Industrial Distribution Group, Inc. v. Waite

Carley, Justice,

dissenting.

In this case, the trial court cited both OCGA § 9-8-13 and Ga. Veneer &c. Co. v. Fla. Nat. Bank, 198 Ga. 591 (32 SE2d 465) (1944) as authority for its award of attorney’s fees to Alvis Waite and, on appeal, the Court of Appeals affirmed that award. Industrial Distribution Group v. Waite, 222 Ga. App. 233, 234 (1) (474 SE2d 28) (1996). I concur in Divisions 1 and 2 of the majority opinion, holding that OCGA § 9-8-13 is not authority for the award, since a receiver was not appointed. However, I cannot concur in Division 3 of the majority opinion, holding that Ga. Veneer &c. Co. likewise constitutes no authority for the award. In my opinion, that decision is viable alternative authority for an award of attorney’s fees to Waite. Although I ultimately am unable to conclude that, under the circumstances, the award should be affirmed pursuant to Ga. Veneer &c. Co., I nevertheless do not agree with the majority that the judgment simply should be reversed. Instead, I believe that the case should be remanded to the trial court for reconsideration of the award of attorney’s fees in accordance with the principles enunciated in Ga. Veneer &c: Co. Thus, I respectfully dissent to the majority’s reversal of the award, without also ordering a remand for reconsideration by the trial court.

As the majority notes, Ga. Veneer &c. Co. is factually distinguishable because there, unlike here, the trial court granted equitable relief which was substantially equivalent to the appointment of a receiver. Ga. Veneer &c. Co. does not hold, however, that an award of attorney’s fees is authorized only when the trial court grants equitable relief equivalent to appointing a receiver. Instead, it was expressly recognized that an award of attorney’s fees is also authorized under a broader principle whereby

*119“[a] court of equity . . . will in its discretion order an allowance of counsel fees to a complainant who at his own expense has maintained a successful suit for the preservation, protection, or increase of a common fund or common property, or who has created at his own expense, or brought into court, a fund in which others may share with him.” [Cits.]

(Emphasis in original.) Ga. Veneer &c. Co., supra at 614 (3). Compare Hope & Assoc. v. Marvin M. Black Co., 205 Ga. App. 561 (1) (422 SE2d 918) (1992) (attorney’s fees in non-equity proceedings). This principle enunciated in Ga. Veneer &c. Co. is equivalent to the “substantial benefit” doctrine which other jurisdictions have recognized.

This development has been most pronounced in shareholders’ derivative actions, where the courts increasingly have recognized that the expenses incurred by one shareholder in the vindication of a corporate right of action can be spread among all the shareholders through an award against the corporation, regardless of whether an actual money recovery has been obtained in the corporation’s favor.

Mills v. Electric Auto-Lite Co., 396 U. S. 375, 394 (IV) (90 SC 616, 24 LE2d 593) (1970). Thus, if the trial court, in the exercise of its discretion, was authorized to award attorney’s fees to Waite under this “substantial benefit” doctrine, it is immaterial that the equitable relief which the trial court did grant was not equivalent to the appointment of a receiver.

To authorize attorney’s fees under the “substantial benefit” doctrine as recognized in Ga. Veneer &c. Co., it is not necessary that the equitable relief granted by the trial court relate to a common fund. Attorney’s fees also would be authorized if the equitable relief had the effect of preserving, protecting or increasing common property. Thus, if a sacrifice of the assets of the corporation was averted by the efforts of Waite, he would “be entitled to expenses and attorney’s fees no less than if [he] had brought into court an amount of money equal to the alleged savings.” Ga. Veneer &c. Co. v. Fla. Nat. Bank, supra at 615 (3). See also Ewing v. First Nat. Bank, 209 Ga. 932 (76 SE2d 791) (1953). Under the “substantial benefit” doctrine,

[t]he definition of a corporate benefit... is much more elastic. While the benefit achieved may have an indirect economic effect on the corporation, in the sense that the interests of the plaintiff class reflect a value not theretofore apparent, the benefit need not be measurable in economic terms. Changes in corporate policy or . . .a heightened level *120of corporate disclosure, if attributable to the filing of a meritorious suit, may justify an award of counsel fees. [Cits.]

