Court Opinion

ID: 9681239
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:46:22.998613+00
Date Added: 2024-06-11T18:17:32.826118
License: Public Domain

Tom Glaze, Justice, dissenting. I dissent because the majority totally ignores the appellee’s contention that the appellant should be estopped from bringing this action. If that issue were addressed, it would be clear that the appellee’s contention has merit and that the trial court should therefore be affirmed. The general rule is that a minority stockholder cannot have relief in equity on account of the salaries paid to corporate officers, when the salary payments have been ratified by the majority stockholders. Fletcher, Cyclopedia of Private Corporations, § 1110 (1986). See also Cunningham v. Jaffe, 251 F.Supp. 143 (D. S.C. 1966). Fletcher further provides: A stockholder who, with knowledge of the facts, himself has given his consent to, or acquiesced in, acts of the directors or other corporate officers, or of majority stockholders, cannot ordinarily attack such acts afterwards. And this applies equally well to ultra vires acts. * * * But if a contract is illegal and void, as being in violation of an express prohibition, or contrary to public policy, and not merely ultra vires, the fact that a stockholder voted therefor as a director or otherwise consented or participated does not estop him from attacking its validity, although there is authority to the contrary. Fletcher, Cyclopedia of Private Corporations, § 5862 (1986). In this regard, appellant’s complaint merely alleges waste, fraud and a breach of fiduciary duties by the directors — not that the contract is illegal and void. The fact remains that the appellant, a minority stockholder by way of gifts from her parents, the majority stockholders, consented to and ratified the employment contract of which she now complains. This contract provided that her parents would each receive a minimum monthly salary of $12,500. All shareholders, including the appellant, consented to this contract, and made the contract a part of their property settlement agreement filed in their divorce action on April 1, 1988. That property settlement agreement read as follows: It is the intent of the parties hereto to place control of Brandon Construction Company equally in the Husband and Wife to provide them with contracts for the continued equal control and management of the company and to provide equal compensation and provide a means by which Husband and Wife shall share equally any accumulated cash obtained by the corporation on an annual basis; that upon the execution of this agreement, the parties will obtain and cause to be delivered to the corporate secretary, with a copy to each party, an employment and management contract whereby Husband and Wife shall be employed and manage the aforesaid corporation for twenty (20) years, or until the death of either, at equal rates of compensation; it is anticipated based upon the history of the corporation’s cash flow, income, taxes and debt service requirements, that each shall be entitled to draw a gross sum of Twelve Thousand Five Hundred Dollars ($12,500.00) each per month; the dollar income accumulated by the corporation shall be distributed, if feasible, upon review by the parties hereto in an amount to be determined by the parties hereto on an equal basis. It was some two months after consenting to the parents’ employment contract that the appellant attempted to revoke her consent. In fact, appellant is the only shareholder who is challenging the contract; all other shareholders remain in agreement. It is clear that appellant, by giving her affirmative consent to the contract, has induced her parents to rely to their detriment upon that contract. Appellant’s belated attack on the validity of that contract should therefore be barred by the principle of equitable estoppel. See Howard Bldg. Centre v. Thornton, 282 Ark. 1, 665 S.W.2d 870 (1984). I would affirm the trial court. Hays, J., joins in this dissent.