Pat Hames and Ben Robinson v. Marybeth Cravens

Pat HAMES and Ben Robinson v. 
Marybeth CRAVENS

97-687                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered April 9, 1998


1.   Motions -- motion to dismiss -- standard of review. -- In reviewing a
     trial court's decision on a motion to dismiss, the appellate
     court treats the facts alleged in the complaint as true and
     views them in the light most favorable to the plaintiff; a
     trial judge must look only to the allegations in the complaint
     to decide a motion to dismiss.

2.   Corporations -- corporation generally distinct from stockholders. -- As a
     general rule, a corporation is a distinct entity from its
     stockholders.

3.   Corporations -- derivative action -- when shareholder entitled to bring. -
     - When a shareholder believes that the corporation has been
     harmed, he may be entitled to bring an action in a derivative
     suit, in the corporation's name, to seek redress for that
     injury; although the shareholder also may be injured
     secondarily, the primary injury is to the corporation, and the
     shareholder's cause of action is derivative and not direct.

4.   Corporations -- derivative action -- equity action. -- In Arkansas, a
     shareholder's derivative suit is an equity action maintainable
     in the chancery court.

5.   Corporations -- derivative action -- trial court correctly found
     appellants' claims constituted. -- The trial court correctly
     concluded that appellants' claims essentially constituted a
     derivative action, which could be maintained pursuant to Ark.
     R. Civ. P. 23.1.

6.   Corporations -- derivative and direct actions contrasted -- appellants
     failed to plead individual harm. -- Plaintiffs may prefer
     characterizing their claims as direct rather than derivative;
     first, derivative actions impose more stringent procedural
     requirements; secondly, any recovery in a derivative action
     accrues to the corporation and not to the shareholders,
     individually; thirdly, a derivative action in chancery court
     precludes a trial by jury; therefore, a plaintiff may
     carefully plead facts in a complaint in order to proceed in a
     direct action; by alleging a direct injury, a plaintiff can
     maintain a direct action even if the corporation was similarly
     harmed; here, the supreme court simply found that appellants
     failed to plead any individual harm. 

7.   Civil procedure -- fact pleading required. -- Arkansas has adopted a
     clear standard to require fact pleading; under Ark. R. Civ. P.
     8(a)(1), a pleading that sets forth a claim for relief must
     contain "a statement in ordinary and concise language of facts
     showing ... that the pleader is entitled to relief"; Ark. R.
     Civ. P. 12(b)(6) provides for the dismissal of a complaint for
     "failure to state facts upon which relief can be granted"; 
     these two rules must be read together in testing the
     sufficiency of the complaint; facts, not mere conclusions,
     must be alleged. 

8.   Civil procedure -- testing sufficiency of complaint -- pleadings liberally
     construed. -- In testing the sufficiency of the complaint on a
     motion to dismiss, all reasonable inferences must be resolved
     in favor of the complaint, and pleadings are to be liberally
     construed.

9.   Corporations -- trial court correctly found appellants lacked standing to
     assert claims relating to harm suffered by company. -- Although
     appellants' complaint alleged that appellee's conduct after
     incorporation caused the closely held corporation harm, it
     failed to plead facts demonstrating that any action prior to
     incorporation harmed them individually; the trial court
     properly concluded that appellants lacked standing to assert
     the claims arising from their allegations because, by their
     very nature, the claims related to harm suffered by the
     company.

10.  Fraud -- elements. -- To plead a cause of action for fraud, the
     existence of the following elements must be proved: (1) a
     false representation, usually of a material fact; (2)
     knowledge or belief by the defendant that the representation
     is false; (3) intent to induce reliance on the part of the
     plaintiff; (4) justifiable reliance by the plaintiff; and (5)
     resulting damage to the plaintiff. 

11.  Fraud -- must be specifically alleged. -- To be well pleaded, fraud
     must be specifically alleged; the complaint must state
     something more than mere conclusions and must clearly set
     forth the facts relied upon as constituting the fraud.

