Berger v. Amana Soc.

• Decision Date: 14 November 1961
• Docket Number: No. 50349,50349
• Citation: 111 N.W.2d 753,253 Iowa 378
• Parties: Adolph T. BERGER et al., Appellants, v. AMANA SOCIETY et al., Appellees.
• Court: Iowa Supreme Court

Page 753

111 N.W.2d 753

253 Iowa 378

Adolph T. BERGER et al., Appellants, v. AMANA SOCIETY et al., Appellees.

No. 50349.

Supreme Court of Iowa.

Nov. 14, 1961.

Rehearing Denied Jan. 9, 1962.

Swift & Swift, Marengo, Edward J. Von Hoene, Williamsburg, Messer & Cahill, Iowa City, for appellants.

David G. Bleakley & Harold D. Vietor, Cedar Rapids, F. Paul Harned, Marengo, for appellees.

HAYS, Justice.

This proceedings in equity involves the validity of an Amendment to the Articles of Incorporation of the Amana Society, an Iowa Corporation organized under the provisions of Chapter 491, Code of Iowa, I.C.A. The Amendment in issue was adopted December 12, 1955. Plaintiffs herin, a minority group of the original Class A stockholders, seek to enjoin the Society from operating thereunder.

The Society originally was formed to aid in effectuating certain ideals in religious life, especially those relating to communistic ownership of property. In 1932, the Society reorganized under Chapter 491, Code of Iowa, I.C.A., and renewed its charter in 1952. By such reorganization, though changes were made in the operation thereof, there was still retained the basic religious beliefs and the intent to keep the control and management of the Society in the hands of members of such Cult. Basically, this was accomplished by placing the sole voting power of the members in the holders of Class A stock. This stock with a par value of $50 was limited one share to a member and one vote to a share which must be cash in person. It was provided for this stock to pass to the Society upon the death or departure of the owner from the community, and for issuance of such stock to a decedent's children. It also provided for the Society, upon the acquiring such stock as above mentioned, to pay cash therefor at its book value.

Under the Amendment, now in issue, each Class A share of stock was reclassified at 100 to 1 with the requirement that each original share be exchanged for a new 100 shares having a par value of 50cents per share. It provided for the issuance of 300,000 shares of Class B stock, par value of 50cents, and gave to such new issue, equal rights with Class A stock in the matter of voting and most other privileges. Class B stock could be freely disposed of among members or to strangers, subject only to an option in the Society, for a limited time, to purchase same. It also eliminated the requirement that the Society redeem Class A stock for cash, by requiring that redemption be made by a compulsory exchange of such stock for an equal number of Class B shares. The Amendment making the changes, above stated, and others not material here, was adopted by a two-thirds vote of the Class A stockholders attending the meeting called for such purpose in accord with Section 491.20, Code 1954, I.C.A.

Plaintiffs alleged in their petition that the amendment was illegal in that it destroyed contractual rights between the Society and its Class A stockholders as to the redemption of their stock. They also alleged the adoption of the Amendment was procured by fraud, misrepresentation and coercion upon the part of the Directors. Defendant by answer denied the fraud and also that such a contract, as alleged by plaintiffs, existed, but if it did it was waived. Issues being thus joined and before trial, the trial court was asked to rule upon law points presented by the pleadings under Rule 105, R.C.P., 58 I.C.A. The Court ruled that if such contract existed, it was waived by the adoption of the Amendment in the manner prescribed in the Articles of Incorporation.

Plaintiffs were granted permission to appeal, as was defendant, under Rule 332, R.C.P. Upon such appeal, this court held plaintiffs had contractual rights to have their Class A shares of stock redeemed in cash which was so fundamental in character as to require the consent of each Class A share owner. The trial court's ruling was reversed and the cause remanded for further consideration of remaining issues. See, Berger v. Amana Society, 250 Iowa 1060, 95 N.W.2d 909, 70 A.L.R.2d 830.

Upon the remand, the defendant, by amendment to its answer, pleaded that the contract was void as being against public policy. Plaintiff by reply pleaded res adjudicata, citing Berger v. Amana Society, supra. The trial Court, after a hearing, held the contract was void as being against public policy; that no fraud was established, and dismissed plaintiff's petition subject to a future determination of the amount of fees to be allowed plaintiff's attorneys for services in the appeal under Rule 332. Both parties have appealed.

