Griffith v. Griffith


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Docket Number: 2006-CA-01849-COA

Court of Appeals: Opinion Link
Opinion Date: 12-02-2008
Opinion Author: KING, C.J.
Holding: Affirmed

Additional Case Information: Topic: Conversion - Breach of fiduciary duty - Damages - Lost profits - Standing - Punitive damages - Usurp a corporate opportunity - M.R.C.P. 15(a)
Judge(s) Concurring: Lee and Myers, P.JJ., Irving, Chandler, Barnes, Ishee, and Roberts, JJ.
Non Participating Judge(s): Carlton, J.
Concurs in Result Only: Griffis, J.
Procedural History: Bench Trial
Nature of the Case: CIVIL - TORTS-OTHER THAN PERSONAL INJURY & PROPERTY DAMAGE

Trial Court: Date of Trial Judgment: 07-21-2006
Appealed from: MARION COUNTY CHANCERY COURT
Judge: James H.C. Thomas, Jr.
Disposition: FOUND DEFENDANT MISAPPROPRIATED CORPORATE FUNDS AND AWARDED PLAINTIFF $27,245 IN COMPENSATORY DAMAGES, $50,000 IN PUNITIVE DAMAGES, AND $5,000 IN ATTORNEY’S FEES
Case Number: 2002-0161-GN-TH

  Party Name: Attorney Name:   Brief(s) Available:
Appellant: THOMAS C. GRIFFITH




RENEE M. PORTER



 
  • Appellant #1 Brief
  • Appellant #1 Reply Brief

  • Appellee: HARRY GRIFFITH T. JACKSON LYONS  

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    Topic: Conversion - Breach of fiduciary duty - Damages - Lost profits - Standing - Punitive damages - Usurp a corporate opportunity - M.R.C.P. 15(a)

    Summary of the Facts: The Ray Griffith Company, Inc. began in the 1950s when Ray Griffith purchased the rights to a patent to manufacture a pecan picker. In 1992, RGC was devised to Ray’s two sons, Tom and Harry Griffith. Tom was given direct ownership of three shares of the company, and Harry was given direct ownership of two shares of the company. Additionally, a trust was set up in each sons’ name with each trust holding eighty-seven and one-half shares. Tom operated RGC from 1983 to 1990. In 1990, the board of directors appointed Harry as president of RGC and authorized Harry to receive $1,000 per month in compensation. In addition, the board decided that all company checks must be signed by two people – Harry and Steve Gray, a certified public accountant and the treasurer of RGC. In 1992, Tom was appointed the vice-president of RGC and served in this capacity until 2002. Every year, Tom and Harry would split RGC’s dividends. However, in the late 1990s, Tom noticed that RGC’s dividends were decreasing. Tom asked Harry about the decline, and Harry explained that RGC’s overhead costs had increased. In January 2001, Tom discovered that Harry had been using RGC’s account for his personal expenses and expenses related to Harry’s other two businesses. Tom also discovered that the checks written on RGC’s account had not been signed by Gray as mandated by the board. Tom filed suit against Harry, alleging conversion and breach of fiduciary duty. Tom also requested an accounting regarding RGC’s funds and a temporary restraining order against Harry. Upon the chancellor’s order, an emergency shareholders’ meeting was held at which Harry was removed as president of RGC, and Tom was appointed as temporary receiver and authorized to take control of the management of the company. The chancellor also granted the temporary restraining order, which prohibited Harry from using RGC’s records and property. After Harry was removed as president of RGC, he began his own company named Pecans, Etc., which sold cheaper pecan pickers that were manufactured in China. Tom later amended his complaint to add the claim that Harry usurped a corporate opportunity. The chancellor found that Harry misappropriated corporate funds and breached his fiduciary duty to Tom. The chancellor awarded Tom $27,245, which represented one-half of the amount Harry charged to RGC’s account in personal expenses. The chancellor found that Harry’s operation of RGC was so wanton and aggravated as to warrant an award of punitive damages in the amount of $50,000 and an award of attorney’s fees in the amount of $5,000. Both Tom and Harry appeal.

    Summary of Opinion Analysis: Issue 1: Damages Tom argues that the chancellor failed to fully compensate him for Harry’s wrongdoings. Harry argues that the chancellor properly awarded Tom damages for misappropriated funds and that the chancellor erred by awarding Tom punitive damages. Although Harry claims that his cell phone bill, gas, health insurance, and car repairs were legitimate business expenses, Tom maintained that he neither knew of these charges nor did he agree to these expenses. As the sole trier of fact, the chancellor determines the credibility of the witnesses and what weight to give to the evidence. Obviously, the chancellor believed Tom’s testimony, and there is no reason to question the chancellor’s judgment based on the record. Since the evidence was unclear whether Harry diverted some of the funds in controversy, the chancellor’s award to Tom, representing Tom’s one-half interest of the personal expenses that Harry charged to RGC’s account, was proper. Tom also argues that he was entitled to an award for the lost profits that RGC sustained because of Harry’s competing pecan-picker business. However, Tom does not have standing to sue Harry based on this ground. Only RGC can recover damages for lost profits it sustained due to Harry’s competing business. Harry argues that the chancellor erred by awarding Tom $50,000 in punitive damages because Tom failed to prove that his conduct was malicious and because the chancellor did not have an evidentiary hearing on the matter. Harry admitted that he used RGC’s funds for his personal expenses and for the expenses of his other two businesses. Additionally, the court-appointed CPA and the chancellor found that RGC’s financial records were not properly maintained and were in poor condition. Therefore, the chancellor did not err by awarding Tom punitive damages based on Harry’s operation of RGC. Tom argues that the chancellor’s award of attorney’s fees was insufficient, because Harry was responsible for the lawsuit. However, this is not the standard. Tom had the burden of proving that the chancellor abused his discretion, and he failed to do so. Tom argues that the chancellor erred by not granting him a restraining order directing Harry to cease competition with RGC. Tom failed to specifically address this issue in his brief. A party’s failure to cite authority in support of an argument precludes consideration of the issue on appeal. Issue 2: Usurp a corporate opportunity Harry argues that the chancellor erred by finding that he usurped a corporate opportunity, because Tom did not seek leave of court to amend and because Tom rejected the opportunity which is a complete defense to the claim. M.R.C.P. 15(a) provides that a party may freely amend a pleading before a responsive pleading is served. Otherwise a party may amend a pleading only by leave of court or upon written consent of the adverse party; leave shall be freely given when justice so requires. There is no evidence that Tom sought leave of court to amend his complaint. However, if this is error, it is only harmless error because Harry did not suffer any prejudice based on the chancellor’s failure to rule. The record is clear that the chancellor did not award Tom any damages based on this claim.


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