Opinion ID: 1153554
Heading Depth: 1
Heading Rank: 6

Heading: Plaintiffs' contentions Browning v. C & C Plywood Corp.

Text: Plaintiffs' primary contentions are: (1) that the trial court erred when it failed to find that the conduct of defendants Siler was oppressive within the meaning of ORS 57.595, as construed by this court in Browning v. C & C Plywood Corp., 248 Or. 574, 434 P.2d 339 (1967), and (2) that the trial court should have used its equitable powers to provide a remedy even if it felt that those provided in ORS 57.595 and 57.600 were inappropriate. Plaintiffs say that this court formerly subscribed to the robber baron theory of corporation law to the effect that the majority stockholders who control the operation of a corporation can do anything, including a squeeze out of minority stockholders, so long as they break no specific laws and commit no actual fraud and that they owe no fiduciary duty to minority stockholders, citing McMunn v. M L & H Lumber, 247 Or. 319, 429 P.2d 798 (1967), and Jackson v. Nicolai-Neppach Co., 219 Or. 560, 348 P.2d 9 (1959), as our most recent decisions reiterating the old `robber baron' theory. Plaintiffs also say that in Browning v. C & C Plywood Corp., supra , this court modified that line of cases in Oregon and adopted the modern rule expressed in O'Neal, citing 2 O'Neal, Close Corporations (1971 ed) 43-45, § 8.07, to the effect that court decisions are outmoded which allow a squeeze out or freeze out, including one accomplished by the following form of conduct: `   The shareholder, director, officers refuse to declare dividends but provide high compensation for themselves and otherwise enjoy to the fullest the patronage which corporate control entails, leaving minority shareholders who do not hold corporate office with the choice of getting little or no return on their investments for an indefinite period of time or selling out to the majority shareholders at whatever price they will offer   .' In Browning the squeeze out was accomplished by what is recognized in O'Neal, supra (at 43), as an entirely different form of conduct. Thus, in that case the majority increased the amount of corporate stock, with pre-emptive rights to existing stockholders to participate in the purchase of such stock in an amount proportionate to the percentage of their previous stock ownership in the corporation. This court found, however, that this was done with knowledge that plaintiff, who then owned a 32% stock interest, would be financially unable to purchase that percentage of the newly issued stock and was done with the purpose of eliminating his interest in the corporation and in such a manner as to reduce that interest from 32% to 1%. Although the majority opinion in Browning, 248 Or. at p. 581, 434 P.2d at p. 343, cited O'Neal, supra, as providing the best analysis of the few cases that are relevant to the question at hand, it did not embrace the proposals by O'Neal to the extent implied by the plaintiffs in this case. Indeed, the only further reference to O'Neal was as follows (at p. 581, 434 P.2d at p. 343):    [t]he authors examine the reluctance of the courts to interfere in intra-corporate disputes but also find that courts have given relief when the purpose of the increased stock issue is only for the benefit of the majority and serves no corporate purpose.    It is true that in Browning this court, instead of decreeing a dissolution of the corporation, remanded the case to the trial court with instructions to determine the feasibility of alternative relief under which plaintiff would be permitted to purchase additional stock in an amount sufficient to retain his 32% interest, to be paid for, in part, by credit for unpaid salary or by an award of damages. In so holding, however, this court in Browning neither cited nor overruled previous decisions, such as Jackson v. Nicolai-Neppach Co., supra, 219 Or. at pp. 574, 575 and 585, 348 P.2d at p. 21 in which the court, after reviewing the history of ORS 57.595, rejected the view that would permit dissolution whenever the jurisdictional facts are proven [7] and held at p. 587, 348 P.2d p. 9 that in a suit under ORS 57.595 (as in this case) the court is not required to dissolve a corporation upon proof of a deadlock between its stockholders, as in Jackson, but that in such a suit the court may consider the equities of the individual case, recognizing that dissolution is a harsh remedy, and that in such cases courts of equity retain the discretion whether to grant or refuse equitable relief. Thus, our opinion in Jackson (219 Or. at p. 575, 348 P.2d at p. 16) said that:    [a]s we read the statute its intent is to obligate the courts to thread their way from case to case without the assistance of sweeping generalizations. We still subscribe to these views. In doing so, however, we do not mean to approve what plaintiff refers to as the robber baron theory of corporate operation, much less to give approval to squeeze out or freeze out tactics in close corporations.