Missala Marine Services, Inc. v. Jenny Kay Odom

• Court: Mississippi Supreme Court
• Decided: September 19, 2000
• Docket: 2000-CA-01192-SCT
• Status: Published

Opinion

IN THE SUPREME COURT OF MISSISSIPPI

NO. 2000-CA-01192-SCT

MISSALA MARINE SERVICES, INC.

v.

JENNY KAY ODOM

DATE OF JUDGMENT: 9/19/2000 TRIAL JUDGE: HON. JAMES W. BACKSTROM COURT FROM WHICH APPEALED: JACKSON COUNTY CIRCUIT COURT ATTORNEY FOR APPELLANT: GARY L. ROBERTS ATTORNEYS FOR APPELLEE: KIMBERLY GOLDEN GORE W. LEE WATT NATURE OF THE CASE: CIVIL - OTHER DISPOSITION: AFFIRMED - 06/12/2003 MOTION FOR REHEARING FILED: MANDATE ISSUED:

BEFORE McRAE, P.J., EASLEY AND GRAVES, JJ.

GRAVES, JUSTICE, FOR THE COURT:

¶1. This civil action is an appeal by Missala Marine Services, Inc. (Missala) following a jury verdict

rendered in the Circuit Court of Jackson County, Mississippi. The judgment awarded Jenny Kay Odom

compensatory damages of $120,000 and punitive damages of an additional $120,000. An amended final

judgment added attorney’s fees and expert witness fees, increasing the total judgment in Odom’s favor

to $318,797.90. Aggrieved by those judgments, Missala appeals and raises the following issues:

I. WHETHER THE TRIAL COURT ERRED BY FAILING TO DISMISS THE CASE. II. WHETHER ODOM PROVED DAMAGES AS A RESULT OF MISSALA’S MISMANAGEMENT.

III. WHETHER THE TRIAL COURT ERRED IN ALLOWING INCONSISTENT CLAIMS TO BE SUBMITTED TO THE JURY.

IV. WHETHER THE TRIAL COURT ERRED BY PERMITTING THE JURY TO CONSIDER PUNITIVE DAMAGES.

V. WHETHER THE TRIAL COURT ERRED IN REFUSING TO DISMISS ODOM’S CLAIM FOR MISMANAGEMENT.

VI. WHETHER THE TRIAL COURT IMPROPERLY AWARDED ATTORNEY’S FEES AND EXPERT WITNESS FEES.

VII. WHETHER THE COURT ERRED BY GRANTING JURY INSTRUCTIONS 4, 5, 6, 7, 7A, 8, 8A AND REFUSING INSTRUCTIONS D-1, D 11-A AND D-13A.

FACTS

¶2. Missala Marine Services, Inc. is a closely held corporation, originally incorporated in 1982 by

brothers, Charles and Robert Graham. At the time of the corporation’s formation, Charles and Robert had

been involved together in many business enterprises, primarily in the marine or seafood industry, with

Charles generally having an 80% interest and Robert having a 20% interest. After incorporating Missala,

Charles decided to use the business for the benefit of their children. The original stock certificates were

issued to Charles and Robert’s children in an 80/20 split. Charles’s five children received an 80% interest

in Missala split equally, so each child owned a 16% interest in Missala. Likewise, Robert’s two daughters

each received a 10% interest in Missala. One of Robert’s daughters is Jenny Kay Odom. Charles’s son,

David Graham (“David”), served as President of Missala.

¶3. Thereafter, Missala purchased Offshore Anglers, Inc., becoming its parent company and sole

shareholder. In 1987, Offshore Anglers acquired a $250,000 loan from AmSouth Bank in Mobile,

2 Alabama, using two shrimping vessels, the Mr. Choper and the Miss Julie, as security. AmSouth

required and received personal guarantees on the loan fromall seven of Missala’s shareholders. In 1992,

a balloon payment on the loan became due, and Missala decided to refinance the loan. Suzie Mestayer

(“Suzie”), Charles’s daughter, secretary of Missala, and a 16% shareholder, approached Odom to have

her sign a personal guarantee for the refinancing. Suzie told Odom that the personal guarantee was for

$250,000, the amount of the original loan, although Missala was refinancing the loan for just over

$100,000. When Odom informed Suzie that she was uncomfortable with signing a personal guarantee,

Suzie told Odom that she had previously signed a personal guarantee for the original loan. Odom was

upset to learn what she had done because she felt as though she would have remembered signing a personal

guarantee for such a large sum of money.

