Duvall v. Moore
| Citation | 276 F. Supp. 674 |
| Decision Date | 30 August 1967 |
| Docket Number | Civ. No. 66-C-2047-C. |
| Parties | Thomas O. DuVALL, Lucille C. DuVall, and Ben C. Birdsall, Plaintiffs, v. G. E. MOORE, James E. Scherrman, G. E. Moore and James E. Scherrman, as Trustees of Midwest Employees' Profit Sharing Trust, Midwest Limestone Co., Incorporated, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Lloyd Karr, Webster City, Iowa, for plaintiffs.
A. Arthur Davis, Donald A. Wine and Donald J. Brown, Des Moines, Iowa, for defendants.
This ruling is predicated upon a motion by the defendants for summary judgment.
Jurisdiction of the instant case is grounded upon diversity of citizenship. The complaint was filed by certain minority shareholders in relation to a purported amendment to the Articles of Incorporation of Midwest Limestone Co., Incorporated, hereinafter called Midwest, which sought to give the corporation perpetual existence.
Plaintiffs have filed what is denominated as a "Request for Findings of Fact and Conclusions of Law." It should be noted that Rule 56 of the Federal Rules of Civil Procedure limits any findings to material facts upon which there is no genuine issue if the case is fully adjudicated upon the motion and to ascertainment of "what material facts exist without substantial controversy" if the case is not fully disposed of.
Certain facts are without dispute. Defendant Midwest filed its Articles of Incorporation and was issued its license by the State of Iowa on February 2, 1953. The Articles provided that the life of the Corporation was twenty years which meant it would end on or about February 2, 1973. Pursuant to the Articles, two types of common stock, Class A and Class B, were issued by Midwest. The two types of capital stock were allocated as follows:
Class A Class B
Thomas A. DuVall 200 200
Ben C. Birdsall 34 500
G. E. Moore 219 2,000
James E. Scherrman 50
Midwest Employees' Profit
Sharing Trust 471 380
Harry Anderson 250
Eugene Simpson 180
John A. Cloos 76 500
_____ _____
Total 1,000 4,060
The defendants, G. E. Moore and James E. Scherrman, individually and as Trustees of the Midwest Employees' Profit Sharing Trust, were the owners of 690 shares of Class A stock and 2,430 shares of Class B stock. These amounts constituted a majority of both classes of stock. The plaintiffs and the other stockholders own a minority of the stock in interest.
On or about November 28, 1966, the defendants G. E. Moore, as President, and James E. Scherrman, as Secretary, caused a "Notice of Annual Meeting of Stockholders" to be sent to all the shareholders of Midwest. The Notice contained a proposal that the Articles be amended to provide for the perpetual existence of the Corporation. The annual meeting was held on December 8, 1966, at the home office of Midwest in Gilmore City, Iowa. A written objection to the perpetual duration proposal in the form of a "Notice of Dissent" was filed with the President and Secretary of Midwest. It was signed by Thomas O. DuVall, Lucille C. DuVall, and Ben C. Birdsall, Plaintiffs, and John A. Cloos. Birdsall and Cloos were personally present at the meeting. Birdsall filed a proxy at the beginning of the meeting which gave him authority to vote all of DuVall's stock, Class A and Class B. The Chairman of the meeting ruled that the Class B stock could not vote. Plaintiffs and John A. Cloos objected to the ruling and stated that it was their position that the Class B stock was entitled to vote on the proposed renewal. The objection was overruled by defendant Moore, the Chairman. Moore then called for a vote on the resolution, announcing that only Class A stock was entitled to vote. Plaintiffs and Cloos again objected and filed a document purporting to show their vote if they had been permitted to vote. The minutes show that the resolution passed by a vote of 690 to 310.
The complaint consists of two Counts. In Count I of the complaint, plaintiffs appear to be asserting a number of theories. In Paragraph 18, plaintiffs allege that the amendment to secure perpetual existence was in bad faith and for the purpose of depriving them of their property rights. In Paragraph 26 of the complaint, it is alleged that the plaintiffs and defendants are unable to agree as to the value of the stock owned by plaintiffs and the obligations of defendants in relation thereto. Plaintiffs claim that the defendants are obligated to purchase all their stock and that of John A. Cloos under Iowa Code Section 491.25. Finally, plaintiffs allege that Section 491.25 is unconstitutional if it is construed to exclude the Class B stock owned by plaintiffs.
Plaintiffs pray, inter alia, for a declaration that defendants are obligated to purchase all of plaintiffs' stock, Class A and Class B, and for the Court to determine the real value thereof. In addition, plaintiffs seek recovery "for the costs of this action and for such other, further and different relief as to the Court may seem just and equitable in the premises."
Count II relates to an alleged agreement that both Class A and Class B stock were to vote on the proposed resolution to renew the Corporation.
The major issues which have been framed for the Court's consideration by the Motion for Summary Judgment and the briefs of the parties are: (1) Whether plaintiffs can have any recovery in the cause as pleaded; (2) Whether the Class B stock was entitled to vote upon the resolution to amend the Articles of Midwest to provide for perpetual existence; (3) Whether Iowa Code Section 491.25 is unconstitutional; (4) Whether the complaint is sufficient in its allegations of bad faith on the part of defendants; and (5) Whether Count II, relating to the voting agreement, can withstand the Motion for Summary Judgment.
