Lett v. Westland Development Co., Inc.

• Decision Date: 02 August 1991
• Docket Number: No. 19471,19471
• Citation: 112 N.M. 327,815 P.2d 623,1991 NMSC 69
• Parties: Debra LETT, nee Nuanes, and Frank N. Nuanes, Plaintiffs-Appellants, v. WESTLAND DEVELOPMENT CO., INC., Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 623

815 P.2d 623

112 N.M. 327

Debra LETT, nee Nuanes, and Frank N. Nuanes Plaintiffs-Appellants, v. WESTLAND DEVELOPMENT CO., INC., Defendant-Appellee.

No. 19471.

Supreme Court of New Mexico.

Aug. 2, 1991.

Rehearing Denied Aug. 21, 1991.

[112 NM 327] Chavez Law Offices, Lorenzo A. Chavez, Albuquerque, for plaintiffs-appellants.

Robert S. Simon, Albuquerque, for defendant-appellee.

OPINION

RANSOM, Justice.

This suit against Westland Development Company, Inc. seeks to have ninety-nine and thirty-three shares of Westland common stock issued, respectively, to plaintiffs Debra Lett and Frank Nuanes. Their claim is based on the fact that they are the successors in interest to Peggy Garcia who died intestate in 1957. Peggy Garcia was one of the several thousands of heirs to the Atrisco land grant. Debra Lett is Peggy's daughter, Frank Nuanes was her husband.

The history of ownership of the Atrisco grant is reviewed in some detail in Armijo v. Town of Atrisco, 56 N.M. 2, 239 P.2d 535 (1951). We note here only that, pursuant to 1891 N.M. Laws, ch. 86, persons claiming to be owners of this communal grant did incorporate in 1892 under the name of the Town of Atrisco, a quasi-municipal corporation. Armijo v. Town of Atrisco, 62 N.M. 440, 451, 312 P.2d 91, 98 (1957). In 1905 the United States government recognized the land claim and issued a patent for 82,728 acres to the Town of Atrisco and to their successors in interest and assigns. Id. at 452, 312 P.2d at 99. In 1967, pursuant [112 NM 328] to 1967 N.M. Laws, ch. 43, Section 1, now compiled as NMSA 1978, Section 49-2-18, that corporation was converted into Westland Development Company, Inc., a domestic capital stock corporation. Subsequently, over 3,000 known heirs to the grant were issued shares of stock in exchange for their interest in the grant property.

The entitlement of Lett and Nuanes to shares in Westland, as successors in interest to Peggy Garcia, is not in dispute. The only controversy surrounds whether those shares are burdened by certain restrictions on transfer purportedly placed upon all Westland shares in 1982. In that year, by a two-thirds vote of the shareholders, Westland amended its articles of incorporation to prohibit the transfer or registration of shares, with certain limited exceptions, to anyone other than a lineal descendent of one of the original incorporators of the Town of Atrisco in 1892.¹ Westland contends that the shares due Lett and Nuanes should bear this restriction.

In the court below Westland tendered the requisite number of shares to Lett and Nuanes stating, in a motion for summary judgment, that the tender gave to each of them their proper intestate interest. Lett and Nuanes refused to accept the tendered shares because the stock certificates were issued with the restrictions on transfer. In their response to the motion for summary judgment, Lett and Nuanes attacked the validity of the restrictions and argued that the tendered shares were not the ones to which they were entitled because the restrictions were not in effect in 1967 when they were entitled to the new capital stock, their having succeeded to their interest in 1957 upon the death of Peggy Garcia. The district court granted summary judgment in favor of Westland and dismissed the suit. The court stated that the issue of whether Lett and Nuanes were entitled to unrestricted shares was raised in their response to Westland's motion for summary judgment, and "since a prayer for unrestricted shares was not a part of the plaintiffs' complaint ... that is not a matter before this court since the plaintiffs did not amend their complaint for such unrestricted shares."

Lett and Nuanes appeal challenging the propriety of the order granting summary judgment. They also challenge the validity of the restrictions both generally and with reference to them as individuals. We reverse and hold that it was not necessary for Lett and Nuanes to have made a specific request for unrestricted shares in their complaint. We also hold that because Lett and Nuanes had no opportunity to participate in the decision to amend the articles of incorporation and to adopt the restrictions on transfer, those restrictions cannot burden any shares due them at this time.