¶4. Odom spoke to her father, Robert, and her sister, Julie Parr (“Julie”), about the refinancing, and

Robert agreed to accept transfer of Odom’s shares and sign the personal guarantee. Charles drafted a

proposed letter and faxed it to Odom. Odom typed that letter, signed it, and sent it to AmSouth. Odom’s

letter, as drafted by Charles, stated that she had transferred her shares to Robert. Robert also sent a letter,

stating that he had just accepted the transfer of Odom’s 10% interest and would sign the personal guarantee

for the refinancing. Robert contacted AmSouth again before the refinancing was complete. Robert then

learned that AmSouth sought only a personal guarantee for the amount of the loan. The bank did not

require shareholders to sign a personal guarantee. Since the letter to AmSouth had been unnecessary,

Odom maintained control of her 10% interest. Odom continued acting as a Missala shareholder, but she

never retracted the letter to AmSouth.

¶5. In 1994, Graham Enterprises began experiencing financial difficulties. On September 8, 1995,

Robert received notice of a meeting of Gulf City Seafoods’ shareholders and directors. The agenda stated

3 that the board of directors and shareholders of Gulf City Seafoods needed to ratify the transfer of Sea-Fab,

Inc. and Sea Savage Offshore, Inc., two of Graham’s wholly-owned subsidiaries, to Missala. Robert did

not attend the meetings. Charles, however, did attend the meeting, and the directors and shareholders of

these companies ratified their respective transfers. Missala, which had previously been a dormant holding

company, now owned $3 million in real estate, which it purchased for $1.4 million, and two more

companies, which it purchased for $600,000. Missala received all of these transfers at significantly less

than market value. Robert later received a copy of Graham’s minutes effecting the transfer of the real

estate and two subsidiaries dated September 1, 1994, thirteen months prior to Graham’s and Gulf City

Seafoods’ shareholders approved the transfers.

¶6. Robert resigned his employment at Gulf City Seafoods, effective November 15, 1995. Shortly

thereafter, David notified Odom, a 10% Missala shareholder, of a Missala shareholder meeting to be held

on October 9, 1995. Odom’s sister, Julie, also a 10% shareholder, was unable to attend, so she gave her

proxy to Robert. On October 9, 1995, as Robert was leaving his office to pick Odom up for the meeting,

Charles, who Missala admits had no interest in Missala as a shareholder, told him that “we,” meaning he

and his five children, had just determined who the Missala shareholders were. Charles stated that Robert

owned the shares in Missala and that Odom was not a Missala shareholder and would not be allowed to

attend the meeting.

¶7. Despite Charles’s comments, Robert brought Odom to the shareholders’ meeting. At which time,

David told Odom and Robert that Odom was not a shareholder and would not be allowed to attend the

meeting. David then asked Robert to sign a waiver of notice to allow the meeting to continue. Robert

refused so the shareholder meeting was cancelled.

4 ¶8. In the fall of 1995, Odom spoke with Lee Watt, her present counsel, about her 10% interest in

Missala and Missala’s refusal to allow her to attend its shareholder meetings. Watt attempted for six

months to persuade Missala to recognize Odom as a rightful owner of a 10% interest in the Missala.

Approximately six months thereafter, Odom filed this suit against Missala claiming that the corporation had

acted wrongfully to freeze her out of her 10% ownership interest.

