Long v. Lampton

Charles L. LONG et al. v. Leslie B. LAMPTON
and Ergon, Inc. 

95-774                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered May 28, 1996


1.   New trial -- review of denial of motion for new trial --
     substantial evidence discussed. -- On appeal, the court's
     standard for reviewing the denial of a motion for new trial is
     whether there is any substantial evidence to support the jury
     verdict; in determining the existence of substantial evidence,
     the evidence is viewed in the light most favorable to the
     appellee; evidence favorable to the appellee is given the
     benefit of all reasonable inferences permissible under the
     proof; substantial evidence compels a conclusion one way or
     the other and is more than mere speculation or conjecture. 

2.   New trial -- trial court has discretion in setting aside jury
     verdict -- when verdict should be disturbed. -- While a trial
     court has some discretion in setting aside a jury verdict,
     there is no longer the broad discretion that the supreme court
     formerly recognized; the trial court is not to substitute its
     view of the evidence for that of the jury's unless the jury
     verdict is found to be clearly against the preponderance of
     the evidence; it is only where there is no reasonable
     probability that the incident occurred according to the
     version of the prevailing party or where fair-minded men can
     only draw a contrary conclusion that a jury verdict should be
     disturbed. 

3.   Corporations -- liability for breach of fiduciary duty --
     conduct of directors subject to rigorous scrutiny. -- A person
     standing in a fiduciary relationship with another is subject
     to liability to the other for harm resulting from a breach of
     the duty imposed by the relationship; in the search for
     inherent fairness and good faith to a corporation and
     shareholders, the conduct of directors must be subjected to
     "rigorous scrutiny" when conflicting self-interest is shown;
     the duty of good faith requires "honesty in fact in the
     conduct or transaction concerned." 

4.   Corporations -- no breach of fiduciary duty found -- trial
     court did not err in denying motion for new trial. --   
     The weight and value to be given to the testimony of witnesses
     is in the exclusive province of the jury; here, fair-minded
     persons could conclude that appellee breached no fiduciary
     duty in that loyalty and good faith did not compel him to
     assume, first, that he knew more about the appellants' banking
     relationships than they did, and second, that the appellants,
     who were represented by an attorney in their dealings with the
     bank, needed him to take over negotiations with the bank to
     obtain more favorable terms for their letter of credit; as
     there was substantial evidence to support the verdict, the
     trial court did not err in denying the motion for new trial.

5.   Jury -- duty owed always question of law -- judge has duty to
     instruct jury on law of case with clarity, leaving no grounds
     for mistake. -- The issue of what duty is owed, if any, is
     always a question of law; it is the duty of the judge to
     instruct the jury and each party to the proceeding has the
     right to have the jury instructed upon the law of the case
     with clarity and in such a manner as to leave no grounds for
     misrepresentation or mistake.

6.   Jury -- erroneous instruction -- presumed prejudice may be
     rendered harmless by other factors. -- An erroneous
     instruction which is likely to mislead the jury is
     prejudicial; although the court will presume prejudice from
     the giving of an erroneous instruction, the error may be
     rendered harmless by other factors in the case.

7.   Jury -- instructions to jury not reviewed in isolation --
     instructions should be considered as a whole. -- Jury
     instructions should not be reviewed in isolation, but rather
     considered as a whole in determining whether the applicable
     law has been given to the jury. 
 
8.   Jury -- instruction given was erroneous -- testimony and other
     instructions rendered error harmless. -- Even though an
     erroneous instruction was given, the testimony of appellee and
     the statements of his counsel, along with the instruction that
     advised the jury of the fiduciary duty owed by directors,
     officers, and shareholders of a corporation, rendered it
     harmless.

9.   Corporations -- business-judgment rule -- two elements
     necessary to invoke rule. -- Two elements must be satisfied in
     order for the business-judgment rule to be invoked; first, its
     protection can only be claimed by disinterested directors
     whose conduct otherwise meets the tests of business judgment;
     second, to invoke the rule, directors have a duty to inform
     themselves of all material information reasonably available to
     them prior to making a business decision; having become so
     informed, they must then act with requisite care in discharge
     of their duties.

