Hajmm Co. v. House of Raeford Farms, Inc.

379 S.E.2d 868, 94 N.C. App. 1, 1989 N.C. App. LEXIS 450
CourtCourt of Appeals of North Carolina
DecidedJune 6, 1989
Docket8816SC574
StatusPublished
Cited by22 cases

This text of 379 S.E.2d 868 (Hajmm Co. v. House of Raeford Farms, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hajmm Co. v. House of Raeford Farms, Inc., 379 S.E.2d 868, 94 N.C. App. 1, 1989 N.C. App. LEXIS 450 (N.C. Ct. App. 1989).

Opinions

COZORT, Judge.

Plaintiff sued defendants House of Raeford Farms, Inc. (Raeford), and E. Marvin Johnson for their refusal to retire a revolving fund certificate issued to plaintiff by Raeford in exchange for stock plaintiff sold to Raeford. Plaintiff asserted claims of relief alleging that defendants: (1) violated Raeford’s by-laws by refusing to retire plaintiff’s certificate after retiring other certificates in the same series as plaintiffs; (2) breached a fiduciary duty owed plaintiff; and (3) committed an unfair or deceptive trade practice. The trial court granted defendants’ motion to dismiss the unfair or deceptive trade practice claim for failure to state a claim upon which relief can be granted. The other issues went to the jury, which found for plaintiff. The judge awarded plaintiff $387,500 in actual damages, and the jury awarded plaintiff $100,000 in punitive damages. Plaintiff and defendants appeal. The primary issues submitted on appeal by defendants are: (1) whether defendants’ motions for directed verdict and judgment notwithstanding the verdict were properly denied and the issues properly submitted to the jury; (2) whether there was sufficient evidence to create a jury issue on partial redemption; (3) whether defendants owed plaintiff a fiduciary duty; (4) whether plaintiff’s expert testimony on breach of fiduciary duty [5]*5was properly admitted; and (5) whether there was sufficient evidence to submit to the jury on the issue of punitive damages. The plaintiff contends that the trial court erred in granting defendants’ motion to dismiss plaintiff’s unfair or deceptive trade practice claim. In defendants’ appeal, we find no error. In plaintiff’s appeal, we find the trial court erred in dismissing the unfair or deceptive trade practice claim, and we remand for a new trial on that issue.

The HAJMM Company, plaintiff herein, is a limited partnership engaged in the business of agricultural marketing. Defendant Raeford is an agricultural cooperative engaged in processing turkeys and other poultry. Defendant Johnson is President and Chairman of the Board of Raeford. Raeford was formed in 1975 when plaintiff and two other turkey producers, Stone Brothers and Nash Johnsons and Sons, Inc. (NJS), sold their stock in Raeford Turkey Farms, Inc. (RTF), to defendant Raeford. Plaintiff held a 25°/o share, Stone Bros, held a 25% share, and NJS held a 50% share in RTF. For its stock plaintiff was issued a “Class B — Series 1975 Revolving Fund Certificate” in the amount of $387,500. Raeford issued a Class B —Series 1975 certificate to Stone Bros, in the amount of $387,500 for its 25% share of RTF and issued a Class B —Series 1975 certificate to NJS in the amount of $750,000 in exchange for its 50% share in RTF. In the same year, Raeford also issued Class A — Series 1975 certificates to other turkey producers at the same time the three Class B certificates were issued.

In 1978 Raeford redeemed and cancelled the Class A —Series 1975 certificates. The same year, Raeford retired the Class B — Series 1975 certificate originally issued to Stone Bros., who negotiated its certificate to FCX, Inc. In its 1984 financial statement Raeford discounted to zero value the Stone Bros./FCX certificate and the certificate to NJS. Raeford subtracted the value of the Stone Bros./FCX and NJS Class B — Series 1975 certificates from the total amount owed on other certificates, thereby reducing stockholder’s equity. Plaintiff’s Class B —Series 1975 certificate was not redeemed at that time and continues to be shown as part of stockholder’s equity in Raeford’s financial statements. On or about 4 February 1986 plaintiff made a formal demand to defendants to redeem plaintiff’s certificate for $387,500. Citing provisions in Raeford’s by-laws giving them the sole discretion to decide whether to retire plaintiff’s certificate, defendants refused plaintiff’s request. Plaintiff filed suit in March of 1986.

[6]*6The trial court submitted seven issues to the jury, which were answered as follows:

1. Did the defendant, House of Raeford Farms, Inc., breach its bylaws by refusing to retire the revolving fund certificate of the plaintiff, HAJMM, in the reasonable exercise of its discretion?
Yes.
2. Did the defendant, House of Raeford Farms, Inc., breach its bylaws by retiring any of the revolving fund certificates in the same annual series as that of the plaintiff, HAJMM, and refusing to retire that of the plaintiff, HAJMM?
Yes.
3. Do the defendants, E. Marvin Johnson and Raeford Farms, Inc., owe a fiduciary duty to the plaintiff, HAJMM?
Yes.
4. If so, was their refusal to retire HAJMM’s revolving fund certificate an open, fair and honest transaction?
No.
5. In what month and year did the breach or violation occur?
March, 1986.
6. In your discretion, what amount of punitive damages, if any, should be awarded to the plaintiff, HAJMM from the defendant E. Marvin Johnson.
None.
7. In your discretion what amount of punitive damages, if any, should be awarded to the plaintiff, HAJMM from the defendant, House of Raeford Farms, Inc.?
$100,000.

The trial court determined that plaintiff should recover the full amount of the certificate, $387,500, from both defendants. The court entered judgment for $387,500 actual damages against both defendants and $100,000 punitive damages against Raeford. Defendants and plaintiff entered timely notices of appeal. We consider defendants’ appeal first.

[7]*7We initially consider defendants’ argument that the trial court erred in denying defendants’ motion for directed verdict and defendants’ motion for judgment notwithstanding the verdict. Defendants’ motion for directed verdict should be granted only if the trial judge concludes that no reasonable juror could find for plaintiff. West v. Slick, 313 N.C. 33, 40, 326 S.E. 2d 601, 606 (1985). In considering the defendants’ motion all conflicts in the evidence must be resolved in favor of plaintiff and the evidence must be viewed in a light most favorable to plaintiff. Id. The standard of review is the same for a motion for judgment notwithstanding the verdict. Bryant v. Nationwide Mut. Fire Ins. Co., 313 N.C. 362, 369, 329 S.E. 2d 333, 337 (1985).

Defendants contend that plaintiff offered insufficient evidence to prove that Raeford breached its by-laws by retiring certificates in the same series as plaintiff’s while refusing to retire plaintiffs certificate. In the alternative, defendants argue that even if the certificates were of the same series, the trial court should have submitted to the jury an issue on whether Raeford retired other certificates for full or partial value. We reject both arguments.

Plaintiff’s evidence tended to show that defendant Raeford issued identical “Class B —Series 1975” Revolving Fund Certificates to plaintiff and to Stone Brothers when it was formed in 1975. Both certificates were in the amount of $387,500. The remaining 50% of RTF was owned by NJS. Defendant Johnson owned 80% of NJS and served as its president. Defendant Johnson is also Chief Executive Officer of defendant Raeford, a post he has held since 1978. NJS is one of defendant’s largest turkey suppliers.

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Hajmm Co. v. House of Raeford Farms, Inc.
379 S.E.2d 868 (Court of Appeals of North Carolina, 1989)

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Bluebook (online)
379 S.E.2d 868, 94 N.C. App. 1, 1989 N.C. App. LEXIS 450, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hajmm-co-v-house-of-raeford-farms-inc-ncctapp-1989.