¶9. Missala maintained that Odom was not a proper shareholder. During the course of litigation, the

trial court, on Odom’s motion to compel production of corporate records, ordered Odom and Robert to

sign affidavits regarding their ownership in the company. Odom and Robert complied with the court’s

directive, stating that Odom owned the shares. In response, David, Missala’s president and a 16%

shareholder, presented Odom with a stock certificate dated July 1997.

¶10. The case proceeded to trial, the jury rendered a verdict against Missala but for Charles Graham.

The jury awarded Odom $120,000 in compensatory damages and $120,000 in punitive damages. On

Odom’s post-trial motion, the trial court determined that the attorney’s fees were reasonable. The final

judgment awarded to Odom was $318,797.90. DISCUSSION

FAILURE TO DISMISS

¶11. Missala argues that the trial court erred by failing to dismiss the case due to Odom’s failure to state

a cause of action upon which relief could be granted. Since issues one and five are interrelated they will

be discussed simultaneously.

¶12. Miss. R. Civ. P. 12 (b)(6) stipulates that a motion to dismiss should not be granted unless it

appears beyond a reasonable doubt that the plaintiff will be unable to prove any set of facts in support of

the claim. In the instant case, Odom presented several claims against Missala for the trial court's

consideration: corporate freeze out, mismanagement, conspiracy, negligence, breach of fiduciary duty, and

5 fraud. The trial court having heard compelling arguments of counsel found that “the motion is not well

taken and should be denied.” The trial court determined that although many of the issues were aggressively

contested, there was some evidence above a scintilla that required consideration.

¶13. Missala asserts that the trial court erred in its refusal to dismiss Odom’s alleged claim of

mismanagement. Missala argues that there is no cognizable cause of action under Mississippi law for

mismanagement per se.

¶14. The granting of motions to dismiss is subject to the discretion of the trial court. Roebuck v. City

of Aberdeen, 671 So.2d 49, 50 (Miss. 1996). “The Supreme Court can reverse trial court’s grant of

motion to dismiss only when there has been an abuse of discretion.” Id.

¶15. In reviewing the record, we find there was compelling evidence presented by Odom. Additionally,

there was no abuse of discretion by the trial court. For these reasons, we find no reversible error.

FAILURE TO PROVE DAMAGES

¶16. Missala contends that Odom had an affirmative duty to provide support for her contention of

damages and failed. Missala argues that the trial court committed error by permitting the jury to consider

punitive damages. Since issues two and four are interrelated they will be discussed simultaneously.

¶17. In order for damages to be awarded, Odom was required to provide substantial proof to the jury

so it could have a reasonable basis to assess her loss. Purina Mills, Inc. v. Moak, 575 So.2d 993,

998 (Miss. 1990). The record reflects that Odom presented proof to the court through lay witness

testimony, expert witness testimony and documentation.

¶18. Odom’s expert witness, Jerry Levens, presented evidence on the current value of Missala’s stock

at the time of the trial. Levens testified that based on recent valuations of Missala, he conservatively valued

the worth of the corporation at $3.55 million. Therefore, Odom’s 10% interest in Missala was worth

6 $355,000. Levens based his testimony on documents in evidence. This testimony, along with the

documents in evidence, provided the jury with ample evidence of the amount of damages to which Odom

was entitled.

¶19. Moreover, Missala accepted Levens’s estimate that Missala had a net worth of $3.55 million.

Missala’s own expert witness, Ken Lefoldt, agreed that Levens had valued the company properly and

conservatively. Lefoldt simply testified that the value of Odom’s 10% share in Missala should be reduced

for two reasons: (1) Missala is a closely held corporation, so the stock was less marketable than publicly

traded stock and (2) Odom’s 10% interest was a minority interest, so the lack of control associated with

that 10% diminished the stock’s value. Lefoldt concluded that the 10% interest was not worth $355,000,

but rather $120,000. Nonetheless, Missala recognized Odom’s interest, which warranted damages

although the actual amount of damages was still at issue. Based upon the expert testimony of Levens and

Lefoldt and the documents in evidence, the jury had sufficient proof provided as to the value of a 10%

interest in Missala.