12.  Fraud -- appellants failed to plead facts -- trial court's decision to
     dismiss affirmed. -- Even drawing all reasonable inferences in
     favor of the complaint, appellants failed to plead a case of
     fraud; some facts regarding the alleged misrepresentation and
     appellee's intent to defraud appellants were required; where
     the complaint states only conclusions without facts, the
     supreme court will affirm the trial court's decision to
     dismiss the complaint pursuant to Ark. R. Civ. P. 12(b)(6).

13.  Corporations -- derivative action -- injury suffered by appellants
     secondary to injury suffered by corporation. -- Where appellants'
     complaint neither pleaded facts to support a distinct and
     separate harm nor alleged that appellee was bound by and
     breached a pre-incorporation agreement regarding proprietary
     information that would give rise to a direct cause of action,
     the supreme court, reading the allegations in appellants'
     complaint, concluded that any injury suffered by appellants
     was secondary to the injury suffered by the corporation, which
     is the essence of a derivative action.

14.  Jurisdiction -- subject-matter jurisdiction -- complaint properly dismissed
     for lack of. -- The supreme court held that the trial court
     properly dismissed the appellants' complaint for lack of
     subject-matter jurisdiction and accordingly affirmed.


     Appeal from Pulaski Circuit Court; Chris Piazza, Judge;
affirmed.
     Harrill & Sutter, PLLC, by: L. O'Neal Sutter and Sherri
McDonough, for appellants.
     Kemp, Duckett, Spradley & Curry, by: Stephen L. Curry, for
appellee.