As to the first issue presented for the Court's determination, the defendants contend that the plaintiffs have sought only a declaration that defendants are obligated to purchase all of the plaintiffs' stock and that they are not entitled to such relief regardless of whether or not the Class B stock was entitled to vote. The argument runs as follows: If the Class B stock was entitled to vote and if the Court were to deem that such stock was voted against the renewal, the resolution would have failed to pass by a vote of 1510 to 690; on the other hand, if the Court were to determine that the Class B stock was entitled to vote and the votes were not cast against the extension, there would similarly be no obligation of defendants to purchase plaintiffs' stock as Section 491.25 applies only to "stock voted against such renewal."
The premise from which defendants' argument flows is fallacious. Plaintiffs pray not only for appraisal but also general equitable relief. A prayer for general equitable relief must be liberally construed. Alcorn v. Linke, 257 Iowa 630, 133 N.W.2d 89 (1965). An equity court will grant relief under such a prayer when it is raised by the issues and supported by the evidence apart from other relief requested. Baldwin v. Equitable Life Assurance Society, 252 Iowa 639, 108 N.W.2d 66 (1961); 27 Am.Jur. 2d 813.
Plaintiffs suggest that the following forms of equitable relief would be appropriate in the case at hand:
1. A declaration that the resolution was not legally adopted and that the corporate life of Midwest has not been renewed to exist perpetually.
2. An order directing the defendants to convene a new meeting of the stockholders of the corporation to present the proposition and to give all stockholders the right to dissent therefrom or to vote thereon with a resulting obligation to purchase imposed on those voting for renewal if the resolution is adopted.
3. A decree restoring all parties to a status quo and holding that all stock of the corporation is entitled to dissent from or vote upon any future proposal for an extension of the corporate life.
Numbers 1 and 3 of the forms of relief to which plaintiffs feel they may be entitled seem to properly be directed at injunctive relief. Number 2 cannot be sustained as it appeals to the Court to direct defendants to convene a new meeting. Such a decree would be in the nature of mandamus. The Court cannot so order under Count I as defendants are not public officials.
In Berger v. Amana Society, 250 Iowa 1060, 95 N.W.2d 909, 70 A.L.R.2d 830 (1959), it was held that an action for an injunction against the corporation and officers to prevent certain illegal amendments to its Articles from being put into effect would lie. Quo warranto was adjudged to be an inappropriate remedy as the public interest was not involved. Also, the remedy was not certiorari against the Secretary of State who approved the disputed amendments because Id., 95 N.W. 2d at p. 916.
In Rath v. Rath Packing Co., 257 Iowa 1277, 136 N.W.2d 410 (1965), the Court struck down a purchase of the assets of Needham Packing Company by Rath. The transaction was in substance a de facto merger and a statutory merger section which required approval by two-thirds vote of the outstanding shares had not been met by Rath. The Court treated the plan as void and did not reach the issue of fairness. See also McDonough, The Appraisal Remedy for Dissenting Shareholders in Iowa and the De Facto Merger Doctrine: Rath v. Rath Packing Company, 16 Drake L.Rev. 22 (1966). Professor McDonough is of the opinion that the Court felt that any plan accomplished by other than the prescribed...
To continue reading
Request your trial
-
ER Holdings, Inc. v. Norton Co.
...WL 7001 (S.D.N.Y. June 18, 1986); Holly Sugar Corp. v. Buchsbaum, Fed.Sec.L.Rep. (CCH) 98,366, 1981 WL 1708 (1981); DuVall v. Moore, 276 F.Supp. 674 (N.D. Iowa 1967); Allen v. Prime Computer Corp., 540 A.2d 417 (Del.1988); State ex rel. Gentles v. Barnholt, 145 Colo. 259, 358 P.2d 466 (1961......
-
Horizon House-Microwave, Inc. v. Bazzy
...of the merger were a dilution of equity of the nonvoting stock, i.e., this would be an adverse effect. Cf. DuVall v. Moore, 276 F.Supp. 674, 686 (N.D.Iowa 1967), in which the court reasoned that the considerations for permitting nonvoting stock to vote on fundamental affairs are more persua......
-
Shidler v. All American Life & Financial Corp., s. 84-2398
...Vorenburg, Exclusiveness of the Dissenting Stockholder's Appraisal Right, 77 Harv.L.Rev. 1189, 1209-10 (1964); cf. DuVall v. Moore, 276 F.Supp. 674, 688 (N.D.Iowa 1967) (stockholders wrongfully denied voting rights had no claim to appraisal because underlying corporate resolution was invali......
-
Acequia, Inc., In re
...The Plan modifies the Debtor's articles and by-laws which permit shareholders to vote for directors. See generally DuVall v. Moore, 276 F.Supp. 674, 680 (N.D.Iowa 1967) (relationship between shareholder and corporation is contractual). As noted, both Clinton and Haley are deprived of their ......