Larry C. Iverson, Inc. v. Bouma
| Decision Date | 11 January 1982 |
| Docket Number | No. 80-83,80-83 |
| Citation | 38 St.Rep. 1911,639 P.2d 47,195 Mont. 351 |
| Parties | LARRY C. IVERSON, INC., a Montana Corporation, Plaintiff, Respondent and Cross-Appellant, v. Ralph BOUMA and Mrs. Ralph Bouma, Defendants and Appellants. |
| Court | Montana Supreme Court |
Gale R. Gustafson, argued, Conrad, for defendants and appellants.
Swanberg, Koby, Swanberg & Matteucci, Great Falls, Raymond F. Koby, argued, Great Falls, Church, Harris, Johnson & Williams, Great Falls, Cresap S. McCracken, argued, Great Falls, for plaintiff, respondent and cross-appellant.
On December 10, 1971, the receiver commenced this action in the Ninth Judicial District of the State of Montana, in and for the County of Pondera, for the purpose of obtaining a decree adjudging documents comprising an installment contract naming Larry C. Iverson, Inc., as seller, and Ralph Bouma, as purchaser, to be invalid, to regain possession of and quiet title to the 4,520 acres of farmland embraced in the contract, together with appropriate ancillary relief including an accounting by the Boumas.
In August 1978, plaintiff and the receiver joined in a motion for summary judgment, asserting that the Bouma contract was void as a matter of law. On September 25, 1979, the motion for summary judgment came on for hearing before the then presiding district judge, the Honorable Leonard H. Langen, who granted the motion for summary judgment. The court reporter's notes containing the order as announced from the bench were discovered missing following a break-in of her automobile before the notes were transcribed. Consequently, Judge Langen prepared and filed a "Memorandum in Lieu of Transcript of Hearing" in October 1979. On November 30, 1979, a formal summary judgment for plaintiff was entered which adjudged the Bouma contract void and ordered the Boumas to account for the money, rents, issues and profits derived from possession of the farm.
Boumas filed their accounting on February 21, 1980. Hearing on the accounting was held May 12 through 14, 1980. On September 9, 1980, the court entered its findings of fact, conclusions of law, judgment and decree on accounting, setting forth all of the respective adjustments found by the court to be appropriate between the parties in conjunction with restoration of the farm to the corporation.
In February 1980, following entry of the summary judgment for the corporation and denial of Boumas' motions, the Boumas filed a notice of appeal to this Court. Boumas requested an order deferring prosecution of the appeal, and this request was granted in an order of this Court dated February 29, 1980, deferring prosecution until thirty days after the conclusion of the accounting and final adjustment and settlement of accounts by notice of entry by the clerk of court of the final order or judgment. Notice of entry of judgment was given by the clerk of court September 10, 1980, and this appeal followed.
To fully comprehend the nature of this case, it is necessary to include a history of the facts and procedures. This matter began when the Larry C. Iverson Corporation, hereinafter called "the corporation," was incorporated on July 17, 1964. The corporation is a Montana corporation with its principal place of business at Ledger, Montana. It was capitalized for $500,000 divided into 5,000 shares of a single class of common stock of $100 par value. It was organized to be governed in its business by a board of directors of three persons empowered to elect officers to perform the executive functions of the corporation.
On August 19, 1964, a total of 2,523 shares of stock of the corporation were issued to the following named persons in certificates as follows:
Stockholder Cert. # No. of
----------- ------- Shares
------
Larry C. Iverson 1 463
Linda M. Iverson 2 1
Mabel Iverson 3 58
Mabel Iverson 4 450
Irene A. Keierleber 5 300
Gilbert F. Keierleber 6 300
Connie Iverson Fulton 7 440
Darrell L. Brown 8 1
Carl O. Iverson 9 450
Carl O. Iverson 10 60
Total Shares 2,523
Further, on November 22, 1965, the following certificates were issued to replace lost certificates representing shares in the corporation:
Issued to No. of
Stockholder Cert. No. Replace Shares
----------- --------- --------- ------
Irene A. Keierleber 11 5 300
Mabel Iverson 12 3 58
Carl O. Iverson 13 10 60
In December 1964, Carl and Mabel Iverson and Gilbert and Irene Keierleber hired J. Milton Krull and John C. Treadaway as business managers for the corporation. Krull and Treadaway continued as business managers, consultants, purported officers, directors and stockholders of the corporation until it went into receivership in November 1970. In the receiver action it was adjudged that Krull and Treadaway were corporate usurpers, and they were "stripped" of their titles and any interest they "did not " have.