     W.H. "Dub" Arnold, Chief Justice.
     This is an appeal from the Pulaski County Circuit Court,
Second Division, and from an order dismissing the appellants'
complaint for lack of subject-matter jurisdiction.  Finding no
merit in appellants' arguments, we affirm.
     Appellants, Ben Robinson and Pat Hames, are husband and wife
and, respectively, own 1% and 49% of the issued and outstanding
common stock of Partners in Rehab, Inc., a closely held Arkansas
corporation.  Appellee Marybeth Cravens owns the remaining 50% of
the Partners stock.  Hames and Cravens are the sole directors of
Partners.  On May 16, 1996, the appellants filed suit against
Cravens in the Pulaski County Circuit Court, alleging fraud and
breach of fiduciary duty.  Specifically, Robinson and Hames claim
that, at the time of Partners's incorporation, Cravens intended to
defraud them of proprietary information they contributed to
Partners.  Additionally, Robinson and Hames maintain that Cravens
violated her fiduciary duty by appropriating the proprietary
information for the benefit of Rehab. Plus, Inc., a corporation
allegedly organized by Cravens or by members of Cravens's family
and in which Cravens plays some management role.  In particular,
appellants allege that Cravens solicited contracts with two
Partners clients who then terminated contracts with Partners
shortly after the incorporation of Rehab Plus.
     According to the complaint, Robinson and Hames are personal
guarantors of most of Partners's corporate debt, and Cravens's
actions have altered the value of corporate debts for which the
appellants are liable.  Notably, at the time of the circuit court
hearing, Partners was also the subject of a dissolution proceeding
pending in the Pulaski County Circuit Court, styled In re The
Judicial Dissolution of Partners in Rehab, Inc., civil docket No.
CV-96-6911.
     On June 10, 1996, Cravens filed a motion to dismiss the
appellants' complaint pursuant to Ark. R. Civ. P. 12(b)(1) and
12(b)(6), reasoning that the case was actually a derivative action
to redress harm to Partners and not to appellants, individually. 
After a hearing on January 28, 1997 and based upon a reading of the
complaint, Judge Chris Piazza agreed that, although the appellants
alleged that Cravens harmed them, either individually or through a
competitive business, the facts asserted and relief requested, by
their very nature, involved the question of whether Partners
suffered damages.  The circuit court recognized that the
allegations in the complaint constituted grounds for a derivative
action, which sounds in equity and must be maintained in chancery
court.  Concluding that the appellants lacked standing to assert
their claims individually, Judge Piazza dismissed the complaint
pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction.
     In reviewing a trial court's decision on a motion to dismiss,
we treat the facts alleged in the complaint as true and view them
in the light most favorable to the plaintiff.  Neal v. Wilson, 316
Ark. 588, 595-96, 873 S.W.2d 552 (1994) (citing Gordon v. Planters
& Merchants Bancshares, Inc., 310 Ark. 11, 832 S.W.2d 492 (1992);
Battle v. Harris, 298 Ark. 241, 766 S.W.2d 431 (1989)); Mid-South
Beverages, Inc., 300 Ark. 204, 205, 778 S.W.2d (1989) (citing
Battle, 298 Ark. 241)).  Further, we note that a trial judge must
look only to the allegations in the complaint to decide a motion to
dismiss.  Neal, 316 Ark. at 596 (citing Wiseman v. Batchelor, 315
Ark. 85, 864 S.W.2d 248 (1993); Deitsch v. Tillery, 309 Ark. 401,
833 S.W.2d 760 (1992)); Mid-South Beverages, Inc., 300 Ark. at 205
(citing Battle, 298 Ark. 241)).
     On appeal, the appellants first query whether they have
standing, in their individual capacities, to assert a claim for an
injury suffered by Partners and its shareholders.  In Arkansas, the
well-settled answer is no.  As a general rule, a corporation is a
distinct entity from its stockholders.  Wiseman v. State Bank and
Trust, N.S., Inc., 313 Ark. 289, 854 S.W.2d 725 (1993).  However,
when a shareholder believes that the corporation has been harmed,
he may be entitled to bring an action in a derivative suit, in the
corporation's name, to seek redress for that injury.  See Taylor v.
Terry, 279 Ark. 97, 649 S.W.2d 392 (1983); Ark. R. Civ. P. 23.1;
Ark. Code Ann.  4-26-714 (Repl. 1991).  Although the shareholder
also may be injured, secondarily, the primary injury is to the
corporation, and the shareholder's cause of action is derivative
and not direct.  Moreover, in Arkansas, a shareholder's derivative
suit is an equity action maintainable in the chancery court.  See
Red Bud Realty Co. v. South, 153 Ark. 380, 241 S.W.2d 21 (1922).
     In an apposite case, Walker v. Hyde, 303 Ark. 615, 798 S.W.2d 435 (1990), a plaintiff-shareholder sued defendants, also
shareholders, for deprivation of majority control and ownership of
the corporation, and loss of good will, business enterprise, future
gross receipts, and net profits.  Additionally, like the case at
bar, the plaintiff sought relief from corporate indebtedness that
she had personally guaranteed.  Upon review of the complaint, this
