Corporate – Shareholders – Previously Declared Dividends – Writ of Mandamus – Transfer of Funds – Board of Directors

Plaintiffs are entitled to their respective shares of the $850,000.00 dividend declared on September 27, 2023 as it was not timely or properly rescinded. We denied the motion without prejudice to a renewal of the application for the writ of mandamus if circumstances later appear to warrant the relief.

We granted in part and denied in part the motion.

This action arose out of a dispute among three siblings, each of whom are shareholders of Ormond Oil & Gas Company, Inc. (OOG) and Ormond’s Sales and Service, Inc. Plaintiffs contended their brother, defendant William E. Ormond, Jr., exercised, and continues to exercise, complete control over the two companies for his own benefit and without regard to plaintiffs’ interests. At issue in the motion was a very limited dispute: whether plaintiffs are entitled, as shareholders of Ormond Oil & Gas Company, Inc., to recover certain previously declared dividends.

Plaintiffs contended we may issue an order compelling OOG to perform a specific duty imposed by law and that we should do so in this situation to require OOG to pay plaintiffs their share of the $850,000.00 dividend declared at the September 27 Board Meeting. As to the fifth required element for issuance of a writ, plaintiffs have another legally adequate remedy available to them: summary judgment in their favor on Count One. Plaintiffs did not address why summary judgment would not serve as a satisfactory alternative remedy. Therefore, we denied the motion in part to the extent it requests we issue a writ of mandamus. This determination is without prejudice to a renewal of the application for the writ if circumstances later appear to warrant the relief.

Next, plaintiffs contended we should grant affirmative summary judgment on Count One against OOG for its failure to pay declared dividends. Defendants argued issues of material fact remain as to whether the declaration of the dividend at the September 27 Board Meeting satisfied the requirements of N.C.G.S. §55-6-40, and whether it continues to be a valid declaration. It is undisputed that plaintiffs were directors of OOG at the time they voted to approve the $850,000.00 dividend. Further, pursuant to N.C.G.S. §55-6- 40(a), the OOG Articles of Incorporation do not contain restrictions that would disallow the dividend.6 In fact, the OOG Articles of Incorporation filed with the North Carolina Secretary of State do not mention dividends. It is also undisputed that plaintiffs provided proper notice of a special meeting in accordance with the Bylaws of OOG, and that Ormond did not object in writing. Further, the meeting minutes from the Board Meeting demonstrate that plaintiffs, acting as a majority of the directors, resolved that OOG would pay its shareholders a dividend in the total amount of $850,000.00; and the dividend would be due and payable on September 29, 2023. The September 29, 2023 payment date came and went without a transfer of funds to plaintiffs for their proportionate share of the $850,000.00.

Furthermore, OOG is a solvent company with funds sufficient to pay the dividend. Defendants have not come forth with competent evidence demonstrating that OOG would be unable to pay the dividend or that paying the dividend would otherwise cause OOG to become insolvent such that dissolution and winding up processes would result in unfairness to creditors and shareholders.

Plaintiffs have shown that the OOG Board of Directors properly authorized the corporation to make a distribution to its shareholders in the amount of $850,000.00. The $850,000.00 dividend became recoverable on September 29, 2023, and it remains an outstanding debt of OOG. Therefore, while it is rarely appropriate to grant affirmative summary judgment, we determined that this is the rare circumstance warranting such a ruling as plaintiffs demonstrated there are no genuine issues of fact, no gaps in their proof, and no inferences inconsistent with their recovery arising from the evidence that would warrant a denial of the motion.

Granted in part, denied in part.

Worley v. Ormond (Lawyers’ Weekly No. 020-040-24, 16 pp.) (Michael L. Robinson, J.) 2024 NCBC 40. James, McElroy & Diehl, P.A., by Fred B. Monroe and Haley Lohr, for plaintiffs Sherry Worley and Ginger Massengill; Goldberg Segalla, by David L. Brown, for defendants Ormond Oil & Gas Company, Inc. and Ormond’s Sales and Service, Inc.; The Armstrong Law Firm, P.A., by L. Lamar Armstrong, Jr., for defendant William E. Ormond, Jr. North Carolina Business Court