¶20. Due to Missala’s mismanagement, Odom’s 10% interest in Missala lost some of its value. Levens,

in his valuation of the stock for purposes of determining the value of Odom’s 10% interest for assessing

damages on her freeze out claim, also included the valuation of the I’m Alone, an asset that Missala sold

in December 1998 for $450,000. Levens valued the I’m Alone at $650,000; however, his valuation

included only the value of the I’m Alone as a vessel and not the value of the income gained from use of

the I’m Alone as a charter boat. Although Missala alleged that the sale was a solid business decision,

Lefoldt, Missala’s expert witness, agreed that the $200,000 allocated for the sale of the I’m Alone should

be included in the valuation. Therefore, Missala’s own expert resolved that the I’m Alone was sold for

significantly less than its actual value.

7 ¶21. Additionally, Odom provided evidence that Missala had mismanaged assets by assigning Charles

and Robert a right of first refusal on a valuable piece of property at no cost. This evidence was ample to

create an issue of fact for the jury on Odom’s claim of mismanagement. The trial court properly submitted

the mismanagement claim to the jury. The jury’s verdict was within the bounds of its discretion and was

not so excessive as to evince bias, passion, or prejudice. This Court has stated that it will not overturn a

jury’s verdict unless no reasonable juror could find damages in the amount that the jury awarded. Wal-

Mart Stores, Inc. v. Johnson, 807 So.2d 382, 389 (Miss. 2001). Based upon the evidence presented

by expert testimony as to Missala’s valuation, the jury’s verdict of $120,000 compensatory damages was

reasonable. In proving evidence of mismanagement, Odom had also proven damages. We find no

manifest error by the trial court.

¶22. The evidence presented and the claims that Odom asserted against Missala are appropriate claims

for which punitive damages may be sought. Corporate freeze out is an intentional tort that is committed

with willful and wanton disregard for the right of the shareholder who is frozen out. Odom asserted in her

complaint and presented evidence at trial that Missala committed gross negligence by breaching its fiduciary

duty to her as a minority shareholder and not permitting her to participate as a shareholder. Both are claims

for which punitive damages can be awarded in Mississippi. Because Odom presented evidence sufficient

to create issues of fact for the jury on these claims, the judge was well within his discretion to allow the jury

to consider an award of punitive damages. MIC Life Ins. Co. v. Hicks, 825 So.2d 616, 617 (Miss.

2002). For these reasons, we find no error.

REQUEST FOR SPECIAL VERDICT FORM

8 ¶23. Missala asserts that it was error for the trial court to allow multiple inconsistent claims to be

submitted to the jury on a general verdict. Missala argues a special verdict or a general verdict

accompanied by answers to interrogatories is more appropriate.

¶24. According to the Miss. R. Civ. P. 49(b), “the court may require a jury to return only a special

verdict in the form of a special written finding upon each issue of fact. . . the court , in its discretion, may

submit to the jury, together with instructions for a general verdict, written interrogatories upon one or more

issues of fact the decision of which is necessary to a verdict.” Previously, this Court has held that the

decision to instruct the jury by means of a special verdict or a general verdict with interrogatories is within

the discretion of the trial court and will be overturned only on a showing that the lower court abused its

discretion. W.J. Runyon & Son, Inc. v. Davis, 605 So.2d 38, 49 (Miss. 1992), overruled on other

grounds, Richardson v. APAC-Miss., Inc., 631 So.2d 143 (Miss. 1994).

¶25. The record contains no request by Missala of either a special verdict or a general verdict with

interrogatories. At the hearing on Missala’s motion for a new trial, the trial court addressed this issue,

stating that “if either side had requested special interrogatories, I would have certainly considered that. But

neither side requested any special interrogatories on the issue of damages as to the particular claims, and,

therefore, the jury was instructed as requested by the parties.” Failure to object to an instruction at trial bars

that issue on appeal. Jones v. State, 776 So.2d 643, 653 (Miss. 2000). We find no error because the

trial court acted within its discretion and Missala failed to object at trial.

