CHARLES K. MONIN, JR., Individually and as President of MONIN, INC. v. PAUL B. MONIN; JOSEPH E. MONIN; RAPHAEL MONIN; WILLIAM MONIN; JAMES A. MONIN; LINDA ROBY; MARTHA WHEELER; and CAROLYN BACKHERMS CHARLES K. MONIN, JR.; MONIN, INC.; and DONALD MONIN v. PAUL B. MONIN; JOSEPH E. MONIN; RAPHAEL MONIN; WILLIAM MONIN; JAMES A. MONIN; LINDA ROBY; MARTHA WHEELER; and CAROLYN BACKHERMS
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January 22, 1999; 2:00 p.m.
NOT TO BE PUBLISHED
MODIFIED: January 29, 1999; 10:00 a.m.
C ommonwealth O f K entucky
C ourt O f A ppeals
NO. 1997-CA-001376-MR
CHARLES K. MONIN, JR.,
Individually and as
President of MONIN, INC.
APPELLANT
APPEAL FROM NELSON CIRCUIT COURT
HONORABLE LARRY RAIKES, JUDGE
CIVIL ACTION NO. 94-CI-00056
v.
PAUL B. MONIN; JOSEPH E. MONIN;
RAPHAEL MONIN; WILLIAM MONIN;
JAMES A. MONIN; LINDA ROBY; MARTHA
WHEELER; and CAROLYN BACKHERMS
and
APPELLEES
NO. 1997-CA-002871-MR
CHARLES K. MONIN, JR.;
MONIN, INC.; and
DONALD MONIN
APPELLANTS
APPEAL FROM NELSON CIRCUIT COURT
HONORABLE LARRY RAIKES, JUDGE
CIVIL ACTION NO. 94-CI-00056
v.
PAUL B. MONIN; JOSEPH E. MONIN;
RAPHAEL MONIN; WILLIAM MONIN;
JAMES A. MONIN; LINDA ROBY; MARTHA
WHEELER; and CAROLYN BACKHERMS
APPELLEES
OPINION
AFFIRMING
** ** ** ** ** ** **
BEFORE: GUDGEL, CHIEF JUDGE; HUDDLESTON and SCHRODER, Judges.
HUDDLESTON, Judge.
Monin,
Jr.,
In appeal No. 1997-CA-001376-MR, Charles K.
individually
and
as
President
of
Monin,
Inc.
(collectively, "Charles"), appeals from a portion of a Nelson
Circuit Court judgment based on a directed verdict granted Paul B.
Monin, Joseph E. Monin, Raphael Monin, William Monin, James A.
Monin, Linda Roby, Martha Wheeler and Carolyn Backherms (collectively,
“the
Monins”),
dismissing
Charles'
complaint
seeking
damages for abuse of process.
In appeal No. 1997-CA-002871-MR, Charles and Donald Monin
(collectively, "Charles") appeal from a Nelson Circuit Court order
directing that Monin, Inc. be dissolved and appointing a receiver
to wrap up the corporation's affairs.
Litigation over the ownership and operation of Monin,
Inc., whose primary asset is a valuable farm in Nelson County,
commenced in 1983.
Its shareholders at that time were Charles
Monin, Sr. and his wife, Thelma Monin, and Charles Monin, Jr. and
his wife, Rosalie Monin, each of whom owned twenty-five percent of
the corporation's capital stock.
Thelma Monin, the mother of the
siblings involved in these appeals, filed suit to examine the
corporate records of Monin, Inc. and rescind the sale of 20 shares
of her stock in Monin, Inc. to Charles.
Before these claims were
resolved, Thelma Monin died in 1984, and her husband inherited her
entire estate.
Upon Charles, Sr.'s death in 1987, his children
were to share equally in their father's estate, which included
fifty percent of the capital stock of Monin, Inc.
Other litigation ensued between the children concerning
the distribution and final settlement of Charles, Sr.'s
estate.
