Carroll By and Through Miller v. Wyoming Production Credit Ass'n

• Citation: 755 P.2d 869
• Decision Date: 02 June 1988
• Docket Number: 87-34,Nos. 87-33,s. 87-33
• Parties: Gertrude S. CARROLL, By and Through Margaret MILLER, the temporary guardian of the person of Gertrude S. Carroll and conservator of the estate of Gertrude S. Carroll, Appellant (Plaintiff), v. WYOMING PRODUCTION CREDIT ASSOCIATION, a corporation, Appellee (Defendant), Carroll and Carroll, a corporation, and Howard T. Carroll (Defendants). Gertrude S. CARROLL, By and Through Margaret MILLER, the temporary guardian of the person of Gertrude S. Carroll and conservator of the estate of Gertrude S. Carroll, Appellant (Plaintiff), v. The FEDERAL LAND BANK OF OMAHA, a corporation, Appellee (Defendant), Carroll and Carroll, a corporation, and Howard T. Carroll (Defendants).
• Court: Wyoming Supreme Court

Page 869

755 P.2d 869

Gertrude S. CARROLL, By and Through Margaret MILLER, the temporary guardian of the person of Gertrude S. Carroll and conservator of the estate of Gertrude S. Carroll, Appellant (Plaintiff), v. WYOMING PRODUCTION CREDIT ASSOCIATION, a corporation, Appellee (Defendant), Carroll and Carroll, a corporation, and Howard T. Carroll (Defendants).

Gertrude S. CARROLL, By and Through Margaret MILLER, the temporary guardian of the person of Gertrude S. Carroll and conservator of the estate of Gertrude S. Carroll, Appellant (Plaintiff), v. The FEDERAL LAND BANK OF OMAHA, a corporation, Appellee (Defendant), Carroll and Carroll, a corporation, and Howard T. Carroll (Defendants).

Nos. 87-33, 87-34.

Supreme Court of Wyoming.

June 2, 1988.

John J. Rooney and William D. Bagley (argued) of Rooney, Bagley, Hickey, Evans & Statkus, Cheyenne, for appellant in Nos. 87-33 and 87-34.

Jerry A. Yaap of Bishop, Bishop & Yaap, Casper, and Howard P. Olsen, Jr. (argued) of Simmons, Raymond, Olsen, Ediger, Selzer & Ballew, Scottsbluff, Neb., for appellee in Nos. 87-33 and 87-34.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT and MACY, JJ.

CARDINE, Justice.

Appellant, Gertrude Carroll, the majority shareholder of Carroll and Carroll, a Wyoming corporation, filed separate suits against appellees Wyoming Production Credit Association and Federal Land Bank of Omaha. She seeks to declare mortgages and accompanying notes, financing statements and security agreements of the corporation in favor of appellees void and to vacate and set aside judgments and decrees of foreclosure of the mortgages. She also seeks an award of damages for any conversion by appellees of property of the corporation pursuant to the judgments and decrees. The single issue raised by appellant is whether a mortgage that encumbers substantially all of the corporation's property, made by a director without shareholder approval, is valid. These consolidated appeals are taken from summary judgments foreclosing appellees' mortgages.

We affirm.

On January 13, 1955, Carroll and Carroll was incorporated in Wyoming with capital stock of $250,000 divided into 2,500 shares with a par value of $100 each. The corporate charter allows the corporation, among other things, "to borrow money, pledge its credit and property as security for loans or the purchase of merchandise and any and all other additional credits that may be necessary or beneficial in the conduct of [its] business." Three directors named at the time of incorporation were Gertrude S. Carroll, holding approximately two-thirds of the 1,832 outstanding shares, Frank N. Carroll (it is unclear from the record whether Frank owned any shares), and Howard T. Carroll, holding approximately one-third of the corporation's outstanding shares.

On January 21, 1971, Howard T. Carroll was elected president of the corporation. He has continued as president since that time. Gertrude Carroll was a director from the date of incorporation until January 27, 1981. From January 7, 1975 to January 27, 1981, however, her physical and mental health was such that she did not participate in corporate affairs or attend the meetings of the Board. On January 27, 1981, Howard T. Carroll, Teri K. Carroll, and Ruth E. Satra were elected directors and have continued as directors since that time. Gertrude Carroll remained the majority shareholder of the corporation at all times.

On December 1, 1982, and May 31, 1983, the corporation, through Howard T. Carroll and the other directors, executed two notes to Wyoming Production Credit Association (WPCA) in the amounts of $1,703,000 and $489,600. A similar note was executed on behalf of the corporation in favor of Federal Land Bank of Omaha (FLB) in the amount of $1,050,000. These notes were secured by mortgages and other security agreements encumbering all of the assets of the corporation. No shareholder meeting was called to discuss the encumbering of the corporation's assets, nor was any notice given to Gertrude Carroll. Each transaction, however, was authorized by corporate resolution. The proceeds of the transactions were applied in part to the corporation and in part to other businesses in which Howard T. Carroll was interested.