court affirmed the trial court's dismissal of the action. 
Specifically, this court reasoned that the relief sought by the
plaintiff should be granted to the corporation and not to a
shareholder.  Any action to recover for the alleged losses was
derivative in nature and an individual suit was not the proper
route for relief.  Walker, 303 Ark. at 618.  Similarly, the trial
court correctly concluded in the instant case that the appellants'
claims essentially constituted a derivative action, which could be
maintained pursuant to Ark. Rule Civ. P. 23.1.
     Our decision in this case is not to imply that shareholders
may never bring a direct suit.  For example, a shareholder may sue
individually in an action to enforce that shareholder's voting
rights, to compel the payment of dividends, or to protect minority
shareholders.  Contrary to the case at bar, these actions
contemplate a direct injury to the shareholder distinct and
separate from harm caused to the corporation.  See 12B Fletcher,
Cyclopedia of Corporations  5915, 5922 (Perm. Ed. 1984).
     Significantly, plaintiffs may prefer characterizing their
claims as direct rather than derivative.  First, derivative actions
impose more stringent procedural requirements.  See Ark. R. Civ. P.
23.1.  Second, any recovery in a derivative action accrues to the
corporation and not to the shareholders, individually.  Third, a
derivative action in chancery court precludes a trial by jury. 
Therefore, a plaintiff may carefully plead facts in a complaint in
order to proceed in a direct action.  For example, by alleging a
direct injury, a plaintiff can maintain a direct action even if the
corporation was similarly harmed.  See Brandon v. Brandon Constr.
Co., 300 Ark. 44, 48, 776 S.W.2d 349 (1989) (citing 12B Fletcher,
Cyclopedia of Corporations  5911 (Perm. Ed. 1984)).  Here, we
simply find that the appellants failed to plead any individual
harm.
     Arkansas has adopted a clear standard to require fact
pleading.  According to Ark. R. Civ. P. 8(a)(1), a pleading which
sets forth a claim for relief shall contain "a statement in
ordinary and concise language of facts showing . . . that the
pleader is entitled to relief."  Rule 12(b)(6) provides for the
dismissal of a complaint for "failure to state facts upon which
relief can be granted."  This court has stated that these two rules
must be read together in testing the sufficiency of the complaint;
facts, not mere conclusions, must be alleged.  Brown v. Tucker, 330
Ark. 435, 438, 954 S.W.2d 262 (1997) (citations omitted).  In
testing the sufficiency of the complaint on a motion to dismiss,
all reasonable inferences must be resolved in favor of the
complaint, and pleadings are to be liberally construed.  Id.; Ark.
R. Civ. P. 8(f).
     Although the appellants' complaint alleges that Cravens's
conduct after Partners's incorporation caused Partners harm, it
fails to plead facts demonstrating that any action prior to
incorporation harmed them individually.  Regarding direct harm, the
appellants merely assert that Cravens "intended to deprive them of
the fruits of their efforts at the time she agreed to incorporate
Partners."  In another paragraph of the complaint, the appellants
claim that "but for Cravens's misrepresentation," they would not
have developed Partners, given Cravens proprietary information, or
guaranteed corporate debt.  However, the proprietary information
allegedly misappropriated by Cravens belonged to Partners and not
to the appellants, individually, at the times relevant to the
claimed misconduct. Here, the trial court properly concluded that
the appellants lacked standing to assert the claims arising from
their allegations because, by their very nature, the claims related
to harm suffered by the company.
      In any event, to plead a cause of action for fraud, the
appellants must prove the existence of the following elements: (1)
a false representation, usually of a material fact, (2) knowledge
or belief by the defendant that the representation is false, (3)
intent to induce reliance on the part of the plaintiff, (4)
justifiable reliance by the plaintiff, and (5) resulting damage to
the plaintiff.  Wiseman v. Batchelor, 315 Ark. 85, 88-89, 864 S.W.2d 248 (1993).  Moreover, to be well pleaded, fraud must be
specifically alleged.  Beam Bros. Cont. v. Monsanto Co., 259 Ark.
253, 263, 532 S.W.2d 175 (1976).  In Burns v. Burns, 199 Ark. 673,
135 S.W.2d 670 (1940), this court noted that the complaint must
state something more than mere conclusions and must clearly set
forth the facts relied upon as constituting the fraud. 
Additionally, in the very early case of McIlroy v. Buckner, 35 Ark.
55 (1880), this court said:
     It is not sufficient to plead fraud generally, or merely
     to characterize actions as fraudulent.  The facts and
     circumstances constituting the fraud should be set forth. 
     There should be some concealment, misrepresentation,
     craft, finesse, or abuse of confidence, by which another
     is misled, to his detriment; and these, or some of them,
     must be alleged and proved.  Mere epithets, or adverbs
     characterizing conduct, which, in itself, may be
     innocent, amount to nothing.