Soon thereafter, the stockholders of the corporation came upon hard times and by March 16, 1967, Farmers State Bank of Conrad had become the owner of 450 shares of Mabel Iverson's stock (of the original issue) and 450 shares of Carl Iverson's stock (of the original issue). Farmers State Bank acquired the ownership as a result of a pledge of the shares by Carl and Mabel on which the bank eventually had to foreclose. Also, as a result of this foreclosure, the corporation was able to redeem as treasury stock and become the equitable owner of 182.7 shares of the 900 shares now owned by Farmers State Bank. Prior to the above foreclosure, on July 21, 1966, in Helena, Montana, United Bank of Pueblo purchased, at a sheriff's sale, 118 shares of stock of the corporation then owned by Carl and Mabel Iverson.
The other major stockholders also fell on bad times. Gilbert and Irene Keierleber were adjudicated bankrupt on January 24, 1966. As a result, the trustee in bankruptcy, Stanley M. Swaine, became the owner of the Keierlebers' stock-that is, Stanley M. Swaine, as trustee in bankruptcy of the estate of Irene Keierleber, became the owner of 300 shares of stock, and, as trustee in bankruptcy of the estate of Gilbert Keierleber, he became the owner of 300 more shares subject to a pledge to Farmers State Bank.
As a result of the above events, the corporation by March 16, 1967, was "owned" by almost a completely new set of shareholders. The ownership was as follows:
Stockholder Shares
----------- ------
UNITED BANK OF PUEBLO 118
CONNIE IVERSON FULTON 440
(Subject to pledge to the United
Bank of Pueblo for the purchase
price at par value of $100 per share)
FARMERS STATE BANK OF CONRAD 717
STANLEY M. SWAINE, as trustee in 300
bankruptcy of the estate of
Irene Keierleber
STANLEY M. SWAINE, as trustee in 300
bankruptcy of the estate of
Gilbert Keierleber (subject to a
pledge to the Farmers State Bank
of Conrad)
LARRY C. IVERSON, INC., (as 648
treasury stock)
Total 2,523
Farmers State Bank, the trustee and United Bank had all made demands upon the corporation, Krull and Treadaway for issuance of stock certificates to them, but these demands were refused. This resulted in state court actions, Nos. 8221 and 8073 respectively, in the District Court of the Ninth Judicial District, Pondera County, to quiet title to the ownership of the stock. The District Court found for the Farmers State Bank, the trustee and United Bank and awarded them title on April 7, 1971.
It is necessary at this juncture to include several factual events transpiring prior to the sale of 4,520 acres of farmland from the corporation to the defendants-appellants Bouma in July 1968. From the findings of fact and conclusions of law of Cause Nos. 8221 and 8073, it was found that a purported meeting of stockholders was held in Phoenix, Arizona, on November 22, 1965, which resulted in a second issue of stock to be distributed on January 3, 1966. However, it was found that not only was the meeting improper but that no compensation was given to the corporation for the stock issued and the amount of stock issued was in excess of that authorized by the articles of incorporation.
There was another "event" which took place in January 1967 and was discussed by the District Court. This "event" was another improper shareholder meeting in Dillon, Montana. At this meeting, attended only by Carl Iverson, Krull and Treadaway, it was decided to cancel all the shares of the second issue and to authorize a third issue. No consideration was given for the 2,595 shares "created," and 2,477 shares were "given" to Krull and Treadaway. It is important to note that at the time of this meeting at least 600 shares of the originally issued stock was "equitably" owned by Stanley Swaine, as trustee in bankruptcy for the Keierlebers.
Although there were numerous events transpiring after incorporation in 1964 that well illustrate the manner in which the corporation was mismanaged, suffice it to say that the contract in question here was the fountainhead. In July 1968 the corporation purported to sell 4,520 acres of land to Ralph Bouma on a contract for deed for a purchase price of $734,500. The validity of the sale of land to Ralph Bouma (hereinafter called the Bouma contract) is the underlying issue of this appeal. Again, a history of the contract negotiations, terms, results, etc., is necessary to provide a clear understanding of the issue at hand. It is important to keep in mind, while reading the following factual summary, that 76 percent of the corporation...
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