Amana Soc. v. Colony Inn, Inc.
| Decision Date | 20 January 1982 |
| Docket Number | No. 63269,63269 |
| Citation | 315 N.W.2d 101 |
| Parties | AMANA SOCIETY, Appellee, v. COLONY INN, INC., an Iowa Corporation James C. Roemig, Donald C. Krauss, Eunice Krauss, and Ramon F. Goerler, Appellants. |
| Court | Iowa Supreme Court |
James F. Pickens, of Pickens, Barnes & Abernathy, Cedar Rapids, for appellants.
James W. Hall, Allan D. Vestal, and Carroll J. Reasoner, of Shuttleworth & Ingersoll, Cedar Rapids, for appellee.
Considered en banc.
The Amana Society, a business corporation owning virtually all of the farmland and much of the business property in the Amana Colonies, sought an injunction to prevent land previously conveyed by it from being used in a manner which was contrary to the "desires" of its board of directors. The defendants, all stockholders in the Amana Society and businessmen in Amana, challenged the board's right to assert control of their land on several grounds: They contended Iowa's "stale use" statute, § 614.24, The Code 1975, barred enforcement of the board's business restrictions; that the Society's attempts to enforce their land-use rules were state actions and resulted in the deprivation of property rights without due process; that the Society's actions resulted in an illegal restraint of trade; and that the Society was equitably estopped from enforcing the land-use restrictions. The defendants complained the Society's actions, moreover, were not calculated to preserve any land-use scheme but to protect its own business by suppressing competition.
After a lengthy trial, the court granted the injunction on the grounds that the defendants had expressly agreed to the Society's control over their use of the land, and that a "general scheme" of land-use control existed. It concluded that the "stale use" statute, section 614.24, was constitutional, but held it was inapplicable in this case because a contract between the Society and the defendants, as shareholders, bound them to the Society's land-use restrictions independently of any deed restrictions. In determining that the Society had the right to control use of the land in the manner prescribed in the deeds, the court stated It held that if the Society had the power to terminate, it had the power to regulate "in detail" the nature and extent of business activities. The defendants appealed from the granting of the injunctions; the Society cross-appealed from the trial court's conclusion that section 614.24 is constitutional. Further proceedings were stayed pending disposition on appeal.
The principle issues raised on appeal are whether section 614.24 is constitutional and, if so, whether it bars the Society's action for an injunction under the facts of this case. We answer both in the affirmative. Our review is de novo. We are reluctant to interfere with a trial court's order for an injunction, Myers v. Caple, 258 N.W.2d 301, 305 (Iowa 1977); nevertheless, we feel compelled to do so under the record in this case. We reverse on the appeal and affirm on the cross-appeal.
There have been two Iowa corporations known as Amana Society. The present Amana Society, the plaintiff, is a profit corporation organized under chapter 491, The Code, and is the present owner of approximately 26,000 acres of land encompassing the area known as the Amana Colonies or Amana Villages, as well as substantial manufacturing, merchandising, and service enterprises.
The original Amana Society, predecessor of the plaintiff and former owner of the property, was a religious society founded in Germany in 1714. The group, which was communal, was then known as the Society of True Inspiration. Approximately 800 of the members left Germany because of high land prices and religious persecution and emigrated to Ebeneezer, near Buffalo, New York, in 1843. When faced with encroachment by the City of Buffalo and increasing "worldly temptation," the religious group bought the Iowa land and moved there during the period of 1855-1860. The first Amana Society was incorporated in Iowa in 1859 as a religious, nonprofit corporation.
In the early days land-use control was no problem: the trustees of the corporation had total control over the use of the land and over what businesses were to be maintained. Agriculture was the principal livelihood. Manufacturing of clothing and furniture, as well as meat processing, was only for the purpose of providing for the needs of the members of the Society, although excess production was sometimes sold to "outsiders."
The original Society remained a true communistic society; and the board of trustees, elected from the elders of the church, retained almost dictatorial control of the Amana Colonies, its land and its people. The trustees decided where the members were to work, where they would live, and to a certain extent, even whom they could marry. Virtually all property used by the members was owned by the Society, except for personal effects such as clothing. Needs of the members were met by the Society, which provided food, clothing, housing, and medical care. It also provided care for orphans and free burial for its members. Upon death, the Society paid to the member's family, in cash, the value of the decedent's accumulated interest in the holdings of the Society. This cash payment on death contributed to a drain on the cash reserve of the Society, which eventually resulted in changes in the Society and its land-use policies. The Society's cradle-to-grave care resulted in lack of motivation of many workers, and it became necessary to hire outsiders to work in the factories and on the farms, causing a further cash drain. These factors, and the general depression, caused the Society to reexamine its communal way of life. Some method had to be devised to restrict the cash outflow or the Society would fail. A committee was formed to study various alternatives and make recommendations to the trustees.
Sale of the Society's assets was rendered impractical by the depression. Another alternative was to eliminate a portion of its financial burdens by embracing some of the aspects of a free-enterprise system. The "Committee of 47," as it was called, decided on the second alternative. Its Plan of Reorganization was ultimately approved by the Society members and brought about the "Great Change," of 1932. This began the eventual conveyance of some land to private ownership, subject to the attached "strings" which are the source of this litigation.
The Plan of Reorganization provided for transfer of the original Amana Society's secular assets, including farmland, businesses, and homes, to a profit corporation to be known as the Amana Society (the plaintiff here), which was to be organized under the laws of Delaware; and the church buildings, cemetery land, and schools were to be transferred to a nonprofit corporation to be known as the Amana Church Society. Each member was to receive one share of common stock as well as one share of "prior distributive" stock for each year of service to the Society. Transfer of land from the original Amana Society was made, pursuant to the plan, to the two corporations. In turn, private members received title to some of the property owned by the new Amana Society corporation. Some businesses, which were not needed by the corporation, were transferred to private owners. Most of the real estate conveyed to members was residential, and in most cases was sold to its occupants, who used their prior distributive shares as collateral.
The Plan of Reorganization anticipated the Society's continued land-use control by providing that
(t)he corporation should endeavor at all times to maintain control of the real estate now held by the present Society, and all deeds executed should, as nearly as they may be, contain reversionary clauses or restrictions, to the end that the control of the real estate be maintained by the new corporation.
The plan, however, provided for some discretion in the board:
The board of directors in this matter .... shall have the greatest discretion and may waive this provision, and they may adopt rules for the sales of real estate or interests therein to meet particular or changed conditions.
A form of deed was adopted by the Society to assure its continued control over the land. It provided for: (1) a utility easement to be reserved by the Society; (2) a right of first refusal in any proposed sale to an outsider or a corporation; (3) a prohibition on any construction on the land without consent of the Society; (4) restrictions on rental of the property; (5) a prohibition on the commercial use of the name "Amana" without the consent of the Society; and (6) most important to this case, extensive future control over the business use of the property by requiring all transfers to incorporate provisions requiring consent of the Society for operation of any business by the grantee or his successor in interest, providing for revocation of any such consent at any time, and automatic termination each April 1. The prescribed deed restriction provided:
This conveyance is made subject to the further restriction that the grantee herein, his or her successors, grantees, legal representatives or assigns, shall not engage in, conduct, maintain or operate on said real estate or in connection therewith any trade, business, occupation or any gainful pursuit without first obtaining the written consent of the grantor, which consent may be revoked at any time by the grantor; and if not revoked by the express act of the grantor shall automatically, and without notice or other action on the part of the grantor, expire on the 1st day of April next succeeding its issue; and any renewal or extension of such consent shall cease and...
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