Id. at 558-59.  
     
     Even drawing all reasonable inferences in favor of the
complaint, the appellants fail to plead  a case of fraud, which
must include some facts regarding the alleged misrepresentation and
Cravens's intent to defraud them.  Where the complaint states only
conclusions without facts, we will affirm the trial court's
decision to dismiss the complaint pursuant to Rule 12(b)(6).  See
Brown, 330 Ark. at 438. 
     The appellants' second query is whether shareholders in
closely held corporations should be required to bring a derivative
action when the corporation is operated more as a partnership than
as a corporation.  Appellants urge us to decide that the answer to
this question should be "no" and that a direct action is
permissible.  In addition to other persuasive authority from
foreign jurisdictions, appellants cite Hikita v. Nichiro Gyogyo
Kaisha, Ltd., 713 P.2d 1197 (Alaska 1986), to support their
position urging this court to adopt the modern trend permitting a
direct shareholder action.  However, Hikita noted only two major
exceptions to the general rule, barring individual shareholder
actions for corporate injuries: (1) where the shareholder suffered
an injury separate and distinct from that suffered by other
shareholders, and (2) where a special duty, such as a contractual
duty, exists between the shareholder and the alleged wrongdoer. 
Id. at 1199 (citations omitted).
     Arguably, the two actions classified in Hikita as "exceptions"
to the general rule are actually independent actions to redress
injuries suffered primarily by the shareholder and secondarily, if
at all, by the corporation.  In any event, the appellants'
complaint does not plead facts to support a distinct and separate
harm, nor does it allege that Cravens was bound by and breached any
type of pre-incorporation agreement regarding the proprietary
information, which would give rise to a direct cause of action. 
Reading the allegations in the appellants' complaint, any injury
suffered by the appellants is secondary to the injury suffered by
Partners, and that is the essence of a derivative action.
     Viewing the facts alleged in the complaint as true and in the
light most favorable to the appellants, the trial court properly
dismissed the appellants' complaint for lack of subject-matter
jurisdiction.  Accordingly, we affirm.
     Newbern, Corbin, and Brown, JJ., dissent.

     David Newbern, Justice, dissenting.  Ben Robinson and Pat Hames,
husband and wife, formed Partners In Rehab., Inc., with Marybeth
Cravens.  Mr. Robinson and Ms. Hames alleged that they agreed to
invest in and work for the corporation in exchange for Ms.
Cravens's efforts to obtain contracts with the Riley Corporation
and the Catlett Corporation.  They further alleged that thereafter
Ms. Cravens formed Rehab. Plus, Inc., and solicited the Riley
Corporation and Catlett Corporation accounts for Rehab. Plus, Inc.
     The complaint, filed in Pulaski Circuit Court, was dismissed
solely on the ground that it stated a stockholder's derivative
claim, Ark. R. Civ. P. 23.1, and should have been filed in a
chancery court.  The Circuit Judge did not have before him a
specific allegation of failure to state a claim for fraud, nor did
he make any ruling in that respect.  The real issue in this case is
whether two of three shareholders must proceed against the other
for breach of her fiduciary obligation to them only in the
derivative format before a chancery court.
     At common law, a shareholder had no means of redress against
officers and majority shareholders whose actions injured their
interests in corporations; thus, equity courts began to provide
relief in the nature of the derivative suit early in the 19th
century.  That history is recited in Ross v. Bernhard, 396 U.S. 531
(1970), in which the Supreme Court recognized that the sole reason
for equity jurisdiction in the so-called equitable stockholder's
derivative action was lack of standing such plaintiffs once had in
law courts.  The Supreme Court held that, after the standing matter
was settled, the claim on behalf of the corporation could proceed
at law with the right of a jury trial guaranteed.  Id.  That means,
of course, that in a federal court the judge decides the standing
issue and then, assuming the remedy to be pursued on behalf of the
corporation is a legal remedy, a jury may decide the facts and
reach a verdict on the claim. 
     In Arkansas, our archaic division of law and equity courts
leaves us with cases like this one in which the fundamental claim
may be one at law, but it is thrown into an equity court,
regardless of the remedy sought, because two hundred years ago the
law courts were not flexible enough to allow such a case to be
heard where it belonged.  
     There is a means to end this artificial situation when the
standing question has to do with a close corporation.  Mr. Robinson
and Ms. Hames have presented a number of cases in their brief, from
a variety of jurisdictions, in which it has been held that
shareholders in a close corporation may proceed directly against
others who have caused injury to their interests in the
corporation.  The majority has chosen to discuss only one of those
cases and has ignored the others, thus giving short shrift to a
meritorious argument.  Some of the examples of the cases cited in
support of the argument follow.
     In Thomas v. Dickson, 250 Ga. 772, 301 S.E.2d 49 (1983), the
Georgia Supreme Court dealt with the issue as one of first
impression.  Three men formed a corporation of which they became
the officers and operators.  One of them died.  His widow, who
inherited one third of the stock of the corporation, sued the other
two incorporators claiming they had conspired to keep her share of
the profits and dividends, had reneged on a promise to pay her a
"death benefit," and had reduced the value of her stock.  In
response to the argument that the plaintiff was limited to bringing
a derivative suit, the Court stated:

