Ernest Lane, III v. Ronald D. Lampkin
175 So. 3d 1222
| Miss. | 2015Background
- Limestone Products, Inc. was a rock-selling corporation 50/50 owned by Ronald Lampkin and J.O. Smith; it operated on a bank line of credit personally guaranteed by both owners.
- Smith died in August 2006; his stock and property interest passed to his estate. The bank extended the credit-deadline to December 8, 2006 to allow the Estate to decide whether to guarantee renewal.
- The Estate did not provide a guarantee before the deadline; Lampkin formed Delta Stone (Jan. 2007) which operated from the same property, used the same facilities, and sold to the same customers.
- The Estate’s executors sued; the chancery court found Lampkin breached fiduciary duties by usurping a corporate opportunity and then awarded damages after a separate damages hearing. The chancellor computed damages by combining a net-book-value figure and a five-year historical net-profit projection.
- The Mississippi Supreme Court granted certiorari and reversed and remanded, finding the damages method improper because it failed to account for diverted inventory (unreported rock), post-breach price changes, and improperly relied on a business-valuation/net-book approach instead of assessing the full loss from the breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether chancellor used proper method to calculate damages for breach/usurpation | Executors: chancellor should use lost-profits and account for full corporate loss from breach, not business valuation | Lampkin: net-book/asset-based valuation (Saunders) or limited historical profits is appropriate | Reversed — chancellor abused discretion by relying on net-book valuation and an incomplete historical-profits method; must calculate entire loss caused by breach |
| Whether court failed to account for Limestone’s diverted/unreported inventory | Executors: diverted rock moved to Delta Stone and must be included in damages as corporate loss | Lampkin: tons were accounted for (moved) and not ‘‘unreported’’ such that no additional damages necessary | Reversed — unreported/diverted rock is part of the corporation’s loss and must be included in damages |
| Whether unpaid rent (lease payments) owed to Limestone should be awarded | Executors: Delta Stone operated on leased property without paying rent after breach; Estate entitled to lease proceeds from 2007 onward | Lampkin: as equal shareholders/lessors, Lampkin and Smith were equally entitled to lease proceeds so lease payments offset each other (a wash) | Remand — chancellor should reconsider lease-proceeds entitlement; not necessarily a wash given Delta Stone’s use without payment |
| Whether chancery abused discretion in denying fees/punitive damages | Executors: wrong to deny attorneys’ fees, expert fees, punitive damages given breach | Lampkin: fees and punitive damages not warranted under facts | Court did not grant fees/punitive relief on this opinion; main reversal focused on damages calculation and remand to reassess damages (including inventory and rent) |
Key Cases Cited
- Aqua-Culture Techs., Ltd. v. Holly, 677 So. 2d 171 (Miss. 1996) (breaching fiduciary liable for entire loss suffered by corporation)
- Lovett v. E.L. Garner, 511 So. 2d 1346 (Miss. 1987) (past profits may inform future-profit damages but can be misleading depending on context)
- Biglane v. Under the Hill Corp., 949 So. 2d 9 (Miss. 2007) (appellate standard for review of chancellor’s factual findings)