Joan L. Robinson v. John F. Lagenbach , 439 S.W.3d 853 ( 2014 )

In the Missottri Cottrt of Appeals
Eastectt District
DIVISION ONE
JOAN L. ROBINSON, ) No. EDlO0958
)
Appellant, ) Appeal from the Circuit Court
) of St. Louis County
vs. )
) Honorable David L. Vincent, Ill
JOHN F. LAGENBACH, et al., )
)
Respondents. ) Filed: September 2, 2014
The plaintiff, Joan Robinson, appeals the summary judgment entered by the Circuit Court
of St. Louis County in favor of the defendants, John Langenbach, judy Longbrook, and Perma-
Jacl< Company, in Robinson’s action against them. We affirm in part, and reverse and remand in
part.
Because we conclude that a maj ority of the directors had authority to remove Robinson
from her position as coinpany president and treasurer, we deny Robinson’s first two points and
affirm the trial court’s judgment with regard to this question Furthemtore, because Robinson
has alleged no action taken by Langenbach that breaches his fiduciary duty to Robinson as a
trustee of the voting trtlst, \ve affirm the judgment insofar as Robitison challenges the grant of
summary judgment on this basis.
Robinson’s rentaining challenges involve shareholder oppression, breach of the
defendants’ fiduciary duties as directors and controlling shareholders, and application of the
business-judgment rule. Resolution of these challenges requires inalId. Wlien considering an appeal from
l The defendants filed a counterclaim requesting an accounting and payinent of income, but they dismissed this
cotmterclairn.
summary judgment, we review the record in the light most favorable to the party against whom
the court enteredjtldgnient. Id.
The axiom that we view the record "in the light most favorable to the non-movant"
means that the movant has the burden to establish a right to judgment as a matter of law on the
record as sub1nitted. Ia’. at 382; Cardz'rzal Pai'fner.s', LLC v. Desco Invesf)nent Co., L.L.C., 301
S.W.Bd 104, 109 (Mo. App. E.D. 2010). if the movant requires an inference to establish the
right to judgment as a matter of law, and the evidence reasonably supports any inference other
than, or in addition to, the inovant’s inference, a genuine dispute exists, and the movant’s prima
facie showing fails. Id.
Arztlrorl`ty ofthe Directors to Re)nove Robr`rrsoir as Presicz'ent and T)'ec:s‘zz)'er‘
In her first point, Robinson claims the trial court erred in granting summary judgment for
the defendants based on the assumption that the directors had authority to remove her as
president and treasurer of the company. She contends that because the disputed resolution
purporting to grant such authority violated the terms of the voting trust, the defendants lacked the
authority to remove her. in her second point, Robinson claims the trial court erred in denying
her motion for partial summary judgment because the disputed resolution reinoving her as
president and treasurer of the cornpany, passed and enforced without corporate authority,
violated the individual defendants’ fiduciary duties to the plaintiff Because they involve
resolution of the same issue_whether Langenbach and Longbrook could legally remove
Robinson as president and treasurer of the company despite the language of the voting trust-we
consider these two points together.
We construe corporate articles and by-iaws pursuant to the general rules of contracts.
Ironite Prodzrcts Co., Inc. v. Smnuels, 985 S.W.Zd 858, 861 (l\/Io. App. E.D. ]998).
4
Iitterpretatioli of a contract is a question of law. Sy.s'te)ncu're, Inc. v. St. Clicu'les Cozu')ty, 432
S.W.3d 783, 787 (Mo. App. E.D. 2014).
