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Kenton v. Wood

Supreme Court of Arizona

November 25, 1940

J. C. KENTON, Appellant,

APPEAL from a judgment of the Superior Court of the County of Maricopa. Levi S. Udall, Judge. Judgment affirmed.

Mr. W. L. Barnum and Mr. Norman S. Herring, for Appellant.

Messrs. Gust, Rosenfeld, Divelbess, Robinette & Coolidge, for Appellees.


Page 381

[56 Ariz. 327] LOCKWOOD, J.

This is an action by J. C. Kenton, hereinafter called plaintiff, as a minority stockholder of Wood's Pharmacy, Inc., hereinafter called the corporation, against C. M. Wood, hereinafter called defendant, Mrs. R. T. Franklin, Charles K. Vickery, Lucille Wood, and the corporation.

The amended complaint, upon which the case was tried, set up three causes of action. The first was dismissed without prejudice. The second cause of action alleged that plaintiff and defendant engaged in the drug business as partners, but that afterwards the business was incorporated and defendant induced plaintiff to transfer to one Virgil Brown some 200 shares of stock of the corporation, which made defendant the majority stockholder. Thereafter defendant acted as president and managing director of the corporation, and managed it as though it were his own private business, illegally applied large amounts of the corporation funds to his own private affairs, and drew excessive salaries for his services all the time. Plaintiff, therefore, as stockholder brought his second cause of action for an accounting by defendant for the funds of the corporation and his use thereof. The third cause of action set up

Page 382

the control of the corporation by defendant, excessive withdrawal of the assets by defendant for his own personal use, a conspiracy between defendant, his wife, Mrs. R. T. Franklin, and Charles K. Vickery to oust plaintiff from any participation in the corporate affairs and deprive him of a fair share of the profits and dividends by (a) the purchase by defendant of Mrs. Franklin's stock in the corporation, which was to be paid for out of its funds, (b) the ousting of plaintiff from his position as an [56 Ariz. 328] employee of the corporation, and (c) the illegal fixing of the salary of defendant in 1935. The prayer was for an accounting and audit, a receivership and that the Franklin stock should be declared to belong to the corporation and not to defendant individually.

After various preliminary matters were disposed of, the case came on for trial on the merits, before the court sitting without a jury. Oral testimony was taken for some four days and much documentary evidence introduced, after which the case was submitted. The court made findings of fact and rendered judgment thereon. This judgment covered the issues very fully, and was in most respects adverse to the various contentions of plaintiff, and he has brought the case before us for review.

There are a number of assignments of error by plaintiff, but we think that substantially they raise but one question for our decision, and that is whether there is sufficient evidence to support the findings and judgment. In considering questions of this nature we have repeatedly laid down the following rules. Evidence will be taken in the strongest manner in favor of the appellee and in support of the court's findings. DeMund Lbr. Co. v. Franke, 40 Ariz. 461, 14 P.2d 256. Where evidence is in conflict, this court is bound by the findings of the trial court. Blackford v. Neaves, 23 Ariz. 501, 205 P. 587. A judgment will not be disturbed when there is any reasonable evidence to support it. Wright v. Young, 20 Ariz. 46, 176 P. 583. The following facts are not in serious dispute.

Plaintiff is the father-in-law of defendant. In 1919 the two parties purchased a drug store in Glendale, Arizona, as a partnership venture. Defendant was a registered pharmacist and took active charge of the partnership from the beginning. Plaintiff had been a banker by profession up to about January, 1925, when he went to work in the office of the county treasurer [56 Ariz. 329] of Maricopa county, being employed there until December, 1928. In January, 1925, the partners decided that a corporation should be formed of the business, and this was done. At the first stockholders' meeting shares were issued as follows: Defendant, 620 shares; plaintiff, 430 shares; Virgil Brown, who was an employee of the business, 200 shares; and Virginia C. Wood, 10 shares, the latter being the daughter of defendant and granddaughter of plaintiff. Defendant, plaintiff and Brown were elected as the board of directors, while defendant was president, plaintiff vice-president, and Brown secretary-treasurer of the corporation. The by-laws provided that the president had the general powers of supervision and management of all the affairs of the corporation. In March, 1925, the corporation purchased a drug store in Peoria, Arizona; in February, 1926, it purchased another one in Wickenburg, Arizona, and in 1936 a second drug store in Wickenburg, so that at the date of the trial it was operating four drug stores. At some time after plaintiff left the employ of the county treasurer in 1928, he was employed by the corporation in its Glendale store, where he worked until December, 1934. Up to this time all of the stockholders and directors of the corporation were in accord and no personal differences arose in the corporate affairs. Regular annual meetings were held at which the same officers and directors were duly elected. In December, 1934, defendant discharged plaintiff, who was at that time employed in the Glendale store at the rate of $100 per month. At the annual election of directors and officers on February 14, 1935, defendant, his wife, and Charles K. Vickery were chosen as directors, plaintiff being dropped. The stockholders also chose defendant as president, his wife as vice-president, and Vickery as secretary-treasurer of the corporation. On March 12th the board of directors, by a single resolution, [56 Ariz. 330] fixed the salary of the president at $350 per month, and that of Vickery as secretary-treasurer at $160 per month. This was the first time during the operation of the corporation that any official action had been taken by the board fixing the salary of any officer or employee. From that time on defendant remained in entire control of the affairs of the corporation, plaintiff having no connection therewith except by the medium of various lawsuits which he brought.

Page 383

The charges which plaintiff made in the complaint were, in substance, as follows: In the second cause of action he alleged that defendant had diverted to his personal use a very large sum of money belonging to the corporation, and in the third cause of action that he had purchased certain stock of the corporation with the funds of the corporation, had discharged plaintiff from any employment ...

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