Two basic issues presented by plaintiffs appeal, are (1) status of our decision in Berger v. Amana Society; and (2) The establishment of fraud upon the part of the directors of the Society.

I. Was the plea of res adjudicata a good defense to the Amendment alleging the contract to be against public policy?

Rule 105, R.C.P., provides: '* * * It shall enter an appropriate final order * * * adjudicating the point so determined * * *.' (Italics ours). Such a ruling is the law of the case during further proceedings in the trial in the absence of an appeal under Rule 332. Litchford v. Iowa-Illinois Gas & Electric Co., 247 Iowa 947, 75 N.W.2d 346. A fortiori, a decision of this court on appeal under Rule 332, and a remand for further proceedings in accord therewith, has no less status or effect. If is the law of the case upon a remand and upon further appeals to this court. Lawson v. Fordyce, 237 Iowa 28, 21 N.W.2d 69; Glenn v. Chambers, 244 Iowa 750, 56 N.W.2d 892.

The trial court does not dispute this as an abstract legal proposition, but holds that the validity of the contract was not the point so determined. The issue thus is as to the point so determined. Plaintiffs assert contractual rights based upon the Articles of Incorporation and seeks injunctive relief to protect them. Defendant states no such contract rights and also that if there be such a contract, plaintiffs waived all rights thereunder. Rule 101, R.C.P. requires that any defense in bar or abatement that a contract sued upon is void or voidable must be specifically pleaded. Rule 103, R.C.P. provides that any defense in bar or abatement shall be made in the answer or reply. In considering this rule we have held it to mean that a party to litigation may not split his cause of action and try it piecemeal; in other words, he may not present one branch of his case for the court's determination, and, when unsuccessful therein, begin over again presenting some other matter upon which he relies which might have been presented and determined theretofore. Rural Independent School Dis't. No. 3 of Johns Tp. v. McCracken, 215 Iowa 55, 244 N.W. 711; Lynch v. Lynch, 250 Iowa 407, 94 N.W.2d 105. This is exactly what defendant attempts to do. To say, as contended by defendant, and concurred in by the trial court, that the plea of waiver did not concede, at least under such defense--see Rule 72, R.C.P., a valid contract is nonsense. It would reduce Rule 105 to a mere means to obtain an advisory ruling and there would be no end to litigation. Defendant's attempt to switch horses at this stage of the race is untenable. Berger v. Amana Society, 250 Iowa 1060, 95 N.W.2d 909 determined the contract was valid. The plea of res adjudicata constituted a good defense to the amendment and the decree of the trial court upon this issue was erroneous.

II. Does the record show fraud upon the part of the Society, acting through its directors, whereby they induced the adoption of the Amendment?

In February 1955, at the annual meeting of the stockholders of the Society, the treasurer of the Society, William F. Noe, gave a report which pictured the Society to be in dire financial distress and recommending some plan to modify the cash redemption of Class A stock, and to provide for outside management of the business of the Society and still keep control in the hands of members of the faith. At this time a special committee was appointed to formulate a preliminary plan leading to such end. William F. Noe, treasurer, and Louis R. Marz and Harry A. Geiger, directors, were appointed. The proposed amendment was formulated by the committee with the assistance of Counsel which it employed. This was approved by the directors on October 5th 1955. As was required by Section 491.20, Code of Iowa, I.C.A., a 60 days notice of a special meeting of the Class A stockholders was sent out on Oct. 10, 1955 with December 12, 1955, being the date set for the meeting. Attached to the notice was a brief statement of the contents which makes no mention of the 300,000 Class B stock provision but stresses the financial status of the Society and the provision for eliminating the cash redemption feature. Also attached was a personal letter from H. G. Moershel, President of the Society and a trustee and president of the Amana Church Society, endorsing the Amendment as a step toward bettering the financial status of the Society.

The Committee arranged three special meetings of Class A stockholders to be held on October 21, 24 and 25 for the purpose of discussing this proposed amendment. Mr. Noe and two directors attended with Noe apparently being in charge. No official record of the proceedings at these meetings was made but it appears that Noe read, at each meeting, what was clearly a carefully prepared statement and in which the financial status of the Society was stressed with emphasis upon the redemption feature. Nowhere in the paper he read is there any reference to the proposed 300,000 shares of Class B stock and its possible effect upon the future control of the Society, nor did any other director there attempt to explain it. In...