          The general rule is that a shareholder seeking to recover
     misappropriated corporate funds may only bring a derivative
     suit. . . . 
          Although Georgia follows the general rule, we believe
     that in exceptional situations this Court ... should look at
     the "realistic objectives" of a given case to determine if a
     direct action is proper. . . .
          In the instant case, the reasons requiring derivative
     suits do not exist.  The reasons underlying the general rule
     are that 1) it prevents a multiplicity of lawsuits by
     shareholders; 2) it protects corporate creditors by putting
     the proceeds of the recovery back in the corporation; 3) it
     protects the interests of all shareholders by increasing the
     value of their shares, instead of allowing a recovery by one
     shareholder to prejudice the rights of others not a party to
     the suit; and 4) it adequately compensates the injured
     shareholder by increasing the value of his shares. . . .
          We will now examine this case to see if these reasons are
     applicable.  First, Mrs. Dickson is the only injured
     shareholder; consequently, there can be no multiplicity of
     lawsuits, and there is no concern that a recovery by her will
     prejudice the rights of other shareholders. 
          In addition, Mrs. Dickson would not be adequately
     compensated by a corporate recovery.  For a shareholder, the
     potential benefit of a corporate recovery in such cases is the
     increase in the value of his or her shares. . . .  There would
     be no such benefit to Mrs. Dickson, however, since, in a
     closely held corporation, there is no ready market for her
     shares.
          The final consideration underlying the general rule, the
     protection of creditors, is also not present in this case. .
     . .  [T]here was no outstanding or dissatisfied creditor. 
     [Internal citations omitted.]

Thomas v. Dickson, 301 S.E.2d  at 50-51.  All of the reasons recited
by the Georgia Court apply in the case now before us.
     In Richards v. Bryan, 879 P.2d 638 (Kan.App. 1994), the Kansas
Court of Appeals reached the same result with respect to
allegations by minority shareholders in a close corporation of a
"freeze out" by the majority.  It recognized the general
proposition that "[a] shareholder may only litigate as an
individual if the wrong to the corporation inflicts a distinct and
disproportionate injury on the shareholder, or if the action
involves a contractual right of the shareholder which exists
independently of any right of the corporation."  Id. at 646.  Then
the Court considered the close-corporation exception, recognizing
that "an increasing number of courts are abandoning the distinction
between a derivative and a direct action because the only
interested parties are the two sets of shareholders."  Id. at 647. 
It recited the concern about the corporation, under the control of
the alleged wrongdoers, being the beneficiary of a derivative
action, citing 2 O'Neal and Thompson, O'Neal's Close Corporations,
 8.11, p. 122 (3d ed. 1992), and then the following:

          In its Principles of Corporate Governance: Analysis and
     Recommendations  7.01(d), p. 731 (Tentative Draft No. 11,
     1991), the American Law Institute recommends allowing an
     independent cause of action for freeze-outs in the close
     corporate setting under certain circumstances:
          If a corporation is closely held . . ., the court in its
          discretion may treat an action raising derivative claims
          as a direct action, exempt it from those restrictions and
          defenses applicable only to derivative actions, and order
          an individual recovery, if it finds that to do so  will
          not (i) unfairly expose the corporation . . . to a
          multiplicity of actions, (ii) materially prejudice the
          interests of creditors in the corporation, or (iii)
          interfere with a fair distribution of the recovery among
          all interested persons.
     See, Schumacher v. Schumacher, 469 N.W.2d 793, 798-99 (N.D.
     1991).