AWARD OF ATTORNEY’S FEES AND COSTS

¶26. Missala argues that the trial court erred in granting an award of attorney’s fees and expert witness

fees. Missala argues that it has a constitutional right to a jury trial on any disputed fact question, including

9 Odom’s claim for attorney’s fees and costs. Missala further contends that the trial court erred in awarding

attorney’s fees by means of a post-trial motion.

¶27. It is proper for the trial court to hold a hearing after the trial of the case to hear evidence on the

issue of attorney’s fees. Smith v. Dorsey, 599 So.2d 529, 550 (Miss. 1992). At the hearing, the trial

court determined that the amount of attorney’s fees requested was reasonable but took the decision

whether to award those fees under advisement. Ultimately, the trial court found that an award of attorney’s

fees was appropriate because it determined that punitive damages were appropriate and because the jury

awarded Odom punitive damages.

¶28. This Court has held that the trial court is the appropriate entity to award attorney’s fees and costs.

Turner v. Terry, 799 So.2d 25, 39 (Miss. 2001). A trial court’s decision on attorney’s fees is subject

to the abuse of discretion standard of review. Id. at 39. Missala has presented no evidence that either the

decision to award attorney’s fees and expenses or the measure of that award were an abuse of the trial

court’s discretion.

¶29. Missala’s contention that the trial court erred in awarding attorney’s fees in a post-trial motion is

meritless. The record reflects that the motion was appropriate because the complaint and amended

complaint specifically prayed for attorney’s fees and costs.

¶30. For these reasons, we find no error and uphold the award of attorney’s fees and costs.

JURY INSTRUCTIONS

¶31. Missala asserts that the trial court erred by granting instructions 4, 5, 6, 7, 7A, 8 and 8A and

refusing instructions D-1, D-11A and D-13A.

¶32. Missala contends jury instructions 4, 5, 6, 7, 7A, 8 and 8A should not have been submitted to the

jury for consideration. The record reflects that Missala did not object to any of the referenced instructions.

10 Therefore, Missala has failed to preserve this issue for appeal. Lucas v. Miss. Housing Auth. No. 8,

441 So.2d 101, 105 (Miss. 1983). Moreover, “[i]t is the rule of this Court that no assignment of error

based on the giving of an instruction to the jury will be considered on appeal unless a specific objection was

made to the instruction in the trial court stating the particular ground or grounds for such objection.”

Watson v. State, 483 So.2d 1326, 1329 (Miss. 1986).

¶33. Missala asserts that proposed jury instructions D-1, D-11A and D-13A should have been granted.

The standard of review for challenges to jury instructions is as follows:

[T]he instructions are to be read together as a whole, with no one instruction to be read alone or taken out of context. A defendant is entitled to have jury instructions given which present his theory of the case. However, the trial judge may also properly refuse the instructions if he finds them to incorrectly state the law or to repeat a theory fairly covered in another instruction or to be without proper foundation in the evidence of the case.

Humphrey v. State, 759 So.2d 368, 380 (Miss. 2000).

¶34. Missala complains of the trial court’s refusal of D-1, which reads as follows:

The court instructs the Jury to find for the Defendant, Missala Marine Services, Inc.

We find that this instruction contains no statement of the law and is a peremptory instruction. Consequently,

this assignment of error is without merit.

¶35. Missala next complains of refused instructions D-11A and D-13A.

¶36. Refused instruction D-11A states:

If you find for the Plaintiff in this case, you are not authorized to find for the plaintiff for any amount beyond reasonable compensation for the damages sustained by the Plaintiff, if any. You are not authorized to award any damages in the nature of a penalty or attorney’s fees, nor are you bound by any estimates of damages made by the attorneys representing the parties in this suit. You are not authorized to award damages based upon the alleged value of the shares of stock of the Defendant, Missala Marine Services Corporation. If you find for the Plaintiff, you must therefore confine your verdict to reasonable compensation for the damages actually sustained, if any, by the Plaintiff as a result of the conduct of the Defendant or Defendants.