Tandycrafts, Inc. v. Initio Partners, 562 A2d 1162, 1165 (II) (Del. 1989). In my opinion, the equitable relief granted as the result of Waite’s suit benefited the corporation and all of its shareholders. As the Court of Appeals recognized,

the trial court granted substantial relief to all shareholders in the form of cumulative voting, preemptive rights and rights of first refusal. Also, the trial court dissolved the shareholder deadlock (versus the corporation itself) by reducing the quorum requirement to a simple majority. The remedy fashioned by the trial court was not a mere injunction but a dramatic reformation of the bylaws. . . . [T]his equitable relief was more beneficial to the corporation as an entity and to all of the shareholders than if the requested receiver had been appointed.

(Emphasis in original.) Industrial Distribution Group v. Waite, supra at 235 (1). Thus, avoidance of a sacrifice of the assets of the formerly deadlocked corporation was directly attributable to Waite’s initiation and pursuit of this litigation and, therefore, he is entitled to recover reasonable attorney’s fees even though he did not bring into court a fund of money. Ga. Veneer &c. Co. v. Fla. Nat. Bank, supra at 615 (3). See also Mills v. Electric Auto-Lite Co., supra; Tandycrafts, Inc. v. Initio Partners, supra.

Alexander v. Atlanta & West Pt. R. Co., 113 Ga. 193 (38 SE 772) (1901) is not authority which conflicts with the “substantial benefit” doctrine enunciated in Ga. Veneer &c. Co. In Alexander, the equitable relief granted was an injunction against the corporation’s performance of an ultra vires, but potentially lucrative act and, consequently, it was only the objecting plaintiff-minority shareholders, not the corporation itself, who benefitted from the lawsuit. “The plaintiffs neither sued to recover, nor did they seek to compel the return of, any money belonging to the corporation, and the only legal result of their suit was the injunction.” Alexander v. Atlanta & West Pt. R. Co., supra at 209. As was expressly recognized, however, a recovery of attorney’s fees would be authorized where, as here, the trial court does grant equitable relief which benefits the corporation, rather than merely the plaintiff-minority shareholders, by ameliorating a situation “ ‘threatening the entire destruction and dissolution of the corporation!.]’ ” Alexander v. Atlanta & West Pt. R. Co., supra at 205.

The majority declines to address the applicability of the “substantial benefit” doctrine in this case, concluding that that issue is *121not presented here. In my opinion, the applicability of that doctrine is presented here, because Ga. Veneer &c. Co. recognizes that doctrine as a viable principle of this state’s jurisprudence and the trial court specifically cited that decision as authority for its award of attorney’s fees to Waite. Under Ga. Veneer &c. Co., a minority shareholder who incurs attorney’s fees in connection with a successful equitable action which results in a substantial benefit to the corporation and, thereby, to all of the other shareholders, is entitled to recover the attorney’s fees expenses expended. Accordingly, if it were clear that the trial court relied upon Ga. Veneer &c. Co. as alternative authority for its award, that award should be affirmed under the “right for any reason” principle. It is not clear, however, that the trial court did consider Ga. Veneer <fee. Co. as alternative authority. It appears that the trial court may have misinterpreted Ga. Veneer &c. Co. as being only decisional authority supporting a statutory award of attorney’s fees under OCGA § 9-8-13, rather than properly interpreting that decision as authority for the award under the alternative non-statutory “substantial benefit” doctrine applicable in equity cases. Because that doctrine is predicated upon the trial court’s exercise of its discretion and it is unclear whether the trial court in this case exercised its discretion in accordance with that doctrine, I agree with the majority that the award cannot be affirmed. Watson v. Elberton-Elbert County Hosp. Auth., 229 Ga. 26, 27 (189 SE2d 66) (1972). However, where, as here, the judgment could be affirmed but for the trial court’s apparent failure to exercise its discretion, the correct resolution is, in my opinion, a reversal with direction that the trial court reconsider the ruling based upon a proper exercise of its discretion. See Stribbling v. Ga. R. &c. Co., 139 Ga. 676, 687 (3) (78 SE 42) (1913). Accordingly, although I agree with the majority that the award of attorney’s fees was not authorized under OCGA § 9-8-13, I dissent to the majority’s failure to remand with direction that the trial court reconsider its award under the “substantial benefit” doctrine previously recognized in Ga. Veneer &c. Co.

Decided June 9, 1997 — Reconsideration denied June 30, 1997. Kilpatrick & Stockton, Thomas C. Harney, Craig E. Bertschi, for appellant. Bondurant, Mixson & Elmore, H. Lamar Mixson, Jill A. Pryor, for appellee. Caldwell & Watson, Harmon W. Caldwell, Jr., Wade H. Watson, Pope, McGlamry, Kilpatrick & Morrison, Charles N. Pope, Paul Kil*122Patrick, Jr., R. Timothy Morrison, William U. Norwood III, amici curiae.