Court Opinion

ID: 6710808
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:36:19.902062+00
Date Added: 2024-06-11T16:01:29.350527
License: Public Domain

Justice Martin
dissenting.
I respectfully dissent from the majority’s opinion. This action was not brought by the plaintiff to compel the payment of dividends within the meaning of N.C.G.S. § 55-50(k). In its complaint, plaintiff alleges: “4. On or about July 10, 1984, the Board of Directors of Syntek Finance declared and paid a dividend of $.25 per share of Preferred A stock.” Defendant in its answer admits the allegations of paragraph four. Thus, it has been judicially determined that defendant paid the dividend at issue. The only issue is whether defendant should have paid the dividend upon the shares owned by plaintiff. The disagreement between the parties arose by virtue of the 31 August 1984 mutual release executed between the plaintiff and the defendant in which the parties released each other from all claims, liabilities, demands, actions, causes of action of any kind or character. Defendant plead this release in bar of the action that the plaintiff have and recover of the defendant damages representing the failure to distribute the dividend to plaintiff based upon plaintiff’s ownership of shares.
I conclude that the statute is only for the purpose of requiring a corporation to declare and/or pay a dividend to a class of shareholders when the corporation has wrongfully failed to do so. The statute is not for the purpose of requiring the corporation to pay an individual person a dividend, but only to require the corporation to pay a dividend to all of its stockholders. The reasoning behind allowing the plaintiff in such case to recover all reasonable expenses including attorney’s fees incurred in maintaining such an action, is to enable stockholders to pursue their rights to have a dividend declared and paid without fear of being liable for large *606expenses and attorney’s fees. The individual who brings an action on behalf of all similarly situated to have a dividend paid should not bear the full expense of maintaining such an action that is for the benefit of all shareholders. It is equitable under those circumstances that the plaintiff be reimbursed for his reasonable expenses including his attorney’s fees; this the statute seeks to do.
However, these reasons are not applicable to a dispute between a shareholder and a corporation regarding whether this particular shareholder should receive payment of a dividend declared and paid by the corporation to all of its other shareholders. That is an individual dispute between the individual shareholder and the corporation, and the shareholders in general will not receive any benefit from such action. In that instance, it is neither reasonable nor equitable to apply this statute to allow reasonable attorney’s fees. It is also to be noted that in N.C.G.S. § 55-50(k) the party bringing the action is entitled to recover from the corporation “all reasonable expenses,” not being limited to attorney’s fees. “All reasonable expenses” is a much broader phrase than “costs.” It is proper for all reasonable expenses to be paid to a person bringing an action on behalf of all shareholders in order to have a dividend paid, but it would not be appropriate to allow an individual plaintiff to recover all reasonable expenses where he is suing the corporation to receive payment of a dividend which has already been declared by the corporation. That case is simply an ordinary lawsuit.
As stated by Chief Judge Hedrick in his dissent to the Court of Appeals’ opinion, this action was brought to recover a debt owed to the plaintiff by the defendant. The dividend had already been paid by the defendant. This case was merely a dispute between an individual shareholder and the corporation and was not a suit brought to compel the declaration and payment of a dividend for the benefit of all shareholders. See, e.g., Dowd v. Foundry Co., 263 N.C. 101, 139 S.E.2d 10 (1964) (suit brought by stockholder for failure of the board of directors to declare and pay a dividend from the corporation’s earnings).
The majority falls into error when it construes this lawsuit to be one “to compel the payment of dividends” within the meaning of the statute. The dividend as admitted by both plaintiff and defendant had already been paid before this action was instituted; therefore, the action cannot be one to compel the payment of a dividend. Plaintiff’s action is truly an action against the corporation *607for a debt that it contends is owed to it for the corporation’s failure to distribute to the plaintiff its share of the dividends. The allowance of “all reasonable expenses, including attorney’s fees, incurred in maintaining such action” is not appropriate under the facts of this case. It was not the intent of the legislature in enacting N.C.G.S. § 55-50(k) to require corporations to pay “all reasonable expenses, including attorney’s fees” for actions brought by an individual shareholder over a dispute with the corporation on whether he is entitled to share in a dividend paid by the corporation. These disputes are personal and are ordinary differences of opinion between parties. North Carolina corporations should not be burdened with paying all reasonable expenses and attorney’s fees in cases of this type.
For the reasons stated, I vote to reverse the Court of Appeals and reinstate the decision of the trial judge.
Chief Justice Exum and Justice Meyer join in this dissenting opinion.