On February 3, 1991, the parties to these appeals entered into a
Settlement Agreement, the purpose of which was to resolve all
pending litigation and settle the rights and obligations of the
parties in relation
to Monin, Inc.
2
Under the terms of the
Agreement, Charles was required to transfer stock in Monin, Inc.,
incorporate a new company, and finally settle Charles, Sr.'s
estate.
When his siblings attempted to effectuate the Agreement,
Charles balked.
He claimed that he had been fraudulently induced
to enter into the Agreement after he discovered that a federal
estate tax return for Charles, Sr.'s estate had not been filed and
that he might be liable for the payment of death taxes.
When the parties could not resolve this issue, the Monins
filed suit to force Charles to abide by the Agreement.
1991,
an
order
administration
of
empowering
Charles,
Joseph
Sr.’s
E.
estate
Monin
On May 31,
to
complete
without
Charles'
participation was entered. Charles continued to refuse to abide by
the Agreement and to cooperate in the settlement of Charles, Sr.'s
estate.
Specifically, Charles refused to permit a survey to be
made of the Monin, Inc. farm and refused to transfer the stock of
Monin, Inc. and create a new company.
The Monins filed several
motions seeking to compel Charles' compliance with the terms of the
Agreement.
In response to a motion filed on December 6, 1991, the
circuit court ordered all parties to comply with and do all things
necessary to carry out the terms of the Agreement.
The court said
that any party not doing so would be held in contempt upon motion
by any other party.
Charles still refused performance under the Agreement.
On February 24, 1992, the Monins sent a letter to Charles requesting that he transfer to the heirs the Monin, Inc. stock held in
Charles, Sr.'s estate.
Upon Charles' refusal to do so, the Monins
moved the court, on March 18, 1992, to hold Charles and Donald in
3
contempt for failing to carry out the terms of the Agreement.
On
March 25, 1992, the court ordered all parties to attend a hearing
"for the purpose of determining whether they should be held in
contempt of Court for failure to carry out the judgment heretofore
ordered done."
When Charles failed to attend the hearing, the
court found Charles in contempt and ordered him incarcerated for
thirty days or until he complied with its judgment.
After Charles
filed several unsuccessful appeals,1 he served thirty days in jail.
In February 1994, Charles filed suit in Nelson Circuit
Court asserting claims for fraud and misrepresentation, abuse of
process, and maladministration by Joseph E. Monin and Paul B. Monin
of the estates of Charles K. Monin, Sr. and Thelma Monin.
The
court granted the Monins' motions for directed verdict only in
regard to the abuse of process claim.
At trial, the jury decided
in favor of the Monins on the fraud and misrepresentation claims.
The estate-related claims have not yet been heard by the trial
court.
Charles argues on appeal that the circuit court erred in
directing a verdict on the abuse of process claim.
He contends
that the December 6, 1991, Order of Compliance sought by the Monins
was unnecessary given the written order of May 31, 1991, empowering
1
Charles appealed to this Court after the trial court denied
his motion for R. Civ. Proc. (CR) 59 relief and his subsequent
motion for CR 60.02 relief. This Court dismissed the appeal of the
contempt order because Charles had failed to timely serve his CR 59
motion and because the denial of the CR 60.02 motion was within the
discretion of the trial court. The United States Supreme Court
rejected Charles' petition for a writ of certiorari.
4
Joseph E. Monin to settle Charles, Sr.’s estate.
However, as has
been noted, Charles continued to interfere with the execution of
the Agreement by failing to transfer stock in Monin, Inc. and
create a new corporation as a spin-off of Monin, Inc.2
The Monins
again sought judicial intervention to compel Charles' cooperation
in these matters.
Charles also contends that the Monins filed the
March 18, 1992, contempt motion with the ulterior purpose of
wrongfully compelling Charles to abide by the Agreement, knowing
his objections concerning the tax issues.
First, we observe that Charles willingly entered into the
Agreement and is bound by its terms.
