Court Opinion

ID: 9666921
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:30:18.835454+00
Date Added: 2024-06-11T18:15:33.547563
License: Public Domain

Lee, J.,
concurring in part and dissenting in part.
The majority of the Court, in my opinion, has correctly decided that the appellant is not entitled to recover anything from any of the defendants on account of monies which they obtained from leases during the lifetime of Roy R. Underwood and prior to January 1,1952. Knox of Pennsylvania owned Knox of Mississippi. Roy R. Underwood, a large stockholder, was president of both corporations. Knox of Mississippi paid a large annual management fee to Knox of Pennsylvania. Roy R. Underwood was, in fact, the czar of both corporations. The stockholders’ knowledge, acquiescence and ratification of his dominant management was doubtless the reason why his estate was not even made a party to this litigation.
Besides, in order to set up the corporate organization of Knox of Mississippi, the parent corporation issued one share only of stock each to C. R. Underwood, C. Alberta Luter, and E. F. Underwood, as qualifying shares to make them eligible as directors. But these parties were each required to endorse their share in blank and return it to the home office of the parent company. They were in fact servile followers and lackeys, without any actual authority whatever. The learned chancellor, constituting a court of equity and conscience, *776was able to look through this subterfuge and determine the real status of these so-called directors. It is a far cry, in the circumstances of this case, to charge these individuals with the same high duties and responsibilities, which, as pointed out in the announced principles from the cases cited in the majority opinion, devolve upon bona fide directors and managing officers.
Following Roy R. Underwood’s death, C. R. Underwood was elected president of both corporations, and acceded to such offices. E. F. Underwood continued in the office of director as he had previously acted. His lackey-like status did not change. C. Alberta Luter had even ceased to be a director prior to Roy R. Underwood’s death. She held no connection, either official or otherwise, whatever with the corporation. J. H. Underwood was made a director on May 5, 1952. Obviously his status was the same as his predecessor.
Thus Roy R. Underwood, after his death, was replaced by czar C. R. Underwood, who made no change in policy. J. H. Underwood obtained his lease on September 8, 1948, and, although C. R. Underwood did not cancel it, the majority opinion holds that he is liable for all of the profits which he made after January 1, 1952. The basis for this imposition is that he became a director and was a son of O. R. Underwood. But he was the same kind of director as were the directors before Roy R. Underwood’s death. It seems to me that this decision as to him is wholly inconsistent with the Court’s opinion as to no liability against directors for the profits from their leases prior to January 1, 1952. Bad faith should not Be imputed to a son, who holds a profitable contract, merely because subsequently his father succeeds to the presidency and does not exercise the power to cancel the contract.
There is a great difference between the relationship of father and son and the closer relationship of husband *777and wife. This is recognized in the tort field. For instance, even a minor, if emancipated, may sue his father in tort. Lancaster v. Lancaster, 213 Miss. 536, 57 So. 2d 302. Obviously a son of full age may do so. And a mother may sue her adult daughter. Shearon v. Shearon, 219 Miss. 27, 68 So. 2d 71. On the contrary, neither husband nor wife may sue each other in tort. Ensminger v. Ensminger, 222 Miss. 799, 77 So. 2d 308. Nor may an unemancipated minor sue his parents therefor. Durham v. Durham, 227 Miss. 76, 85 So. 2d 807. There was no proof that J. H. Underwood was apprised in any way that his lease constituted a fraud on the corporation.
C. Alberta Luter ceased to be one of the lackey directors on July 26, 1951. Thereafter, she had no connection with, and was not even an employee of, the corporation. In my opinion, there is no justification for concluding that she knowingly assisted the officers and directors of the corporation in a diversion of corporate funds, as was dealt with in American Agricultural Chemical Company v. Robertson, 273 Mass. 66, 172 N. E. 871, and other cases cited in the majority opinion. The construction is too strained to say that, under the circumstances here, she entered into a scheme to divert company money to other sources. She was simply carrying out a contract which was profitable to her. The mere fact that her leases were profitable to her is not sufficient, in my opinion, to require her to pay all of her profits into the coffers of the company; and this is true without reference to any friendly or personal relations, which she may have had with C. R. Underwood.
In my opinion, C. R. Underwood, when he became president, ought to have canceled his own leases, those of his wife, and those which he had previously held and which he changed to, or placed in, the names of E. F. Underwood and J. H. Underwood for the benefit of his grandchildren. Especially was this required of him inasmuch as he was the head of the management and knew *778that the profits from these leases were large. I cannot excuse the continuance of his own leases and those in which he gave his beneficial interest to his grandchildren. This is likewise true as to the leases of his wife. The relationship of husband and wife is close. With such a relation, there is a oneness, although it may sometimes be a question of which one. I think he should be required to repay the amounts which make up these three items.
However, I see a vast difference between this category and the other leases. The policy of nonownership of the trucks was firmly established. The board of directors of the parent company must have known and assented to that policy. There is no sufficient assurance that the board of directors of the parent company, if the matter had been timely submitted to them, would have changed the policy which had been promulgated and adhered to for such a long period of time by Boy B. Underwood, in whom they had so much confidence.
I find myself in agreement with much of the reasoning so ably presented in the dissenting opinion of Judge Boberds.