10.  Corporations -- meaning of "disinterested director" -- when
     director may be disqualified. -- "Disinterested directors"
     does not mean indifferent directors, or directors with no
     stake in the outcome; if that were so, shareholders could
     never be directors or officers; disinterested directors are
     those who neither appear on both sides of the transaction nor
     expect to derive any person financial benefit from it in the
     sense of self-dealing, as opposed to a benefit that devolves
     upon the corporation or all stockholders generally; the
     decisions of disinterested directors will not be disturbed if
     they can be attributed to any rational business purpose; self-
     interest, alone, is not a disqualifying factor even for a
     director; to disqualify a director, for rule-rebuttal
     purposes, there must be evidence of disloyalty.

11.  Corporations -- reliance of business-judgment rule proper --
     no error found. -- Where any benefit from the recapitalization
     plan flowed not only to appellees, but to all other
     shareholders as well, the trial court instructed the jury that
     appellees were not entitled to rely on the business-judgment
     rule unless there appeared to be a predominant corporate
     purpose for their actions, and several reasons for the
     recapitalization plan were given, it was clear that each
     shareholder, not just appellee, was able to benefit from this
     plan; consequently, the trial court did not err in allowing
     reliance on the business-judgment rule.


     Appeal from Union Circuit Court, Second Division; David F.
Guthrie, Judge; affirmed.
     Shackleford, Shackleford & Phillips, P.A., by:  Dennis L.
Shackleford and Jerry Watkins, for appellants.
     Wright, Lindsey & Jennings, by:  Gordon S. Rather, Jr., for
appellees.

     Andree Layton Roaf, Justice.May 28, 1996.   *ADVREP*SC9*








CHARLES L. LONG ET AL.,
                    APPELLANTS,

V.

LESLIE B. LAMPTON AND ERGON,
INC.
                    APPELLEES,






95-774


APPEAL FROM THE UNION COUNTY
CIRCUIT COURT, SECOND DIVISION
NO. CIV-94-3-3,
HON. DAVID F. GUTHRIE, JUDGE,




AFFIRMED.


