Hyatt Bros., Inc. ex rel. Hyatt v. Hyatt
| Decision Date | 03 February 1989 |
| Docket Number | No. 88-74,88-74 |
| Citation | 769 P.2d 329 |
| Parties | HYATT BROTHERS, INC., ex rel., Dorothy C. HYATT, a shareholder; Dorothy C. Hyatt, as a shareholder and individually; and Medicine Lodge Livestock Corp., Appellants (Plaintiffs), v. S. Wesley HYATT, as a director, officer and shareholder in Hyatt Brothers, Inc., and individually; Margaret F. Hyatt, as director and shareholder in Hyatt Brothers, Inc., and individually; P. Milton Hyatt, as a director, officer and shareholder in Hyatt Brothers, Inc., and individually; Loretta D. Hyatt, as a director and shareholder in Hyatt Brothers, Inc., and individually; Wesmar Ranch, Inc.; and Hyatt Brothers, Inc., Appellees (Defendants). |
| Court | Wyoming Supreme Court |
Steven F. Freudenthal of Freudenthal, Salzburg, Bonds & Rideout, P.C., Cheyenne, John P. Worrall, Davis, Donnell, Worrall & Bancroft, P.C., Worland, for appellants.
Henry A. Burgess and Darlene L. Reiter of Burgess & Davis, Sheridan, for appellees.
Before CARDINE, C.J., and THOMAS, URBIGKIT, MACY and GOLDEN, JJ.
We hold that the trial court erred in striking appellants' demand for jury trial under W.R.C.P. 38(b)(1), in an action for the recovery of money allegedly wrongfully diverted from a close corporation and from one of the minority shareholders of the corporation and for other relief.
We remand the case for jury trial. In light of our remand, we need not answer the other questions raised since the matters
to which they relate will be decided on retrial.
PARTIES
The appellants are:
1. Hyatt Brothers, Inc., a close corporation, on the relation of Dorothy C. Hyatt, a minority shareholder (HBI);
2. Dorothy C. Hyatt, individually and as a shareholder (415 shares) (Dorothy);
3. Medicine Lodge Livestock Corporation, a corporation wholly owned by Dorothy (Medicine Lodge).
The appellees are:
1. S. Wesley Hyatt, individually and as a shareholder (400 shares), a director and an officer of HBI (Wesley);
2. Margaret F. Hyatt, Wesley's wife, individually and as a shareholder (15 shares) and a director of HBI (Margaret);
3. P. Milton Hyatt, Wesley's brother, individually and as a shareholder (400 shares), a director, and an officer of HBI (Milton);
4. Loretta D. Hyatt, Milton's wife, individually and as a shareholder (15 shares) and a director of HBI (Loretta);
5. Wesmar Ranch, Inc., a corporation largely owned by Wesley and Margaret (Wesmar); and
6. HBI, the previously mentioned close corporation.
Milton, Wesley, and Gilbert Eugene Hyatt (Eugene), brothers, were born and raised on the Hyatt family home ranch on Paint Rock Creek in Big Horn County, Wyoming. Their father, Samuel C. Hyatt, took them into the ranch operations as they grew up. In 1948, while attending college, Eugene married Dorothy. Graduating from college, Eugene returned to the family ranch with Dorothy and resumed the ranch operation with his father and two brothers. In 1956, the three brothers formed a partnership and purchased their father's ranch operation. In 1963, the brothers incorporated their partnership to form HBI. Each brother owned 415 shares of HBI stock. From 1963 to 1968, the three brothers shared equally the operational responsibilities of HBI, with Milton responsible for cattle, Wesley responsible for sheep, and Eugene responsible for the ranching and farming. HBI's ranching operation also included the separate ranches which each brother individually owned. During this time period the brothers drew no salaries. At monthly meetings the brothers would present all their bills, post them in "the black book," charge each brother's bills to each brother's account in the book, and have HBI pay all the bills. At the end of the year, the brothers tabulated and settled the accounts and shared equally any profit made.
In January, 1968, Eugene died. As a result of discussions with Milton and Wesley, Dorothy indicated to them she wanted to stay at the ranch. All of them wanted the ranch operation to continue. Milton and Wesley told Dorothy they would look after her interests in the ranch as well as their own. From September 1968, to August 1970, Dorothy commuted to Northwest Community College in Powell, Wyoming, to attend classes. From fall 1970, to fall 1972, she attended classes at the University of Wyoming. From fall 1972, to January 1973, she was a student teacher at a school in Powell. From January 1973, to August 1975, she had an internship through the University of Wyoming. She worked in Rock Springs from fall 1975, to early 1976. Then she returned to Laramie and lived there until September 1977. She spent a month in Norway and then returned to live with her son and his wife at Medicine Lodge on the ranch. During this period from 1969 through 1977, Dorothy only occasionally visited the ranch and had little involvement in the ranch operation. She has lived at the ranch from late 1977 or early 1978 to the present time.