Article III, Section 1 of the cornpany’s original by-laws adopted in 1975 provides in
relevant part that "[t]he property and business of the corporation shall be controlled and managed
by a board of one director." Aineiidineiits to the by-laws increased the number of directors
Since 1988, Robinson, Langenbach, and Longbrook have served as the three directors of the
company. Article III, Section 6 of the company’s original by-laws provides that a majority of the
full board of directors shall constitute a quorum for the transaction of business This section
continues: "The action of the majority of the directors present at a nieeting at which a quorum is
present shall be the act of the Board of Directors." Article IV, Section 2 of the company’s
original by-laws addresses the tenure of officers and provides in relevant part:
Any officer or agent appointed by the Board of Directors may be renioved by the Board
of Directors whenever in thejudgment of the Board the best interests of the corporation
will be served thereby, but such removal shall be without prejudice to the contract rights,
if any, of the person so removed.
in 1985 the company’s sole director at that time, George Langenbach, amended the by-
laws to provide for the position and duties of a chairman of the board as the chief executive
officer of the company, to designate the president as the chief operating officer of the company,
and to renumber the sections within Article IV. The current Aiticle IV, Section 4, as amended in
1985 , provides in relevant part that “[t]he President shall be the chief operating officer of the
corporation and shall exercise general supervision, direction, nianagement and control over all
the business and affairs of the corporation, subject at all times to the control of the Board of
Directors."
Except as set forth here, the by-laws as relevant to our inquiry rernained unchanged since
their inception. Langenbach and Longbrook, representing two-thirds of the directors, voted at a
special meeting to remove Robinson as president and treasurer of the company. Constituting a
two-thirds inajority of the directors, Langenbach and Longbrook possessed authority to take this
action according to the company’s by-laws.
Robinson contends, however, that the voting trust agreement established in 1985
precludes such action because Article 5 of the voting trust required the tiuanhnotrs consent of the
two trustees_namely Robinson and Langenbach-to the resolution that removed Robinson as
president and treasurer, and that such consent was not obtained. Article 5 of the voting trust is
titled "Trustees’ Rights in Stock."z Robinson argues that Article 5 of the voting trust requires the
trustees to unanimously approve or veto every resolution of any character whatsoever adopted by
the board of directors We disagree Such an interpretation would render the board of directors
superfluous and transfer power for all corporate decisions to the trustees who vote the
shareholders’ stock.
2 Article 5 provides in full:
Until the transfer of the Stock out of the itarne of the Trustees on the books of the Conipany, the
Trustees shall have the right to exercise in person or by nominee or proxy or proxies, all rights and po\vers
of the record owners of the Voting Trust Certificates in respect of all Stock represented thereby, including
the right to vote the Stock and take part in or consent to any corporate or shareholders’ action of any kind
whatsoever. ln voting and taking part in or consenting to any corporate or shareholders action, the
Trustees shall act unanimously. Except as otherwise provided liereixt, the right to vote shall include the
right to vote for the election of Directors and in favor of or against any resolution or proposed action of any
character whatsoever, or ratification of any past action, which may be presented at any meeting or require
the consent of the shareholders of the Company, and shall include, without liiniting the generality of the
foregoing the right to vote in favor of the election of the Trustees as Directors or officers of the Coinpaiiy.
In voting upon any matters, the Trustees shall exercise their best judgment and shall not be liable for any
error of judg1nent or mistake of la\v or fact, or for any other action taken or failed to be taken by the
Trustees, except for willful inisconduct.
lt is a general principle that management and control of a corporation is vested in the
board of directors. Fix v_ Fi.r Mafez'r`crl Co., Inc., 538 S.W.Zd 351, 359 (Mo. App. St.L.D. 1976).
The company in this case is no different. Article 111, Section 1 of the company’s by-laws, as
amended in 1988 aj‘er adoption of the voting trust, reiterates in relevant part that “[t]lte properly
and business of the corporation slrall be controlled and )nanaged by aboard of three (3)
directors." (Einpliasis added). Furtherniore, Langenbach and Longbrook, acting as the majority
of the directors of the company, could reinove Robinson as president and treasurer according to
the plain language of the by-laws, which state "[a]ny officer or agent appointed by the Board of
Directors may be removed by the Board of Directors . . . ."