                       Andree Layton Roaf


     This appeal arises from a minority shareholders' action for
breach of fiduciary duty.  Appellants Charles Long and other
members of the Long family, minority shareholders of Lion Oil
Company ("Lion"), filed an action against appellees Ergon, Inc.
("Ergon"), the largest shareholder of Lion, and Leslie B. Lampton,
president of both Ergon and Lion, alleging breach of fiduciary duty
in the implementation of a corporate recapitalization plan.  The
Longs appeal a jury verdict in favor of Lampton and Ergon.  They
assert that the trial court 1) erred in denying a motion for new
trial on the ground that the verdict was clearly against the
preponderance of the evidence; 2) erroneously instructed the jury
that they had the burden of proving Lampton and Ergon owed them a
duty as a fiduciary; and 3) erroneously instructed the jury that
Lampton and Ergon could rely on the business-judgment rule.  In
their cross-appeal, Lampton and Ergon raise five points to be
addressed only if we reverse on direct appeal.  We find no error
and affirm.
     Charles L. Long and Leslie B. Lampton, as president of Ergon,
were among five investors who came together in 1985 to purchase a
refinery, pipeline, and other related assets located in El Dorado,
Arkansas.  Long is one of four brothers involved in various
business ventures in Union and Miller Counties, including Long
Brothers Oil Company.  Ergon is a family owned corporation headed
by Lampton and based in Jackson, Mississippi.  The new corporation
became known as Lion Oil Company.  It was determined that $24
million was needed to acquire the refinery and sustain its
operation.  The longtime attorney of Charles Long also served as
counsel for Lion and drafted the Pre-Incorporation Agreement. 
Under this agreement, each investor was to obtain a letter of
credit from a financial institution, in the amount of $2 for each
$1 par value subscribed in stock.  Of the 8 million shares of stock
originally issued, Charles Long invested $1.5 million in cash with
a letter of credit from First Commercial Bank ("First Commercial")
in the amount of $3 million; he later transferred some of his stock
to other members of his family.  Ergon invested $4.5 million and
provided a $9 million letter of credit.  Several other investors
were later brought into the corporation;  Ergon ultimately owned
43.3% of the stock and the Longs owned 18.6%.
     Ergon contracted to manage Lion in exchange for a fee of 20%
of the net profits.  This management was overseen by Lion's seven-
member board of directors, which met monthly and received
information concerning all aspects of the refining operation,
including financing needs.  Long served as chairman of the board
from Lion's inception until April 1989.  His attorney also served
on the board, although he held no stock in the company.  
     Because Lion's business of refining oil required periodic
purchases of crude oil in tanker-size lots, Lion needed to have
access to substantial amounts of credit from a commercial lender. 
Lion originally operated under a $60 million line of credit from
General Electric Capital Corporation ("GECC") secured by Lion's
inventory, its receivables, and a pledge of the shareholders letter
of credit.  During the initial four years of operation, the
directors periodically discussed eliminating the shareholders
letters of credit but decided not to do so because of the need for
the additional credit they provided to Lion.
     The events which gave rise to this lawsuit and appeal took
place primarily between February and September 1989.  As the May 1,
1989, expiration date of the financing arrangement with GECC
approached, the board directed Lion's chief financial officer to
locate a more advantageous line of credit.  The board subsequently
selected First National Bank of Boston ("Bank of Boston") to
replace GECC because its credit line was less expensive and more
generous in the valuation it placed on Lion's inventory and
receivables.  Lion's directors, including Long, voted unanimously
on February 28, 1989, to make the change form GECC to Bank of
Boston effective May 1, 1989.
     Although the Bank of Boston did not require Lion to provide
shareholders' letters of credit, it did agree to provide additional
credit per dollar of each shareholder letter of credit offered by
Lion, therefore making available to Lion an additional $16 million
in credit.  The Bank of Boston would not accept transfer of the
GECC letters of credit, but required the issuance of new letters in
its favor or amendments which named it as beneficiary.
     The Longs' initial $3 million letter of credit with First
Commercial had been issued on July 1, 1985.  Although the
preincorporation agreement did not set a time limit for the
shareholders' letters of credit, the banking institutions which
agreed to issue them were told that they would be needed for only
three to five years, or until Lion had established sufficient
credit on its own.  Each shareholders' letter of credit provided
that it could be called in the event the lending institution failed
on or before April 1 of any year to extend or renew it for an
additional year.  Therefore, if First Commercial failed to renew
the Longs' letter of credit by April 1, this would be considered a
default which would allow GECC to demand payment on the letter of
