [were] unable to reach its merits and dismissed the appeal. Id. at 300, 673 N.W.2d at 567. The only issue we decided in Pennfield Oil Co. was whether the district court had entered a final, appealable order. Contrary to Andrew's argument, we did not decide, expressly or impliedly, whether the district court should have dismissed the action because Pennfield's board of directors had not authorized its filing. [8,9] Nonetheless, we conclude that the district court did not err in reaching the merits of this action. We initially note that although the board of directors of a corporation, under ordinary circumstances, controls an action brought by the corporation, that control is not unconstrained. See System Meat Co. v. Stewart, 175 Neb. 387, 122 N.W.2d 1 (1963). A court of equity can and should interfere in the event of usurpation, fraud, gross negligence, or transgression of statutory limitations. See id. In particular, a board of directors of a corporation has no right to dismiss an action through collusion with the defendant. Id. Here, the defendantBillwas also in effective control of the board of directors. Andrew's cross-claim alleged that Bill was in breach of his fiduciary duties. But more significantly, regardless of how the action was initiated, the district court had jurisdiction to proceed, because Andrew, as a party to the agreements, also had standing to pursue their enforcement. In F.H.T., Inc. v. Feuerhelm, 211 Neb. 860, 320 N.W.2d 772 (1982), we permitted a corporation and its minority shareholder to maintain an action against the majority shareholder to compel enforcement of a redemption clause signed by the shareholders. We explained the policy underlying transfer restriction agreements, stating: In [close] corporations, stock restrictions are devices often employed to insure that the management and control of the business remains with the same group of investors or with people well known to them. Such restrictions may be embodied in the articles of the corporation, in the bylaws, or in shareholder agreements, and generally provide that upon the withdrawal or death of a stockholder, his shares will be sold or transferred only to the remaining stockholders or to the corporation, or at least will be offered to them before being sold to any outsider. Such agreements make it possible for shareholders to choose future associates and prevent unwanted outsiders from entering the business if their integrity or business acumen is in doubt. Id. at 865, 320 N.W.2d at 776. We also explained that '[t]here seems to be no reason in principle why they (the stockholders of a corporation) should not be permitted to retain the control of the corporation in which they have embarked their fortunes among themselves, or such of them as stand by the vessel, where no question of a bona fide purchaser without notice is involved. In this court, where the intent of the parties is the thing sought to be enforced, every effort should be made to hold men to agreements into which they have voluntarily entered, where the same are not obnoxious to any law or policy, and upon the strength of which others have changed their position or circumstances, or parted with a valuable consideration. . . .' Id. at 866, 320 N.W.2d at 776. In Lauritzen v. Davis, 214 Neb. 547, 335 N.W.2d 520 (1983), we implemented that policy by permitting nonsignatories of a stock transfer restriction to maintain an action to enforce the restrictions, on the theory that they were third-party beneficiaries of the restrictions. Beneficiaries of a contract may recover thereon, though not named as parties, when it appears by express stipulation or by reasonable intendment that rights and interests of such beneficiaries were contemplated and being provided for thereon. Id. at 557, 335 N.W.2d at 526. [10] The essence of these authorities is that [t]he intended beneficiaries of a share transfer restriction are entitled to enforce the restriction. 12 William Meade Fletcher et al., Fletcher Cyclopedia of the Law of Private Corporations § 5460.70 at 169 (perm. ed., rev. vol. 2004 & Cum. Supp. 2005). In other words, the shareholders are all bound by the restriction and thus have standing to enforce the agreement against one another. In the present case, Andrew brought claims against Bill in his individual capacity, seeking the same relief as Pennfield's petition. Bill and his wife filed a petition in intervention which sought, in part, a declaration that Pennfield had no right or obligation to redeem stock from the estate. The issues presented by the various pleadings were essentially the same: whether Bill's transfer of stock to himself from the Estate violated the stock transfer restriction agreements or whether Pennfield (in the absence of a valid waiver) was required to redeem the stock pursuant to the agreements. Regardless of whether the action was initiated properly, Andrew's cross-claims, and Bill and his wife's petition in intervention, effectively raised the same issues, so the court had before it all the parties to a legal dispute that was ripe for disposition. The court did not err in refusing to dismiss the action because Pennfield's board of directors did not authorize the initiation of the action.