Central Nat. Bank & Trust Co. of Des Moines v. Wagener

• Decision Date: 09 February 1971
• Docket Number: No. 54265,54265
• Citation: 183 N.W.2d 678
• Parties: CENTRAL NATIONAL BANK AND TRUST COMPANY OF DES MOINES, Appellee, v. L. H. WAGENER, L. H. Wagener, Inc. and Dorothy Wagener, Appellants.
• Court: Iowa Supreme Court

Page 678

183 N.W.2d 678

CENTRAL NATIONAL BANK AND TRUST COMPANY OF DES MOINES, Appellee, v. L. H. WAGENER, L. H. Wagener, Inc. and Dorothy Wagener, Appellants.

No. 54265.

Supreme Court of Iowa.

Feb. 9, 1971.

William B. Perry, Storm Lake, for appellants.

White, White, Prichard & Flores, Storm Lake, for appellee.

BECKER, Justice.

This is a judgment creditor's action in equity under Iowa Code, 1966, section 630.16 et seq. to subject property alleged to be the property of judgment debtor L. H. Wagener to legal process for the benefit of plaintiff judgment creditor. Judgment and decree was entered in favor of plaintiff and against defendants. Defendants appeal. We affirm.

On March 30, 1967 plaintiff obtained judgment against L. H. Wagener in the sum of $39,754.31. Execution was issued and returned unsatisfied on September 14, 1967. This action was started March 28, 1968.

Division I of plaintiff's petition alleges L. H. Wagener transferred 298 shares of stock to his wife Dorothy Wagener, that the transfer was invalid, without adequate consideration and made to hinder, delay and defraud plaintiff. Defendant denied the allegations. The trial court agreed with plaintiff, placed a lien against the stock and ordered execution sale thereof.

Division II of plaintiff's petition alleges the assets held by L. H. Wagener, Inc., a corporation, are the assets of L. H. Wagener, individually, the corporation is nothing more than the personal business of the individual. L. H. Wagener operated the corporation as a subterfuge and means of hindering and evading the collection of his personal debts. A lien was sought against the assets of the corporation including eight specifically described pieces of real estate. Again defendant denied generally, trial court found for plaintiff, imposed a lien on the corporately held property and ordered execution.

L. H. Wagener and his wife Dorothy were partnership owners of an automobile business prior to 1950. In that year they incorporated the L. H. Wagener, Inc., as sole owners. Three hundred shares of stock were issued, 299 to L. H. Wagener and one share to Dorothy. Mr. Wagener gave Dorothy a personal note dated November 27, 1950 for $29,800 payable on demand; interest was 7 percent per annum payable annually. This note is said to represent Dorothy's one-half share in the partnership, the assets of which went into the corporation. Under the terms of the note Mr. Wagener pledged 298 shares of his stock as security but payor had the option to either pay the note in cash or deliver the 298 shares in full settlement. A stock certificate was issued for 299 shares to Mr. Wagener and left with other corporate papers. Mr. Wagener was president of the corporation and Dorothy was secretary. It is not clear who had actual physical possession of the stock certificates. No stock, other than the 300 shares, was ever issued.

The existence of the note and pledge were not made known to anyone but the two sole stockholders. No interest was paid on the note. On March 5, 1965 Mr. Wagener signed the transfer clause on back of the stock certificate transferring 298 shares of stock to his wife. However the transfer was never reflected on the stock transfer stub book, no new certificates were ever issued and the corporate records are silent as to the transfer except for a reference in the minute book dated November 27, 1965 recognizing the transfer and directing the secretary to make transfer on the stock records. This transfer was never made.

Since the organization of the corporation Wagener used it to engage in various business including insurance, highway construction, real estate, financing other contractors, guaranteeing for a fee the performance bonds of other contractors and sundry other business enterprises.

Early in January 1965, in a rather complicated business transaction, Wagener agreed to guarantee $70,000 of a $100,000 note from the Marric Company, another construction firm. This note evidenced a loan from plaintiff bank to Marric Company. During the preliminary negotiations Mr. Wagener represented to the bank officers that his personal net worth was about $250,000, most of which was represented by ownership of stock in defendant corporation. A corporate financial statement as of January 15, 1965, on a form required by the Iowa State Highway Commission, was furnished the bank. This statement showed a corporate net worth of $248,000 and ownership by Mr. Wagener of 299 of the 300 shares issued by the corporation. We find this information was intended to, and did, furnish corroboration for Wagener's representation that his net worth was about a quarter of a million dollars, mostly in L. H. Wagener, Inc. corporate stock. Subject to the accuracy of the valuations placed in corporate assets, the information was true at the time made. What was not known or revealed was that Wagener would shortly transfer his entire fortune to his wife in payment of an unrevealed lien of 15 years duration.

Mrs. Wagener testified she knew of the negotiations with the bank. She also knew that if her husband transferred 298 shares of his stock to her his net worth was practically zero. She knew of no other assets that he might own except the one remaining share of stock. It should be noted the automobiles personally used by Mr. and Mrs. Wagener and their son, and a fiberglass boat were all owned by the corporation. Mr. Wagener also testified that after transferring the 298 shares he was without substantial assets.

No explanation of why the fifteen-year-old note was called on March 5, 1965 was ever given. Also defendants failed to explain the apparent inadequacy of consideration. The note, with interest, had a face value of about $72,000. The corporate value of the stock by the financial statement certified by defendants was over $245,000. Defendants are in no position to gainsay this evaluation.

On March 19, 1965 Wagener signed the $70,000 guarantee. Plaintiff also showed transactions by Mr. Wagener under which he incurred additional personal indebtedness of nearly $200,000. Each transaction benefited the corporation. None were noted by the corporation as liabilities. All were accomplished under financial statements showing rapidly rising net worth and ownership of 299 shares of stock in L. H. Wagener.

I. We need not repeat the elements necessary to prove fraud, the character of the evidence required or the burden of proof. These matters were recently reviewed in Hall v. Wright, 261 Iowa 758, 766, 767 156 N.W.2d 661 (1968) as to law cases and in Detrick v. Aetna Casualty and Surety Co., 158 N.W.2d 99, 105 (Iowa 1968) as to equity cases. Cf. Alpen v. Chapman, 179 N.W.2d 585, 589, 590 (Iowa 1970).

Enough facts have been...