credit.  If the Longs' letter of credit was called by GECC, First
Commercial would in turn demand $3 million from the Longs who could
then look to Lion for repayment.  
     The Longs' letter of credit was renewed for 1988-89 and was
"irrevocable and transferable."  However, because of certain
financial reversals suffered by the Longs, First Commercial advised
them in February 1989, that it would not renew their letter of
credit for 1989-90.  At the March 1989 board meeting, Charles Long
told the other board members, including Lampton, of the bank's
intention not to renew his letter of credit.
     GECC attempted to call the Longs' letter of credit and
demanded payment from First Commercial on April 13, 1989.  Upon
learning of GECC's call on the letter of credit, Long and his
attorney sent correspondence to First Commercial and GECC
threatening litigation unless the demand for payment was withdrawn. 
Lampton learned in a telephone conversation with an officer of
First Commercial on April 13, 1989, that First Commercial would
agree to extend the letter of credit for one more year, however, he
was advised that the letter would be issued as non-transferable. 
GECC withdrew its demand for payment after the letter of credit was
renewed.
     At the annual shareholders meeting on April 27, 1989, Lampton
was elected chairman of the board to replace Charles Long, who had
been chairman since 1985.  Two of Lampton's sons and the son of
another substantial shareholder were elected to replace three other
board members.
     Lampton testified that after learning of the Longs' plight at
the March Board of Directors meeting, several shareholders
complained that it would be unfair for the Longs to maintain the
same amount of stock while withdrawing two-thirds of the capital
they had agreed to provide because they would or could not renew
their letter of credit.  According to Lampton, he was requested by
other shareholders to find a way to address this inequity.  At the
April 27, 1989 board meeting, Lampton provided a draft
recapitalization plan prepared by Lion's attorneys in Mississippi
who had been working on the company's transaction with the Bank of
Boston.  
     The recapitalization plan was approved at a September 1989
shareholders' meeting and granted each shareholder the right to
acquire at $.10 per share, one additional share of stock for each
dollar in letters of credit placed with the Bank of Boston.
According to Lampton, this plan was designed to encourage
shareholders to put up new letters of credit by acquiring more
stock which could be pledged as collateral.  The plan further
provided for the number of shares to be increased from 10 million
to 30 million followed by a reverse stock split to reduce the
number of shares.  Because they were unable to put up letters of
credit and thereby purchase additional shares of stock, the Longs'
1.5 million shares were reduced to 675,000 and their $1.5 million
investment reduced to $675,000.  It is this loss in their
investment which gave rise to the Longs' action against Lampton and
Ergon.
                    1.  Motion for new trial
     The Longs first argue that the trial court erred in denying
their motion for new trial because the verdict was clearly against
the preponderance of the evidence regarding Lampton's breach of his
fiduciary duty.  Lampton, and consequently Ergon, breached their
fiduciary duty, according to the Longs, when Lampton failed to
either timely advise the Longs that First Commercial would not
issue a transferable letter of credit which would have allowed them
the opportunity to request a call of the letter of credit, or to
act within his authority to require First Commercial to issue a
transferable letter of credit.
     On appeal, this court's standard for reviewing the denial of
a motion for new trial is whether there is any substantial evidence
to support the jury verdict. Ray v. Green, 310 Ark. 571, 839 S.W.2d 515 (1992).  In determining the existence of substantial evidence,
we must view the evidence in the light most favorable to the
appellee. Egg City of Arkansas, Inc. v. Rushing, 304 Ark. 562, 803 S.W.2d 920 (1991).  Evidence favorable to the appellee is given the
benefit of all reasonable inferences permissible under the proof.
Scott v. McClain, 296 Ark. 527, 758 S.W.2d 409 (1988).  Substantial
evidence compels a conclusion one way or the other and is more than
mere speculation or conjecture. Ray, supra.
     While a trial court has some discretion in setting aside a
jury verdict, there is no longer the broad discretion that this
court formerly recognized. Ray, supra.  The trial court is not to
substitute its view of the evidence for that of the jury's unless
the jury verdict is found to be clearly against the preponderance
of the evidence.  It is only where there is no reasonable
probability that the incident occurred according to the version of
the prevailing party or where fair-minded men can only draw a
contrary conclusion that a jury verdict should be disturbed.
Blissett v. Frisby, 249 Ark. 235, 458 S.W.2d 735 (1970).
     The standard of conduct for directors of a corporation is set
out in Ark. Code Ann.  4-27-830 (Repl. 1996), which provides in
pertinent part:
    A.  A director shall discharge his duties as a
    director, including his duties as a member of a
    committee:

              1. In good faith;

              2. With the care an ordinarily prudent person in a
              like position would exercise under similar
              circumstances; and

              3. In a manner he reasonably believes to be in the
              best interest of the corporation.

A person standing in a fiduciary relationship with another is
subject to liability to the other for harm resulting from a breach
of the duty imposed by the relationship. Cherepski v. Walker, 323
Ark. 43, 913 S.W.2d 761 (1996).  Restatement (Second) of Torts 
874 (1979).  In the search for inherent fairness and good faith to
a corporation and shareholders, conduct of directors must be
subjected to "rigorous scrutiny" when conflicting self-interest is
shown. Hall v. Staha, 314 Ark. 71, 858 S.W.2d 672 (1993).  The duty
of good faith requires "honesty in fact in the conduct or
transaction concerned." Ark. Code Ann.  4-1-201 (Supp. 1995).  
     The Longs contend that it is significant that First
Commercial's Executive Vice President, Ed Henry, told Lampton on
April 13, 1989, that the bank would not renew the Long Brothers
letter of credit on a transferable basis.  They assert that had
Lampton brought this to their attention, they could have used the
threat of a GECC call to force First Commercial to issue a
transferable letter of credit.  However, GECC did effectively call
Longs' letter of credit with First Commercial.  This, of course,
would have created a $3 million debt that the Longs would have to
repay to First Commercial.  The Longs' attorney testified that they
asked GECC to not call the letter of credit and threatened
litigation against GECC and First Commercial Bank if they continued
with this course of action.  First Commercial consequently agreed
to extend the letter of credit for an additional year, however it
was not transferrable and thus terminated upon the expiration of
the GECC financing on May 1, 1989.  The Longs make much of the fact
that an April 14 letter sent by Henry to Lampton confirming their
conversation of April 13, and copied to Charles Long and his
attorney was not postmarked until May 8, and was not received by
them until May 10, after the non-transferable letter of credit had
been issued by First Commercial.  However, the bank sent this
letter, not Lampton, and there was no evidence that Lampton was
involved in causing the letter to be delayed.  Moreover, although
the attorney for the Longs reviewed the Longs' letter upon its
renewal, he testified that he did not notice that it was non-
transferable.  
     The Longs argue in the alternative that Lampton should have
used his leverage with GECC to force First Commercial to issue a
transferable letter of credit.  Lampton testified that First
Commercial was the Longs' lender -- not his or Lion's, and that he
felt that it was not his responsibility to tell Long or Long's
attorney that he knew that First Commercial was not going to issue
a transferable letter of credit.
     The Longs also argue that Lampton breached his fiduciary duty
because he knew that the Longs were not able to transfer their
letter of credit prior to finalizing the arrangement with the Bank
of Boston which involved shareholder letters of credit.  Even
though the Bank of Boston did not originally require shareholder
letters of credit, Lion's board concluded that letters of credit
were necessary to obtain additional financing and to enable Lion to
purchase foreign oil.  The Longs' attorney testified that had he
thought about it, he would have concluded that because of their
financial reversals, the Longs would not be able to extend their
letter of credit with First Commercial.  Lampton, on the other
hand, testified that he had no idea of the Longs' banking
connections, and that he assumed that the Longs would be able to
obtain a letter of credit from another lending institution. 
However, because the Longs had experienced financial difficulties
since their initial letter of credit was issued by First Commercial
in 1985, they were not able to obtain a letter of credit from other
lenders.  Lampton denied that he devised the recapitalization plan
to take advantage of the Longs' financial difficulties, and
testified that it was the Longs' threat to sue GECC and First
Commercial which caused the Bank of Boston to refuse to accept
transfer of the shareholders letters of credit.  
     The weight and value to be given to the testimony of witnesses
in such matters is in the exclusive province of the jury. Ray,
supra.  Here, fair-minded persons could conclude that Lampton
breached no fiduciary duty in that loyalty and good faith did not
compel Lampton to assume, first, that he knew more about the Longs'
banking relationships than they did and second, that the Longs, who
were represented by an attorney in their dealings with First
Commercial, needed him to take over negotiations with the bank to
obtain more favorable terms for their letter of credit.  As there
is substantial evidence to support the verdict, we cannot say that
the trial court erred in denying the motion for new trial.
                     2.  Duty of a Fiduciary
     The Longs next assert that the trial court erred by
incorrectly instructing the jury that they had the burden of
proving that Lampton owed them a duty as a fiduciary.  The trial
court instructed the jury that the Longs had the burden of proof as
to each of the following four essential propositions:
     First:    That they have sustained damages.

     Second:   That Leslie B. Lampton, Sr., owed plaintiffs
     duties as a fiduciary.

     Third:    That Leslie B. Lampton, Sr., breached his
     fiduciary duties to the plaintiffs.