879 P.2d  at 647-48.
     The same result was reached by the Ohio Supreme Court in
Crosby v. Beam, 548 N.E.2d 217 (1989), a case in which minority
stockholders in a close corporation claimed the majority
stockholders had breached the fiduciary duty owed to the minority
stockholders by misappropriating corporate funds.  It was pointed
out that, if the minority shareholders in a close corporation were
forced to sue on behalf of the corporation, then any recovery would
go to the corporation that remained under the control of the
majority.
     Underlying these cases permitting close-corporation
shareholders to sue directly, in the circumstances stated, is the
fact that most such corporations are operated more like
partnerships than corporations.  See Johnson v. Gilbert, 127 Ariz.
410, 621 P.2d 916 (1980); Crosby v. Beam, supra.  In the case now
before us, it would be wrong to require Mr. Robinson and Ms. Hames
to sue on behalf the corporation (assuming the petition to dissolve
it has not yet been granted) so that the shares owned by Ms.
Cravens could benefit by a recovery from Ms. Cravens.  See Atkinson
v. Marquart, 112 Ariz. 304, 541 P.2d 556 (1975).  It makes sense to
require the derivative format with respect to a corporation having
many shareholders whose interests require protection against the
wrong allegedly perpetrated against all, but not when the alleged
wrongdoer is the only other shareholder and the rights of creditors
and other (in this case nonexistent) shareholders are not
prejudiced.  Watson v. Button, 235 F.2d 235 (9th Cir. 1956).
     The case of Schumacher v. Schumacher, cited above in the
quotation from the Richards case, is especially interesting in the
respect that it deals properly with the matter of precedence of
legal and equitable issues resulting from one set of facts.  The
Supreme Court of North Dakota concluded that it was necessary to
have a jury trial of legal issues arising from breach of a
fiduciary relationship owed by one close-corporation shareholder to
another prior to deciding the entitlement to equitable remedies. 
If the right to equitable relief were tried first, and the factual
issues decided in that context by the court without a jury, then
the plaintiff would, by the application of law of the case, be
denied a jury trial.
     Although it has been said that breach of a fiduciary duty is
an equitable claim, Watson v. Buton, supra, that may well depend
upon the remedy sought.  We have no definitive ruling on whether
breach of a fiduciary relationship must be pursued in equity, but
we note that we have entertained appeals from both chancery and
circuit courts where breach of a fiduciary relationship was the
basis for a remedy, legal or equitable, being sought.  See, e.g.,
Wilson v. Wilson, 327 Ark. 386, 939 S.W.2d 287 (1997)(appeal from
chancery where remedy sought was an estate accounting and setting
aside a deed); Alexander v. Flake, 322 Ark. 239, 910 S.W.2d 190
(1995)(appeal from circuit court where remedy sought was damages);
Green v. Jones-Murphy Properties, Inc., 232 Ark. 320, 335 S.W.2d 822 (1960)(appeal from circuit court where remedy awarded was
damages).  
     The complaint in this case, as abstracted by the appellee,
makes it clear that money damages is the remedy being sought, and
that remedy belongs in a circuit court.  Even if, however, the
matter were one to be tried by a chancellor as a direct, rather
than derivative, action, the proper procedure for the Trial Court
would have been to transfer the case rather than dismiss it.  See
Linder v. Howard, 296 Ark. 414, 757 S.W.2d 549 (1988).
     I respectfully dissent.
     Corbin and Brown, JJ., join in this dissent.