Furthermore, the court
empowered Joseph E. Monin to settle Charles, Sr.'s estate, thus
relieving Charles of his alleged tax liability exposure by not
requiring his signature on the tax returns.3
The tort of abuse of process involves "the irregular or
wrongful employment of a judicial proceeding." Bonnie Braes Farms,
Inc. v. Robinson, Ky. App., 598 S.W.2d 765, 766 (1980) (citations
omitted).
The essential elements of the tort include an ulterior
purpose and a wilful act in the use of the process not proper in
the regular conduct of a proceeding.
Id. (citing W. Prosser,
Handbook of the Law of Torts, § 121 (4th ed. 197[1]).
There is no
2
Charles' refusal to allow a survey of the farm resulted in
the circuit court issuing an order on July 25, 1991, directing
Charles to not interfere with the surveyors and stating that any
violation of the order would be punishable as contempt of court.
3
We were told at oral argument that the tax issues have been
resolved.
5
liability where the defendants have done nothing more than carry
out the process to its authorized conclusion, even though with bad
intentions. Simpson v. Laytart, Ky., 962 S.W.2d 392 (1998) (citing
Prosser, supra. The Monins filed both motions only to compel their
uncooperative sibling, Charles, to abide by the terms of the
Agreement and to comply with the court's order ordering him to do
so.
The court itself, in its sua sponte order of December 23,
1991, stated that any party failing to execute the Agreement would
be held in contempt upon motion by any aggrieved party.
The Monins
were only pursuing the legal remedies available to them to enforce
the Agreement and were simply carrying out that process to its
authorized conclusion.
A circuit court considering a motion for a directed
verdict must "consider the evidence in its strongest light in favor
of the party against whom the motion was made and give him the
advantage of every fair and reasonable intendment that the evidence
can justify.
On appeal the appellate court considers the evidence
in the same light."
Lovins v. Napier, Ky., 814 S.W.2d 921, 922
(1991) (citations omitted).
Applying this standard, we conclude
that the circuit court appropriately directed a verdict for the
Monins on the abuse of process claim.
The evidence clearly
establishes that the Monins did not abuse the judicial process in
employing legally sanctioned processes to compel Charles' compliance with the Agreement and the court's orders.
6
In his second appeal, Charles argues that circuit court
should not have ordered Monin, Inc. dissolved.
In response to the
suit Charles instituted in February 1994, the Monins filed a
counterclaim
and
third-party
complaint
on
November
12,
1996,
requesting that Monin, Inc. be dissolved and that a receiver or
custodian be appointed.
On January 17 and 24, 1997, the court
conducted a bench trial on this issue, and it rendered its decision
on August 15, 1997, ordering the dissolution of Monin, Inc. and
providing for the appointment of a receiver.
Where a trial court acts as fact finder, its findings
will not be reversed on appeal unless clearly erroneous.
Ky. R.
Civ. Proc. (CR) 52.01; Faulkner Drilling Company, Inc. v. Gross,
Ky. App., 943 S.W.2d 634, 638 (1997).
Findings of fact which are
supported by substantial evidence are not clearly erroneous. Black
Motor Company v. Greene, Ky., 385 S.W.2d, 954, 956 (1964).
Here,
the trial court's findings are supported by substantial evidence
and, thus, are not clearly erroneous.
The Monins sought judicial dissolution pursuant to Ky.
Rev. Stat. (KRS) 271B.14-300 (2) (b) and 271B.8-410.4
The former
statute provides, in pertinent part, that:
The circuit court may dissolve a corporation:
(2) In a proceeding by a shareholder if it is established
that:
4
Both statutes became effective January 1, 1989.
7
(b) The directors or those in control of the corporation
have acted, are acting, or will act in a manner that is
illegal or fraudulent . . . .
KRS 271B.8-410 provides that "[e]ach officer shall have
the authority and shall perform the duties set forth in the bylaws
. . . ."