In all the business transactions with WPCA and FLB, Howard T. Carroll represented that he was the majority shareholder of the corporation and had full authority to borrow funds and execute security instruments on behalf of the corporation. On September 30, 1985, Howard T. Carroll filed Chapter 11 bankruptcy on behalf of the corporation, swearing in the petition that he was the sole stockholder of the corporation, owning 2,100 shares of stock. He later corrected this representation while testifying in the bankruptcy court on October 28, 1985, stating that he owned only about 700 of the 2,200 outstanding shares, and that the balance of the stock was owned by his mother in trust.

Upon learning of the bankruptcy petition, WPCA and FLB filed foreclosure actions in the district court on the notes. The corporation defaulted by not answering the complaints, and the district court entered judgments and decrees of foreclosure against the corporation. Foreclosure proceedings are now pending.

On December 6, 1985, Margaret Miller was appointed temporary guardian of Gertrude Carroll and the conservator of her estate. In that capacity, Margaret Miller filed two actions in district court--the first against WPCA, the corporation, and Howard T. Carroll, and the second against FLB, the corporation, and Howard T. Carroll--alleging that Howard T. Carroll executed the notes without the approval or authorization of at least two-thirds of the stockholders of the corporation, as required by § 17-1-502, W.S.1977. Appellant asked the district court to declare the notes, mortgages and various financing statements and security agreements void, to vacate and set aside the judgments and decrees of foreclosure entered against the corporation, and to award damages to appellant for any conversion by WPCA and FLB of any of the properties of the corporation pursuant to the judgments and decrees.

Appellees WPCA and FLB answered, alleging that Howard T. Carroll and the corporation continuously misrepresented the true ownership of the stock of the corporation and Howard T. Carroll's authority to act on behalf of the corporation; that Howard T. Carroll presented a proper corporate resolution by the board of directors authorizing the borrowing and execution of the security documents; and that the action was barred by the statute of limitations, the doctrine of laches, and the doctrine of estoppel.

Appellant moved for partial summary judgment against WPCA and summary judgment against FLB. Appellees also filed motions for summary judgment with supporting affidavits and exhibits. The district court denied appellant's motion for partial summary judgment and entered summary judgments in favor of appellees. Appeal is taken from these summary judgments.

The purpose of summary judgment is to eliminate formal trials where only questions of law are involved. Duffy v. Brown, Wyo., 708 P.2d 433 (1985). Summary judgment is only appropriate when there is no genuine issue of material fact and the prevailing party is entitled to judgment as a matter of law. Greaser v. Williams, Wyo., 703 P.2d 327 (1985); Hurst v. State, Wyo., 698 P.2d 1130 (1985). A material fact is one which, if proved, would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. Colorado National Bank v. Miles, Wyo., 711 P.2d 390 (1985).

In this case we are asked to interpret §§ 17-1-501 and 17-1-502, W.S.1977, of the Wyoming Business Corporation Act. Generally, statutory interpretation is a question of law for the court. School Dist. No. 48, Washington County v. Fair Dismissal Appeals Board, 14 Or.App. 634, 514 P.2d 1114 (1973). See also Noey v. Department of Environmental Conservation, Alaska, 737 P.2d 796 (1987). In interpreting statutes, "[i]t is our duty to ascertain the intention of the legislature as completely as possible from the language used in the statute itself," State, Department of Revenue and Taxation, Motor Vehicle Division v. Andrews, Wyo., 671 P.2d 1239, 1246 (1983), and "if such intent is expressed clearly and without ambiguity in the language of the statute, such intent must be given effect." Oroz v. Hayes, Wyo., 598 P.2d 432, 434 (1979).

In 1957, the Wyoming legislature adopted the Model Business Corporation Act (MBCA) which, with some modification, was titled the Wyoming Business Corporation Act. Sections 17-1-501 and 17-1-502, W.S.1977, were modeled after §§ 71 and 72, respectively, of the MBCA. In 1957, § 71 of the MBCA provided:

"The sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of a corporation, when made in the usual and regular course of the business of the corporation, may be made upon such terms and conditions and for such considerations * * * as shall be authorized by its board of directors; and in such case no authorization or consent of the shareholders shall be required." (Emphasis added.)

Section 72 provided:

"A sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets, with or without the good will, of a corporation, if not made in the usual and regular course of its business, may be made upon such terms and conditions * * * as may be authorized * * * [upon]

* * *

* * *

"(c) * * * the affirmative vote of the holders of at least two-thirds of the outstanding shares of each class of shares entitled to vote as a class thereon and of the total outstanding shares." (Emphasis added.)

Both §§ 71 and 72 included within the disposition of assets a mortgage or pledge of those assets.

The Wyoming legislature, in enacting §§ 17-1-501 and 17-1-502, adopted the MBCA with a modification that is of...