Kwikie Minit Markets, Inc. v. Hutner

• Decision Date: 22 February 1973
• Docket Number: No. 3--972A57,3--972A57
• Citation: 155 Ind.App. 307,292 N.E.2d 832
• Parties: KWIKIE MINIT MARKETS, INC., et al., Appellants, v. David S. HUTNER, Appellee.
• Court: Indiana Appellate Court

Page 832

292 N.E.2d 832

155 Ind.App. 307

KWIKIE MINIT MARKETS, INC., et al., Appellants, v. David S. HUTNER, Appellee.

No. 3--972A57.

Court of Appeals of Indiana, Third District.

Feb. 22, 1973.

Rehearing Denied April 3, 1973.

J. A. Bruggeman, William F. McNagny, James M. Prickett, Barrett, Barrett & McNagny, Fort Wayne, for appellants.

Stephen D. Long, William Salin, Kennerk, Dumas, Burke & Backs, Fort Wayne, for appellee.

STATON, Judge.

NATURE OF THE APPEAL: Kwikie Minit Markets was incorporated in 1962, to engage in the grocery business in Fort Wayne, Inaiana. The capitalization of the corporation was effected by the issuance of stock and debentures to David S. Hutner, hereinafter referred to as Hunter, and Haskell B. Schultz, Richard Means, John N. Welch, Robert E. Meyers and Richard Lehman, hereinafter referred to as the Directors. Hutner received 100 shares of common stock and six (6) bonds with a face value of $1,000.00. The corporation did not do as well as the investors had hoped and in an effort to improve the financial picture of the corporation, the Directors passed a resolution whereby bonds could be converted into common stock. All the investors except Hutner converted their bonds into common stock.

President-Director Schultz corresponded with Hutner concerning the conversion of his bonds. Hutner answered that he would not convert. The business of the corporation did not improve. Two years later, the Directors authorized a liquidation of assets and made a distribution. Hutner was not reimbursed for the face amount of his bonds.

Hutner brought suit against the corporation and the Directors to recover the principal and interest due on his bonds. After all pleadings, interrogatories and admissions of fact had been filed, Hutner filed a motion for summary judgment. The trial court granted the motion for summary judgment.

The issues presented in the Directors' brief, which will be discussed in our opinion, may be summarized as follows:

1. Did the affidavit, interrogatories and requests for admissions properly present to the trial court for its consideration on summary judgment the affirmative defense of estoppel?

2. Did the Directors properly raise the issue of contractual waiver for the trial court in their motion to correct errors to preserve the issue on appeal?

In our opinion which follows, we hold that the affirmative defense of estoppel was not properly presented to the trial court for its consideration upon a motion for summary judgment and that the issue of contractual waiver was not mentioned or referred to in the motion to correct errors. We affirm the judgment of the trial court in our opinion.

STATEMENT OF THE FACTS: Kwikie Minit Markets, Inc. was incorporated in 1962 and conducted a grocery business. The capital structure was effected by the issuance of common stock and interest bearing debentures. Seventy-two bonds at a face value of $1,000.00 and 2,500 shares of $10.00 par value stock were issued. Six bonds and 100 shares of common stock were issued to David S. Hutner. In 1966, the corporation began to experience financial difficulties. The Board of Directors passed several resolutions in an attempt to revitalize the company. Those resolutions which are pertinent to this appeal involve the converting of the outstanding bonds into common stock. The first resolution passed by the shareholders for the conversion of bonds into common stock was made on September 19, 1966. It reads as follows:

'RESOLVED: that upon receipt of the approval from the Secretary of State of the State of Indiana of the amendments to Articles V and VI to the Articles of Incorporation of this corporation, which amendments were adopted at this meeting, that the corporation Board of Directors thereupon authorize conversion of the debentures now outstanding of the corporations, into common capital stock of the new type authorized by the new amendments of the Articles of Incorporation, and which stock shall be voting stock, on a dollar for dollar conversion, at a rate of $10 of debenture bonds for each share of common voting no par value stock (that is to say, 100 shares of stock for each $1,000 face value of debentures); and, . . .'

However, the Directors rescinded the above resolution and issued the following resolution on November 10, 1966:

'WHEREAS, a resolution was passed at a special meeting of shareholders held on September 19, 1966, recommending to this board of directors that upon receipt of the approval from the Secretary of State of Indiana of the amendments to Articles 5 and 6 to the Articles of Incorporation of this corporation, which amendments were adopted at said meeting of September 19, 1966, that the conversion of debentures of the corporation now outstanding be authorized into common capitgal stock with voting rights on a capital stock with voting rights on a face value of debentures for each share of common voting no par value stock and that the conversion of the said debentures into the said shares of common voting no par value stock of this corporation shall be offered in this manner to all holders of debentures outstanding of this corporation on the same basis, and that unless all the debentureholders agree to convert their bonds to common voting no par value stock on the basis aforementioned and that all debentureholders agree to waive all interest due to the date of conversion of their bonds to stock and that if there by (be) any debentureholders who refuse to accept the offer in its terms as above contained, that no debentures be converted into stock; and,

'WHEREAS, this board of directors does not deem it practicable to require such conversion offer to be accepted by all debenture holders in order to be effective as recommended in said resolution aforementioned; now,

'THEREFORE, BE IT RESOLVED: that this corporation, through its board of directors, does not hereby authorize the conversion of the debentures now outstanding of this corporation into the common voting no par value capital stock of this corporation on a dollar for dollar basis, that is, at a rate of $10 of face value of debenture bonds for each share of common voting no par value stock, with waiver of all interest that may be due on debentures so converted by the debenture holder; and,

'RESOLVED FURTHER: that this offer for conversion of the debentures shall be made to all holders of debentures outstanding of this corporation on this same basis in accordance with the attached 'Notice of Redemption of Debentures', a copy of which is attached hereto and made a part hereof, and in accordance with the terms of said notice, and that the debentures of all debenture holders executing the agreement to convert and returning the same duly executed by the debentureholder on or before December 31, 1966, in the form attached hereto, duly waiving interest as above provided, shall be retired and cancelled and shares of the common voting stock of this corporation be issued as fully paid and nonassessable to such debentureholders at the rate of one share of such stock for each $10 of face value of debentures so retired and cancelled; and,

'RESOLVED FURTHER: that said notice of said offer be mailed to each debentureholder at his address listed with the corporation on or before December 21, 1966.'

On the same day that the above resolution was issued, November 10, 1966, a notice of redemption was issued to David S. Hutner. Several letters were exchanged between Haskell B. Schultz, President of the corporation, and David S. Hutner concerning the conversion. The only conclusion that can be drawn from this correspondence is that Hutner declined to convert his bonds into common stock and further declined to invest any further monies in the corporation.

The corporation continued to do business for an additional two years without financial improvement. Finally, the Board of Directors passed a resolution to dissolve the corporation. After all the assets were converted into liquid assets and after pay off of all outstanding debts, a partial distribution of assets was made. No money was paid to Hutner on his outstanding bonds. It was also admitted by Schultz that Hutner never signed the notice...