Court Opinion

ID: 9795050
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:18:51.211064+00
Date Added: 2024-06-11T08:23:01.372485
License: Public Domain

CROTHERS, Justice,
dissenting.
[¶43] The essence of the majority’s holding on Leach’s liability to a single shareholder states:
“When the particular statutory provisions of N.D.C.C. § 10-19.1-115 are considered together in the context of N.D.C.C. ch. 10-19.1 and Danuser’s action against the corporate directors of a closely-held corporation for his individual damages, we conclude James Leach, as a director, had a fiduciary duty not to act in a manner unfairly prejudicial to one or more shareholders in the closely-held corporation under the plain language of N.D.C.C. § 10-19.1-115(1)(b)(3). See Kortum [v. Johnson ], 2008 ND 154, ¶¶ 21-42, 755 N.W.2d 432; Lonesome Dove [Petroleum, Inc. v. Nelson], 2000 ND 104, ¶¶ 29-30, 611 N.W.2d 154.”
Majority opinion at ¶ 25.
[¶ 44] In Kortum v. Johnson, the defendants did not challenge the application of N.D.C.C. § 10-19.1-115 to a shareholder’s individual action against a director. 2008 ND 154, 755 N.W.2d 432. Leach makes that challenge, which leads me to respectfully dissent here for reasons not articulated in Kortum. Id. (Crothers, J., concurring in part and dissenting in part).
[¶ 45] Section 10-19.1-115, N.D.C.C., is not properly used here to impose liability on Leach in a shareholder action for damages. Section 10-19.1-115 is titled “Involuntary dissolution.” Section 115 is not a general provision but is a particular law found in chapter 19.1 in the middle of other provisions specifically related to corporate dissolution. See N.D.C.C. §§ 10-19.1-105 (Methods of dissolution), 10-19.1-106 (Voluntary dissolution prior to the issuance of shares), 10-19.1-107 (Voluntary dissolution after the issuance of shares), 10-19.1-108 (Filing notice of intent to dissolve-Effect), 10-19.1-109 (Procedure in dissolution), 10-19.1-110 (Dissolution procedure for corporations that give notice to creditors and claimants), 10-19.1-110.1 (Dissolution procedure for corporations that do not give notice to creditors and claimants), 10-19.1-111 (Claims in dissolution (Repealed)), 10-19.1-112 (Revocation of dissolution proceedings), 10-19.1-113 (Articles of dissolution-Certificate of dissolution-Effeet (Repealed)), 10-19.1-113.1 *501(Filing of articles of dissolution-Effective date of' dissolution-Certificate), 10-19.1-114 (Supervised voluntary dissolution), 10-19.1-116 (Procedure in involuntary or supervised voluntary dissolution), 10-19.1-117 (Qualifications of receivers [in dissolution]-Powers), 10-19.1-118 (Action [to dissolve] by attorney general), 10-19.1-119 (Filing claims in proceedings to dissolve), 10-19.1-120 (Discontinuance of dissolution proceedings), and 10-19.1-121 (Decree of dissolution). This statutory organization does not suggest section 10-19.1-115 applies to anything but dissolution, and the majority’s expansive reading is unwarranted.
[¶ 46] My reading is supported by history showing section 10-19.1-115 replaced N.D.C.C. § 10-21-16. See 10-19.1-115, Derivation (2012). Section 10-21-16, N.D.C.C., was titled “Jurisdiction of court to liquidate assets and business of corporation” and provided a process to dissolve and liquidate the assets by shareholder action when the shareholders or directors were deadlocked, in a creditor’s action when the corporation was insolvent, upon the corporation’s filing of statement of intent to dissolve or in an action by the attorney general. N.D.C.C. § 10-21-16 (1976). Section 10-19.1-115, N.D.C.C., clearly added remedies upon dissolution to those formerly available in N.D.C.C. § 10-21-16. However, I submit neither section was intended to provide such broad liability on a director to a single shareholder as now is imposed by the majority.
[¶ 47] Under my application of chapter 10-19.1, I would reverse and not reach the damages question. If damages are considered, I question their allocation given the modified comparative fault provisions in N.D.C.C. § 82-03.2-02. This Court has noted, “By enacting N.D.C.C. § 32-03.2-02, the Legislature ‘clearly intended to replace joint and several liability with several allocation of damages among those who commit torts in proportion to the fault of those who contributed to an injury.’ ” M.M. v. Fargo Public School Dist. No. 1, 2012 ND 79, ¶ 7, 815 N.W.2d 273 (quotation omitted). Danuser clearly treated the fiduciary duty claim as a tort — he sought punitive damages due to the breach. See N.D.C.C. § 32-03.2-11 (exemplary damages only in action “not arising from contract”). However, this issue has not been briefed and the majority does not address it so we must leave its resolution for another day.
[¶ 48] DANIEL J. CROTHERS.