     Fourth:   That such breach of fiduciary duties was a
     proximate cause of plaintiffs' damages.
We agree that it was error to instruct the jury that the Longs had
the burden of proving that Lampton owed them a duty as a fiduciary.
     This court has repeatedly stated the issue of what duty is
owed, if any, is always a question of law. First Commercial Trust
Co. v. Lorcin Eng'g., 321 Ark. 210, 900 S.W.2d 202 (1995). 
Further, it is the duty of the judge to instruct the jury and each
party to the proceeding has the right to have the jury instructed
upon the law of the case with clarity and in such a manner as to
leave no grounds for misrepresentation or mistake. Dorton v.
Francisco, 309 Ark. 472, 833 S.W.2d 362 (1992).
     An erroneous instruction which is likely to mislead the jury
is prejudicial. Bailey v. Rose Care Center, 307 Ark. 14, 817 S.W.2d 412 (1991).  However, we have also held that although we will
presume prejudice from the giving of an erroneous instruction, the
error may be rendered harmless by other factors in the case. Davis
v. Davis, 313 Ark. 549, 856 S.W.2d 284 (1993); Skinner v. R.J.
Griffin & Co., 313 Ark. 430, 855 S.W.2d 913 (1993).
     During the trial, Lampton testified that "I recognize that I
had a duty as a shareholder and a director to Mr. Long is another
shareholder.  I recognize that I have a duty to treat all of the
shareholders fairly and equally in this situation."  Lampton also
testified that "[a]ll parties have a fiduciary duty, including a
duty of fairness and loyalty and not taking advantage of the
other."
     Lampton's counsel also admitted the existence of such a duty
in his closing argument:
          We do not deny that Mr. Lampton had a duty. 
          He had a duty to the other shareholders, to
          the other directors, to his corporation as a
          company, including all of its employees. . . .
          So, we do not deny that element.  We will
          concede, and do not dispute that a duty
          existed.

Finally, the following instruction was given immediately after the 
charge which erroneously advised that the Longs had the burden of
proving that Lampton owed them a duty:
          Directors, officers and shareholders of a
          corporation owe fiduciary duties of care, good
          faith and loyalty to each other.

     In St. Louis Southwestern Railway Co. v. Grider, 321 Ark. 84,
900 S.W.2d 530 (1995), this court stated that jury instructions
should not be reviewed in isolation, but rather considered as a
whole in determining whether the applicable law has been given to
the jury. 
     In the present case, the testimony of Lampton and the
statements of his counsel, along with the instruction which advised
the jury of the fiduciary duty owed by directors, officers, and
shareholders of a corporation rendered harmless the erroneous
instruction.
                   3.  Business-judgment rule
     For their third point, the Longs contend that the trial court
erred by instructing the jury that Lampton and Ergon may rely on
the business-judgment rule.  The trial court gave the following
instruction over the objection of the Longs:
     The Business Judgment Rule is a presumption  that in
     making a business decision, the directors or officers of
     a corporation acted on an informed basis in good faith
     and in an honest belief that the action was in the best
     interest of the corporation.  Here defendants may rely on
     the protection of the Business Judgment Rule if they
     establish by a preponderance of the evidence that there
     was a predominating corporate purpose for their actions
     and that they acted in good faith.
     This court has stated that two elements must be satisfied in
order for the business-judgment rule to be invoked.  First, its