The voting trust does not alter the actions that may be taken by the directors Rather, the
voting trust affects the rights and responsibilities of the shareholders and establishes a framework
for the trust to vote all outstanding shares. The voting trust sets forth, inter crli'a, that the trustees
will receive and hold the outstanding shares of stock for the shareholders; that the trustees will
vote those shares for the shareholders; that the trustees must act unanimously; that a trustee must
be actively involved in the day-to-day operation of the company’s business in order to qualify as
a trustee; and that in the event there remains only one able, willing, and qualified trustee, that
person shall act as the sole trustee. The voting trust does not address the rights and
responsibilities of the directors and officers, and has no bearing on their rights and obligations as
directors and officers
'l`herefore, we reject Robinson’s contention that, as a two-thirds majority of the board of
directors, Langenbach and Longbrook lacked authority to adopt the disputed resolution and to
take the actions stated therein, namely removing Robinson as the company’s president and
treasurer. We deny Robinson’s first two points.
7
Langenbach ’s Fiducirtry Duty As Trustee ofthe Voting Trust
ln her fourth point, Robinson claims the trial court erred because the evidence supported
her claim of breach of fiduciary duty. in her petition, Robiiison asserted a claim for breach of »
fiduciary duty, and contended that Langenbach and Longbrook owe her a fiduciary duty in their
capacities as directors and controlling shareholders She also inaintaiiied that Langenbach owes
her a fiduciary duty in his capacity as trustee of the voting trust. 3 We must separately consider
Robinson’s claims of breach of fiduciary duty in the capacity of trustee of the voting trust and in
the capacity of directors and controlling shareholders
Robinson pleaded that she was reinoved as an officer of the coinpany, terminated from
her employment with the resulting loss of salary and benefits, and reinoved from the company’s
day-to-day operations and thus removed as a trustee of the voting trust. She also cites increased
compensation for Langenbach and his daughter and installation of the daughter as company
secretary as evidence of wrongdoing Robinson speculates that Langenbach and Longbrook will
in the future use their control to remove her as a director. This is the only allegation even
arguably related to Langenbach’s capacity as trustee of the voting trust since the trustees who
vote all the shares of stock thus elect the directors, and it is entirely speculative According to
the by-laws, the board of directors and the president, not the trustee(s) of the voting trust, have
authority to inake the personnel and compensation decisions that Robinson complained have
already occurred.
in her brief, Robinson devotes no single point to Langenbach’s purpolted breach of
fiduciary duty as a trustee of the voting trust. We have already determined that the niajority of
the directors had the authority to remove Robinson, and that this action did not require approval
3 Longbrook is not a trustee of the voting trust.
by the trustees of the voting trust. Robinson’s third point primarily addresses shareholder
oppression although it does state that controlling shareholders have a fiduciary duty to refrain
from using their control to obtain a profit for themselves at the expense of the minority or to
produce corporate action designed to operate unfairly to the ininority. The allegedly oppressive
acts listed in Robinson’s third point, however, are ali actions that Langenbach would have taken
as a director or as president responsible for general supervision, direction, management and
control over all the business and affairs of the corporation. None of Robinson’s listed coinplaints
involve actions taken as a trustee entitled to vote all shares of the voting trust.
Because Robinson has alleged no action that breaches Langenbach’s fiduciary duty as a
trustee of the voting trust, we affirm the judgment insofar as Robinson challenges the grant of
suinmary judgment on this basis.
Shai'elzoldei' Op;))'ession, B)‘eclcl? of!lze Defendanfs’ Fidticia)y Dufy
As Directors and Controlh`ng Shm'eliolcfers, and Applz`ccztion of the Busi)ie.s's-Jcldgnzertt Rule
in her third point, Robinson claims the trial court erred in granting summary judgment for
the defendants because the evidence failed to establish shareholder oppression sufficient to
warrant dissolution of the company. Shareliolder oppression suggests l) burdensonie, harsh, and
wrongful conduct; 2) a lack of probity and fair dealing in the company’s affairs to the prejudice
of some of its inernbers; or 3) a visible departure from the standards of fair dealing and a
violation of fair play on which every shareholder is entitled to rely when entrusting her money to
a company.‘l F:`x, 538 S.W.2d at 358. The existence of shareholder oppression must be
determined on a case~by~case basis. Sfruckhq§”v. Eclio Ridge Farni, Inc., 833 S.W.Zd 463, 467
(Mo. App. E.D. 1992).