The circuit court found that Charles, as director and
president of Monin, Inc., had violated KRS 271B.8-140 and 271B.14300 in that:
(1) he executed a lease on June 1, 1989, of Monin,
Inc. property to Monin Trucking, a concern of which he is 50%
owner, in contravention of Article IV, Section 5 of the Bylaws; (2)
he renewed the above referenced lease on June 1, 1995; (3) in 1995,
he settled an insurance claim on a burned barn owned by Monin, Inc.
without corporate authority; (4) he exercised an option on behalf
of Monin, Inc. in 1991 to purchase one-half acre of land, without
approval of the corporation’s shareholders or directors; (5) he
granted an easement in 1984 to the City of Bardstown for a water
line
across
corporate
realty
without
the
approval
of
the
corporation’s shareholders or directors; (6) for several years
Charles arranged for the growing of crops on the corporation’s farm
without authorization from the corporation's directors; (7) on more
than one occasion, Charles and/or his wife obtained personal loans
from the corporation, contrary to Article V, Section 1 of the
Bylaws; (8) he has acted as treasurer of the corporation since his
wife died, contrary to the division of powers required by the
8
Bylaws; (9) he authorized his daughter to sign checks and perform
other
acts
on
behalf
of
Monin,
Inc.
without
approval
of
shareholders or directors; and (10) he paid personal attorneys’
fees and court costs from corporate funds.
The court concluded that Charles had the duty under KRS
271B.8-410 to act in accordance with the Bylaws, and he had the
duty under KRS 271B.8-420(c) and KRS 271B.8-300(c) to act in the
best interest of the corporation.
He engaged in both illegal acts
and unauthorized acts that were not in the best interest of the
corporation. Thus, the court concluded, dissolution of Monin, Inc.
is mandated by KRS 271B.14-300(2)(b).
Charles does not deny that he committed the acts detailed
above, only that they are not illegal, as defined in Reid Drug Co.
v. Sayler, Ky., 105 S.W.2d 625 (1937), because there has been no
showing of dishonesty on his part. However, the Reid Drug standard
is no longer controlling since KRS 271B.14-300 does not require a
showing of dishonesty, only illegality and because most of the
illegal and unauthorized acts attributed to Charles occurred after
the enactment of the present business corporation act.
Charles also contends that since the Agreement prohibited
the
dissolution
dissolved.
of
Monin,
Inc.,
the
court
may
not
order
it
Such an argument is disingenuous, considering the
lengths to which Charles went to obstruct performance of the
Agreement.
9
Charles
insists
that
the
circuit
court
abused
its
discretion in appointing Roger Leggett as receiver, an individual
who Charles alleges has a conflict of interest.
Leggett had
functioned as a Commissioner in valuing the corporation’s farm
during a condemnation proceeding.
In that proceeding, as in this
one, Leggett acted for the circuit court rather than for any party.
Cerwin v. Taub, Ky. App., 552 S.W.2d 675, 678 (1977).
He has no
conflict of interest that disqualifies him from acting as receiver
for Monin, Inc.
Charles final argument is that KRS 271B.14-050 prohibits
the disposal of property other than in kind to a corporation's
shareholders according to their interests.
Charles misreads the
applicable statute, KRS 271B14-050(b), which permits a corporation,
upon dissolution, to dispose of its properties that will not be
distributed in kind to its shareholders. Moreover, KRS 271B.14-320
(3)(a)(1) authorizes a receiver to "dispose of all or any part of
the assets of the corporation wherever located, at a public or
private sale . . . ."
The judgment in appeal No. 1997-CA-001376-MR is affirmed
as is the final order in appeal No. 1997-CA-002871-MR.
ALL CONCUR.
BRIEF AND ORAL ARGUMENT
FOR APPELLANTS:
BRIEF AND ORAL ARGUMENT
FOR APPELLEES:
Marshall V. Gaither
Pewee Valley, Kentucky
John S. Kelley, Jr.
Bardstown, Kentucky
10
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