As a result of their brother Eugene's death in 1968, Milton and Wesley made changes in the operation of the ranch, including:
1. In 1968, they began paying themselves salaries in addition to charging expenses for the "meals and lodging" account.
2. Beginning in 1969, they had HBI enter into identical separate written lease agreements with Milton, Wesley, and Dorothy under the terms of which HBI, as lessee, leased from each lessor all of the lessors' lands and livestock. From the sale of each lessor's cattle and sheep, identified as "saleable crop," HBI as lessee kept sixty percent of the gross income and the lessors received forty percent. With reference to the further division of HBI's sixty percent share of the gross income, Milton and Wesley devised a division formula based upon each lessor's percentage allocation under federal grazing permits to use lands of the Big Horn National Forest. Neither Milton nor Wesley told Dorothy about this formula and Dorothy claimed no one told her about it.
3. They gave to themselves "wage credits" that were subtracted from their personal expense totals tabulated at each year's end. A "wage credit," also called a "convenience to the employer" item under § 119, Internal Revenue Code, represented a sum of money paid to a corporate officer to defray costs of rent, utilities, gas, and the like incurred by the corporate officer required to be on corporate premises by the corporation. The "wage credits" received by Milton and Wesley from HBI were in addition to their salaries.
4. The two brothers allegedly:
a. used HBI property and employees in the operation of their separate hunting operation and dude ranch operation.
b. without Dorothy's consent, leased and then sold certain Bureau of Land Management grazing rights belonging to her.
c. wrongfully induced Dorothy to convey her interest in certain real property to a grantee corporation owned in part by them.
d. failed to return to Dorothy her cattle and money to which she believed she was entitled after her lease with HBI was terminated.
e. accumulated and kept for themselves in the form of certificates of deposit large sums of money derived from HBI's ranching operations.
In their original and amended complaints, appellants demanded a jury trial under W.R.C.P. 38(b)(1). As finally framed in the second amended complaint, the essential nature of the allegations to be tried by a jury and the relief sought by appellants were as follows:
Count 1: Milton and his wife and Wesley and his wife managed HBI's affairs in derogation of HBI's interest and diverted to their own benefit HBI's and shareholders' profits and funds in excess of $210,000 and cash in the amount of $124,000. Appellants sought recovery of this money.
Count 2: Appellees breached an agreement dated March 1, 1970, among all HBI shareholders which provided, among other things, that if a shareholder decided to sell his or her individual property which was included in HBI's ranch operation, then he or she would first offer the property to the remaining shareholders on terms specified in the agreements. Appellants sought sale of HBI without offering Dorothy the right to purchase HBI at the highest bid.
Count 3: Milton and Wesley retained for their personal benefit all profits resulting from a lease of Grey Bluffs Ranch to third parties; that ranch included HBI's 201 animal unit months and Milton and Wesley sold those 201 animal unit months and retained the proceeds in derogation of HBI's and Dorothy's ownership interest in them. Appellants sought payment to Dorothy and her corporation of lease profits and sales proceeds.
Count 4: Milton and Wesley fraudulently caused Dorothy to convey to one of their corporations a one-fifth undivided interest in a 280-acre ranch in return for which she received nothing. She sought the return of the property to her.
Count 5: Milton and Wesley caused HBI, as lessee, to terminate its lease with Dorothy and Medicine Lodge, as lessors, after Count 6: Milton and Wesley caused HBI, in conjunction with themselves and Wesmar, as lessors, to enter into a management agreement or lease with third parties, as lessees, under the terms of which Milton, Wesley, and Wesmar are receiving disproportionate economic benefits to the detriment of HBI and Dorothy. Appellants sought cancellation or revision of the management agreement or lease to fairly compensate HBI.
which Wesley and Milton wrongfully retained cattle owned by Dorothy and Medicine Lodge. She sought payment for these cattle.
In addition to the above-described relief sought, appellants also asked for a court-appointed receiver to render an accounting of HBI affairs from January 1, 1968, to the present; punitive damages; costs and attorney fees; a permanent injunction enjoining Milton and Wesley and their spouses from interfering with Dorothy and her corporation's property rights and interests. Appellees answered generally denying the allegations. They also moved to strike appellants' jury demand on the grounds that the relief sought was primarily equitable in character.
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