4 The parties dispute whether the three elements of sliareliolder oppression require the conjunctive "and" or the
disjunctive "or." We need not decide this issue.
in her fourth point, Robinson claims the trial court erred because the evidence supported
her claim of breach of fiduciary duty. The officers and directors of a corporation occupy a
fiduciary relationship to the corporation and to the shareholders. Waters v. G & B Feeds, Inc.,
306 S.W.3d 138, 146 (Mo. App. S.D. 2010). Theil‘ position is one of trust, and in the event of a
conflict, they are bound to act with fidelity and to subordinate their personal interest to the
interest of the company. Icf. This fiduciary duty requires corporate directors and officers to
exercise the utmost good faith in the discharge of their duties and to act for the corporation and
its shareholders, giving all the benefit of their best judgment Id. Furtlierinore, officers of a
closely held corporation owe a higher degree of fiduciary duty to shareholders than do their
counterparts at public corporations. ld. at 146-47.
In her final point, the plaintiff claims the trial court erred in granting summary judgment
in favor of the defendants based on the business-judgment rule because the evidence does not
support the defendants’ entitlement to the protection afforded by the rule. The business-
judgment rule protects the directors and officers of a corporation from liability for infra iu'res
decisions within their authority and made in good faith, uninfluenced by any consideration other
than an honest belief that the action promotes the corporation’s best interest Suther/and v.
Sutherlcznd, 348 S.W.3d 84, 89-90 (Mo. App. W.D. Z()l l). The rule precludes courts from
interfering with the decisions of corporate officers and directors absent a showing of f1'aud,
illegal conduct, an 111/rcr vires act, or an irrational business judgment Id. at 90.
The parties do not dispute the basic facts~»»who took what actions. The real dispute lies
in the reason for the actions or whether those actions were justified, and thus whether the actions
constitute shareholder oppression or breach of the defendant’s fiduciary duty as directors and
controlling shareholders and whether the business-judgment rule protects the defendants
l0
Virtually every action taken by either Robinson or Langenbach is portrayed as appropriate and
justified by the one who took the action and as sinister and self-serving by the other side.
Resolution of Robinson’s challenges concerning shareholder oppression, breach of the
defendants’ fiduciary duty as directors and controlling shareholders, and application of the
business-judgment rule require the trial court to make credibility determinations and to choose
among competing inferences, which is not permitted at the sunimary-jtidgnient stage.
Summary judgment allows a trial court to enter judgment for the moving party where the
party demonstrates a right to judgment as a matter of law based on facts about which there is no
genuine dispute. ]TT Co)n:nercicr! Fin., 854 S.W.2d at 376. When considering an appeal from
suinmary judginent, we review the record in the light most favorable to the party against whom
the court entered judgment Id. "{T]lie rule that we give the non-movant the benefit of all
reasonable inferences means that if the movant requires an inference to establish the right to
judgment as a matter of law, and the evidence reasonably supports any inference other than, or in
addition to, the movant’s infe1'ence, a genuine dispute exists, and the movant’s prima facie
showing fails.” Ccrrdirzal Partners, 301 S.W.3d at 109. Therefore, we reverse and remand for
trial the issues of shareholder oppression, breach of the defendants’ fiduciary duty as directors
and controlling sliareliolders, and application of the business-judgment rule.
Corzclus'ion
We conclude that a majority of the directors had authority to reinove Robinson from her
position as company president and treasurer, despite the language of the voting trust. We affirm
the trial court’s judgment with regard to this question Furtherinore, because Robinson has
alleged no action Langenbach took that breaches his fiduciary duty to Robinson as a trustee of
il