Wolfe v. AMERICAN SAV. AND LOAN ASSOC., FLA.Wolfe v. AMERICAN SAV. AND LOAN ASSOC., FLA.
Gеrald WOLFE, Victor J. Farmer and Milton Berns, Appellants,
v.
AMERICAN SAVINGS AND LOAN ASSOC. OF FLORIDA, Morris N. Broad, Shepard Broad, Edward P. Mahoney, James H. Brennan, Jr., M. Trinita Flood, O.P., Stephen M. Lazovitz, Sheldon Lelchuk and Louis G. Lytton, M.D., Appellees.
District Court of Appeal of Florida, Third District.
*607 Steinberg & Merlin, Miami Beach, Berger & Montague and Stanley Wolfe, Philadelphia, Pa., for appеllants.
Coll, Davidson, Carter, Smith, Salter & Barkett and Richard Smith, Steel, Hector & Davis and Lewis F. Murphy, Miami, for appellees.
Before SCHWARTZ, C.J., and NESBITT and FERGUSON, JJ.
SCHWARTZ, Chief Judge.
The appellants are holders of preferred stock in American Savings & Loan Association of Florida (ASL). They brought consolidated class actions for themselves and the remaining preferred shareholders[1] to secure damagеs which were allegedly caused those stockholders by a 1987 merger of ASL into other corporations. The merger resultеd in the survival of the ASL entity with a markedly altered equity and corporate structure. The plaintiffs sued ASL itself and its officers and directors on two separate, but related theories:
(a) It was claimed that the fact that under the terms of the merger, the рreferred stock no longer bore a right of conversion into common stock violated the corporation's рrior agreement that the preferred carry the convertibility feature.
(b) It was alleged that the merger arrangement undеrtaken by the ASL officers and directors, which allegedly had the effect of unjustifiably decreasing the value of the prefеrred stock, was in breach of the fiduciary duty they owed that, as every other, class of shareholders. Liebschutz v. Schaffer Stores Co.,276 A.D. 1 ,93 N.Y.S.2d 125 (1949); see Security Nat'l Bank v. Peters, Writer & Christensen, Inc.,39 Colo. App. 344 ,569 P.2d 875 (1977).
Without reaching the mеrits of these contentions in any way, the trial judge held that the cases could not be maintained, as they had been asserted, as "direct" actions against the corporation and its officers and directors, and, contrariwise, that they were сognizable only as derivative actions subject to the requirements of section 607.147, Florida Statutes (1987), with which the plaintiffs did not comply. Accordingly, the amended complaints were dismissed without prejudice to the filing of derivative actions. The plaintiffs аppeal from this order and we reverse.
In our view, it is clear that both causes of action asserted below arе direct and individual rather than derivative in nature. As the distinction between the two types of actions has been simply but accurately expressed,
[a] derivative suit [is] defined as an action in which a stockholder seeks to enforce a right of action existing in the corporation. Conversely, a direct action, or as some prefer, an individual action, is a suit by a stockholder to enforce a right of action existing in him. What these definitions attempt to convey is that a stockholdеr may bring a suit in his own right to redress an injury sustained directly by him and which is separate and distinct from that sustained by other stockholders. (footnоtes omitted)
8 Fla.Jur.2d Business Relationships § 361 (1978); see Alario v. Miller,
From the plaintiffs' point оf view, the claims involve allegations of injury to their separate, individualized interests as preferred shareholders alone which would necessarily inure to their own benefit, rather than as is true of a derivative claim that of the corporation itself. Carrying the argument one step further, far from requiring the corporation to make its own claim by asserting that claim on its behаlf, which is the essential object of a derivative action, Koster v. Lumbermens Mut. Casualty Co.,
From every point of view, therefore, this cause is correctly maintained as an individual or direct action for the benefit of those purportedly harmed, the preferred shareholders, and is therefore necessarily not one which may, much less must, be brought on bеhalf of the corporation as a derivative case. Eisenberg v. Flying Tiger Line, Inc.,
As we have noted, the lower court reached neither the legal nor the factual validity of the claims asserted. Thе appellees, however, ask us to consider these questions initially on appeal under the doctrine that we may affirm if the lower court has reached the correct result for an incorrect reason. We decline this invitation. Instead we invoke the rule, one which seems especially appropriate in this difficult and esoteric field, that:
appropriate principles of appellate decisionmaking dictate that we have the benefit of [these questions] having been first considered and decided by the lower court. See Aetna Cas. & Surety Co. v. Flowers,330 U.S. 464 , 468,67 S.Ct. 798 , 800,91 L.Ed. 1024 , 1027 (1947); United States v. Ballard,322 U.S. 78 , 88,64 S.Ct. 882 , 887,88 L.Ed. 1148 , 1154 (1944).
City of Coral Gables v. Puiggros,
Accordingly, the final order below is reversed and the cause remanded for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
NOTES
Notes
[1] The defendants make no challenge to the maintenance of this case as a class action.