Plaintiffs not required to have made a specific request for unrestricted shares. An important purpose of our rules of civil procedure is to avoid the tyranny of formalism. Rule 8(A) requires only that a claim for relief contain: (1) allegations of venue, (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief to which the pleader deems himself entitled. SCRA 1986, 1-008(A). Rule 15 provides for the liberal amendment of pleadings so that litigation may be disposed of on the merits. SCRA 1986, 1-015. Rule 54(D) provides that, except in cases of default judgments, every other final judgment shall grant the relief to which a party is entitled, "even if [that] party has not demanded such relief in his pleadings." SCRA 1986, 1-054(D). While a prayer for relief may be helpful in specifying the contentions of the parties, it forms no part of the pleader's cause of action, and the prevailing party should be given whatever relief he is entitled to under the facts pleaded and proved at trial. See 6 J. Moore, W. Taggart, & J. Wicker, Moore's Federal Practice pp 54.60, 54.62 (2d ed. 1991) (discussing Fed.R.Civ.P. 54(c), the federal counterpart to SCRA 1986, 1- 054(D)); 10 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 2662 (1983) (same); accord State ex rel. Newsome v. Alarid, 90 N.M. 790, 798-99, 568 P.2d 1236, 1244-45 (1977); State ex rel. Gary v. Firemans' Fund Indem. Co., 67 N.M. 360, 365, 355 P.2d 291, 294-95 (1960).

The pleadings in this case stated that the claim of Lett and Nuanes was based upon their status as successors in interest to Peggy Garcia, a lineal descendant of one of the original incorporators of the Town of Atrisco. As such, Lett and Nuanes had a right, albeit one not asserted until 1988, to have shared in the original distribution of Westland stock after its incorporation in 1967. Lett and Nuanes asserted that they were unaware of their right to receive the shares due Peggy Garcia until 1987 when they were able to examine Westland's genealogy records. The restrictions on transfer were adopted in 1982. The implicit question these facts pose is whether Lett and Nuanes' interest in shares, created in 1967, is burdened by the restrictions. By simply requesting the shares of Westland stock as successors to Peggy Garcia, the pleadings gave fair notice that Lett and Nuanes were claiming a right to have shared in the original distribution of corporate stock and for this reason it was unnecessary for them to have made a specific request for "unrestricted shares." The allegations in the complaint, if true, are sufficient to make such relief appropriate.

Persons entitled to share in original distribution of corporate stock must have opportunity to participate in shareholders' decision to impose restrictions on transfer. Lett and Nuanes challenge the general validity of the restrictions arguing that they represent an unreasonable restraint on alienation. They also argue that the restrictions, even if reasonable, cannot fairly be imposed on the shares that are due them. Because we agree with this latter proposition we find it unnecessary to address the general validity of the restrictions and on this matter we offer no opinion.

Under the common law, restrictions on the alienation or transfer of corporate stock are not viewed with favor and are strictly construed. Valley Nat'l Bank v. Arthur (In re Estate of Martin), 15 Ariz.App. 569, 570, 490 P.2d 14, 15 (1971), petition for review vacated, 108 Ariz. 536, 502 P.2d 1355 (1972); Earthman's, Inc. v. Earthman, 526 S.W.2d 192, 202 (Tex.Civ.App.1975); see also Annotation, Restrictions on Transfer of Corporate Stock as Applicable to Testamentary Dispositions Thereof, 61 A.L.R.3d 1090, Sec. 3 (1975). While the Model Business Corporation Act expressly provides that a corporation may impose such restrictions through its articles of incorporation, bylaws, agreement among the shareholders, or agreement between the shareholders and the corporation, 1 Model Business Corporation Act Annotated Sec. 6.27(a) (3d ed. & Supp.1991), including a prohibition against the transfer of shares "to designated persons or classes of persons," id. Sec. 6.27(d)(4), New Mexico has not adopted this provision of the model act.² See NMSA 1978, Secs. 53-11-1 to -18-12 (Repl.Pamp. 1983 & Cum.Supp.1989) (New Mexico Business Corporation Act). Lett and Nuanes argue (without citation to authority) that the transferability of corporate shares may not be restricted in the absence of specific statutory authorization. This assertion may take their argument too far.

Nonetheless, one provision of our corporation statutes does mention transfer restrictions. See Sec. 53-12-2(B)(2) (Cum.Supp.1989). In general, Section 53-12-2 sets forth certain provisions that are either required (subsection A) or permitted (subsection B) to be set forth in the articles of incorporation. Subsection (B)(2) provides that the articles of incorporation may contain provisions not inconsistent with law regarding "the definition, limitation and regulation of the powers of the corporation, the directors and the shareholders, or any class of the shareholders, including restrictions on the transfer of shares." This provision was enacted in 1983. See 1983 N.M. Laws, ch. 304, Sec. 43. Prior to this time there was in effect, between 1968 and 1975, a similar provision stating that the articles of incorporation could contain "any provision, not inconsistent with law, which the incorporators elect to set forth ... for the regulation of the internal affairs of the corporation, including any provision restricting the transfer of shares." See 1967...