protection can only be claimed by disinterested directors whose
conduct otherwise meets the tests of business judgment.  Second, to
invoke the rule, directors have a duty to inform themselves of all
material information reasonably available to them prior to making
a business decision.  Having become so informed, they must then act
with requisite care in discharge of their duties. Hall v. Staha,
303 Ark. 673, 800 S.W.2d 396 (1990).  
     The Longs argue that Lampton and Ergon were not entitled to
this instruction because they were not disinterested.  This
contention was also raised in Smith v. Leonard, 317 Ark. 182, 876 S.W.2d 266 (1994).  However, in Smith, we affirmed the chancellor's
determination that there was a predominating corporate purpose for
the transaction, even though Leonard also received a benefit.
     We further agree with the Court of Appeals of Ohio that
"disinterested directors" does not mean indifferent directors, or
directors with no stake in the outcome. Koos v. Cent. Ohio Cellular
Inc., 641 N.E.2d 265 (Ohio App. 8 Dist 1994).  If that were so,
shareholders could never be directors or officers. Id. 
Disinterested directors are those who "neither appear on both sides
of the transaction nor expect to derive any person financial
benefit from it in the sense of self-dealing, as opposed to a
benefit which devolves upon the corporation or all stockholders
generally." Id.  The decisions of disinterested directors will not
be disturbed, according to Koos, if they can be attributed to any
rational business purpose. Id.  Self-interest, alone, is not a
disqualifying factor even for a director. Cede & Co. v.
Technicolor, Inc. 634 A.2d 345 (Del. 1993).  To disqualify a
director, for rule rebuttal purposes, there must be evidence of
disloyalty. Id.
     Under the recapitalization plan, the Longs and all other Lion
shareholders had the right to purchase additional shares of Lion
stock on the basis of letters of credit provided for the benefit of
the Bank of Boston.  By giving all shareholders the right to
purchase additional shares at $.10 per share, the plan provided a
means of obtaining additional collateral for a letter of credit. 
Lampton testified that even if a shareholder could not obtain a
letter of credit, stock purchase rights could be sold to recoup
some of the investment.  Clearly, any benefit from the
recapitalization plan flowed not only to Lampton and Ergon, but to
all other shareholders as well.
     Moreover, the trial court instructed that Lampton and Ergon
were not entitled to rely on the business-judgment rule unless
there appeared to be a predominate corporate purpose for their
actions.  Lampton testified to several reasons for the
recapitalization plan.  Other shareholders were unwilling to allow
the Longs to maintain their percentage of interest in Lion if they
did not put up a letter of credit, and threatened to also not renew
their letters of credit.  The letters of credit were deemed
necessary by the board because they allowed Lion to obtain a larger
line of credit with the Bank of Boston.  Individual shareholders
were able, through the plan, to increase their amount of collateral
in the company, and thereby increase the amount of stock owned by
each shareholder.  Each shareholder, not just Ergon, was able to
benefit from this plan.  Consequently, we cannot say that the trial
court erred in allowing reliance on the business-judgment rule.
                        4.  Cross-appeal
     On cross-appeal, Lampton and Ergon raise five points to be
addressed only if the judgment is reversed on direct appeal.  Since
we affirm on direct appeal, we do not consider the issues raised in
the conditional cross-appeal.
     Affirmed on direct appeal; cross-appeal moot.
     Jesson, C.J., and Glaze, J., dissent.
     Dudley, J., not participating.
*ADVREP*SC9-A*