11 ¶37. Refused instruction D-13A states:

If you are to determine that the Plaintiff has successfully proved the elements of her claims and that she is entitled to recovery in this case, you are limited to compensating the Plaintiff through an award of monetary damages in this court. By choosing to bring her claims in this court, Plaintiff has requested that she be compensated through the award of money and not through any equitable relief which you may deem appropriate.

In other words, you are not to consider whether or not the company should be dissolved or liquidated or Plaintiff should transfer or sell her stock or be given certain rights in the company. A plaintiff’s offer to transfer her shares cannot be ordered. The only award in favor of the Plaintiff which you or his court can give is money damages.

¶38. We find that the trial judge refused these instructions because he believed that the jury would be

fairly instructed by all of the instructions as a whole. The trial judge gave instructions 8 and 8A, which were

comprehensive damages instructions. Consequently, we find this assignment of error is without merit.

CONCLUSION

¶39. For the reasons indicated above, we affirm the judgment below.

¶40. AFFIRMED.

McRAE, P.J., DIAZ, EASLEY AND CARLSON, JJ., CONCUR. SMITH, P.J., CONCURS IN PART AND DISSENTS IN PART WITH SEPARATE WRITTEN OPINION JOINED BY PITTMAN, C.J, WALLER AND COBB, JJ.

SMITH, PRESIDING JUSTICE, CONCURRING IN PART AND DISSENTING IN PART:

¶41. I concur in the affirmance of the award of compensatory damages only. However, I respectfully

dissent from the affirmance of the awards of punitive damages and attorney’s fees and expert witness fees.

The majority states that a claim of corporate freeze out can support a punitive damages claim. Perhaps this

is so when the directors of a corporation act in an egregious manner. Punitive damages are available in

cases of gross negligence, willful misconduct, fraud, malicious conduct, or reckless disregard for the rights

12 of others. Hurst v. Southwest Miss. Legal Servs. Corp., 708 So. 2d 1347, 1350 (Miss. 1998);

Richardson v. Byrd, 215 So. 2d 424, 425 (Miss. 1968). However, punitive damages are only to be

allowed in extreme cases. Beta Beta Chapter of Beta Theta Pi Fraternity v. May, 611 So. 2d

889, 894 (Miss. 1992).

¶42. In the case at bar, there was a genuine issue as to who was the proper owner of the stock in

Missala Marine Services, Inc. (“Missala”). David Graham (“David”) had knowledge of letters to AmSouth

Bank, signed by Jenny Kay Odom (“Odom”), indicating the stock in question had been transferred from

Odom to her father. Given the uncertainty surrounding the owner of the stock, it was not gross negligence

to refuse to allow Odom to participate as a shareholder. Similarly, Missala cannot, as the majority asserts,

be grossly negligent in breaching a fiduciary duty to a shareholder when there is a real question as to whom

that duty is owed.

¶43. Good faith is a defense to a punitive damages claim. Walker v. Brown, 501 So. 2d 358, 363

(Miss. 1989). Here, there is evidence that David acted in good faith to protect the interests of the

corporation when he did not allow an individual he did not feel was a shareholder to participate in

corporate activities. David’s understandable (though ultimately incorrect) refusal to allow Odom’s

participation should not support a claim for punitive damages. Punitive damages are not appropriate when

the wrong results from an honest mistake. The mere fact that the case at bar involves a claim of corporate

freeze out does not automatically mean that punitive damages can be awarded. There must be egregious

behavior by the wrongdoer to support punitive damages. David’s actions do not rise to this level.

¶44. Missala’s allegation that it is entitled to a jury trial regarding the award of attorney’s fees and expert

witness fees is without merit. However, since Missala’s behavior did not merit an award of punitive

damages, I agree that the attorney’s fees and the expert witness fees granted by the trial court to Odom

13 are not appropriate. Thus, I respectfully concur in part and dissent in part and would reverse and render

both the punitive damages and award of attorney’s fees and expert witness fees.

PITTMAN, C.J., WALLER AND COBB, JJ., JOIN THIS OPINION.