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NOVEMBER 16, 1988





This interlocutory appeal wherein time is of the essence asks that we articulate the duties of a corporate officer and sole shareholder owed to a pledgee of his shares. The pledgee's legitimate concern is that the pledgor/officer has disposed of the corporate assets out of the ordinary course of business and without receiving fair value in exchange. This, of course, has rendered pledgee's security worthless.

 The trial court relied upon the sales and pledge agreement between the parties and held the pledgor entitled to do as he did. Because of the Court's failure to perceive and enforce the pledgor/officer's fiduciary duties of care and loyalty to his pledgee, we reverse and remand.


 In the beginning John T. Gibson *fn1 of Greenville, Mississippi, was the owner of Clearwater Broadcasting Corporation (CBC). A Florida corporation qualified to do business in Mississippi, CBC's sole business was the operation of Radio Station WDDT in Greenville. WDDT broadcast on AM 900khz, and had experienced declining financial fortunes in the early 1980s. This fact and others led Gibson and his partner to the view that the business should be sold.

 In December, 1983, Gibson reached an agreement with Donald G. Manuel of Florida wherein all of CBC's outstanding shares would be sold to Manuel. The sale was consummated pursuant to a written "Memorandum of Sale" executed on March 5, 1984. The stated purchase price for the CBC stock was a sum equal to four hundred percent (400%) of the "book" assets of the corporation. This was so to account for the most valuable asset of the corporation, the FCC license to transmit.

 In exchange for Gibson's transfer to him of all outstanding shares in CBC, Manuel executed an installment note in Gibson's favor and delivered it to him. Manuel's payments under the note aggregated $169,954.21 together with interest. To secure performance of his obligations under the note, Manuel pledged his newly acquired shares and in fact delivered to Gibson the certificate evidencing those shares. The agreement was structured so that the note would be paid out of anticipated earnings. It was unusual in one important respect. Gibson agreed that in event of default he would look solely to the collateral and that Manuel would have no personal liability for any deficiency. Manuel paid Gibson $4,985.79 at the time of closing.

 Effective March 5, 1984, Manuel assumed complete control of CBC. Not only was he the owner of all outstanding shares, he was also elected president and treasurer of the corporation. Manuel made annual payments of $10,006.57 each on April 10, 1985, and 1986. He defaulted on his payment due April 10, 1987, and has paid Gibson nothing since that time.

 On July 8, 1987, Gibson formally commenced this civil action by filing his complaint in the Circuit Court of Washington County. Gibson sought to accelerate the $150,000.00-odd balance on the note, to foreclose his security interest in the pledged stock, and "such other and further relief as the court deems just and proper.

 Shortly thereafter, as the parties were engaged in pretrial discovery, Gibson became aware through a radio trade publication that WDDT's license to transmit was to be transferred from a corporation known as Clearwater Communications Corporation (CCC) to a corporation known as Clyma Communications, Inc. This was Gibson's first knowledge that CBC no longer held the FCC license. Upon further investigation Gibson learned that Manuel had effectively stripped CBC of all of its assets and that a new corporation, CCC, had assumed the ownership and operation of WDDT. In April of 1984, Manuel had caused CBC to dispose of a storefront building located on Main Street in Greenville. In May of 1987, after the third installment on the note had matured but prior to the filing of the lawsuit, Manuel caused CBC to deed to CCC the WDDT broadcasting site including its equipment.

 On September 21, 1987, Gibson moved for a preliminary injunction to prevent the sale of the license to Clyma Corporation and to restore the assets of CBC. See Rule 65(a), Miss.R.Civ.P. The Circuit Court heard the motion ten days later. *fn2

 At the close of the testimony the Circuit Court denied Gibson any relief. The Court emphasized the provision of the sales agreement that Gibson would look" solely to said stock as collateral for this note and maker shall not be liable for payment of any deficiency between the balance due hereunder and the value of said stock. "The Court went on to observe that" I don't know whether at the time of the execution of these documents it was the intent of Mr. Manuel to proceed to loot the corporation, but the documents as drafted and signed certainly gave him the opportunity to do so. And the sellers' failing ...

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