CHARLES L. LONG, ET AL.,
                    APPELLANTS,

V.

LESLIE B. LAMPTON AND ERGON,
INC.,
                    APPELLEES.



95-774

Opinion Delivered:  5-28-96








DISSENTING OPINION




                  TOM GLAZE, Associate Justice

     Trial attorneys and members of the bench should take
particular note of this decision, because it represents this
court's change in case law involving the giving and prejudicial
effect of (1) erroneous conflicting jury instructions and (2)
inherently erroneous instructions.  As this court ruled in Alpha
Zeta Chapter of Pi Kappa Alpha Fraternity v. Sullivan, 293 Ark.
576, 740 S.W.2d 127 (1987), it is settled law that it is
prejudicial error for the court to give instructions which are
directly conflicting and calculated to mislead the jury.  See also
Chicago Mill & Lumber Co. v. Johnson, 104 Ark. 67, 147 S.W. 86
(1912); McCurry v. Hawkins, 83 Ark. 102, 103 S.W. 600 (1907); St.
Louis, I.M.& S. R. Co. v. Beecher, 65 Ark. 64, 44 S.W. 715 (1898). 
It is also well settled that an inherently erroneous instruction
cannot be cured by a correct instruction.  MoPac Railroad Co. v.
Boley, 251 Ark. 964, 477 S.W.2d 468 (1972); Clark v. Duncan, 214
Ark. 83, 214 S.W.2d 493 (1948); Reynolds v. Ashabranner, 212 Ark.
718, 207 S.W.2d 304 (1948); Mo. Valley Bridge & Iron Co. v. Malone,
153 Ark. 454, 240 S.W. 719 (1922).  Believe it or not, the majority
court has decided in this case today that inherently erroneous and
directly conflicting instructions are no longer presumed
prejudicial error.
     This case centers on a dispute between the majority
shareholders, Leslie Lampton, Sr. and Ergon, Inc., and the minority
shareholders, the Longs, and whether the majority and its
management representatives breached their fiduciary duties owed the
Longs.  While the question as to whether Lampton and the other
majority shareholders owed the Longs a duty as a fiduciary is a
matter of law, the trial court erroneously submitted this question
as a factual issue in instruction no. 9 as follows:
          Plaintiffs claim damages from Ergon, Inc. and
     Leslie B. Lampton, Sr., and have the burden of proving
     each of four essential propositions:
          First:  That they have sustained damages.
          Second:  That Leslie B. Lampton, Sr., owed
     plaintiffs duties as a fiduciary.
          Third:  That Leslie B. Lampton, Sr., breached his
     fiduciary duties to the plaintiffs.
          Fourth:  That such breach of fiduciary duties was a
     proximate cause of plaintiffs damages.
          If you find from the evidence in this case that each
     of the propositions has been proved, then your verdict
     should be for the plaintiffs and against the defendants
     Leslie B. Lampton, Sr., and Ergon, Inc.   But, on the
     other hand, you find from the evidence that any of these
     propositions has not been proved then your verdict should
     be for Ergon, Inc., and Leslie B. Lampton, Sr.  (Emphasis
     added.)
As can be seen by the foregoing language (and as pointed out by the
Longs), the jury is told that, if it finds each of the four
essential conditions to exist (including Lampton owed the Longs
duties as a fiduciary), the jury should return a verdict for the
Longs.  But if the jury finds that any one of the four propositions
has not been proved, the jury's verdict should be for Lampton and
Ergon.  In other words, the instruction in effect "binds" the jury
to return a verdict based only on such instruction.  See
Reynolds v. Ashabranner, 212 Ark. 718, 207 S.W.2d 304 (1948).
     Lampton and Ergon concede the second paragraph in instruction
no. 9 is incorrect, but contend that mistake was cured in two ways: 
(1) In their closing argument, they said, "We do not deny that Mr.
Lampton had a duty.", and (2) instruction no. 10 cured any defect
in no. 9 by informing the jury, "Directors, officers and
shareholders of a corporation owe fiduciary duties of care, good
faith and loyalty to each other."
     Lampton's and Ergon's two contentions are without merit for
several reasons.  One, the jury rendered a general verdict in
Lampton's behalf, and under the erroneous second paragraph and
binding effect of instruction no. 9, the jury may well have reached
its verdict by finding Lampton, Sr. owed no fiduciary duty to the
Longs.  Two, while Lampton and Ergon argue instruction no. 10 cured
the error in no. 9, I would first point out that no. 10 gave only
a general statement of law, and it never stated that, as a matter
of law, Lampton and Ergo owed any fiduciary duties to the Longs. 
Concerning Lampton's and Ergon's contention that they cured the
erroneous portion of instruction no. 9 by not denying they owed the
Longs fiduciary duties, I note that they offer no citation of
authority supporting such an argument and I am aware of none. 
Four, it is also difficult to understand any logic in Lampton's and
Ergon's (now this court's) argument that the error in instruction
no. 9 was cured by no. 10.  Assuming instruction no. 10 was
intended to relate to the jury that Lampton owed fiduciary duties
to the Longs, it still directly conflicts with the directions given
in no. 9.
     In sum, instruction no. 9 contained an obvious mistake which
is conceded by all parties.  Assuming, as we must, the jury
followed the direction in that erroneous instruction, the jury
could well have decided in Lampton's favor because it found Lampton
and Ergon owed the Longs no fiduciary duties.  No other instruction
could cure such an error.
     Finally, I need to mention the majority opinion's unfortunate
citations to cases such as Bailey v. Rose Care Center, 307 Ark. 14,
817 S.W.2d 412 (1991); Davis v. Davis, 313 Ark. 549, 856 S.W.2d 284
(1993); and Skinner v. R. J. Griffin & Co., 313 Ark. 430, 855 S.W.2d 913 (1993), in support of the court's assertion that the
error committed here could be harmless.  Those cases have nothing
to do with a binding or an inherently erroneous instruction as we
have before us here.  Again, inherently erroneous instructions
cannot be cured, and Arkansas law has so held for a century.  It is
disappointing this court fails to recognize the simple distinction
when reviewing civil instructions. 
     For the above reasons, I would reverse and remand this cause. 
     JESSON, C.J., joins this dissent.