Miller v. Geerlings

• Decision Date: 05 May 1964
• Docket Number: No. 51300,51300
• Parties: Walter P. MILLER, Home Oil Company and Oskaloosa Armory Association, individually and as representing all persons and corporations composing the class of preferred stockholders of Mahaska Industries, Inc., Appellees, v. P. J. GEERLINGS, Appellant.
• Court: Iowa Supreme Court

Page 207

128 N.W.2d 207

256 Iowa 569

Walter P. MILLER, Home Oil Company and Oskaloosa Armory Association, individually and as representing all persons and corporations composing the class of preferred stockholders of Mahaska Industries, Inc., Appellees,

v.

P. J. GEERLINGS, Appellant.

No. 51300.

Supreme Court of Iowa.

May 5, 1964.

Patrick J. Life, Oskaloosa, and Phil Gross, Sumner, for appellant.

Bray, McCoy & Faulkner, Oskaloosa, for appellees.

SNELL, Justice.

This is a class action by plaintiffs individually and in behalf of holders of preferred shares of capital stock of a corporation. Plaintiffs asked judgment and declaration of rights against a guarantor who had defaulted.

The defendant filed no answer. No testimony was offered. The matter was before the trial court and is before us on the petition, various motions, resistances, supporting affidavits, findings and rulings.

Pursuant to Rule 102, Rules of Civil Procedure, 58 I.C.A., we accept as established facts pleaded and not denied. We also accept the admissions of defendant in his affidavit attached to his resistance to motion for summary judgment. We determine the rights of the parties from the premise they themselves created and tendered.

Defendant, P. J. Geerlings, was the organizer and principal stockholder of Mahaska Industries, Inc. He sought financial assistance from plaintiffs and the shareholders 'represented by them in this action and proposed to cause to be issued to them by said corporation preferred shares of its capital stock * * * which would entitle them to a preferred dividend of seven per cent (7%) per annum, payable semi-annually on June 1st and December 1st of each year after the date of issuance and if they would purchase 300 shares of said preferred capital stock he would personally guarantee the payment of said dividends * * * and that the offer so made was accepted by them.' (Emphasis supplied.)

Following this representation and acceptance defendant executed and delivered a written instrument referring to the organization of the corporation, the issuance of 7% cumulative preferred stock and the offer for sale. It then provided:

'WHEREAS, the undersigned, P. J. Geerlings, is desirous of guaranteeing personally the payment of dividends on said preferred stock and payment of par value thereof on dissolution or liquidation of the corporation;

'NOW, THEREFORE, in consideration of the agreement of any person, firm or corporation hereinbefore or hereinafter made to purchase shares of the seven per cent (7%) cumulative preferred stock of Mahaska Industries, Inc., P. J. Geerlings does hereby guarantee that in the event that the corporation does not pay seven per cent (7%) dividends called for in said preferred stock semi-annually in accordance with the terms and provisions of said preferred stock, or said corporation on liquidation or dissolution does not pay in full the par value of said preferred stock, he will pay said dividends and/or said par value on said liquidation or dissolution within ten (10) days after the same become due. * * *'

A copy of the guaranty agreement was attached to the petition. A copy of the stock certificates as issued and delivered was attached to the petition. Each certificate provided that the holder was entitled 'to receive a preferential dividend of seven per cent (7%) per annum, payable semi-annually on the first day of June and on the first day of December of each year, after the date of issuance, to be paid out of the net earnings and undivided surplus of the corporation. * * * The preferred stock shall be subject to redemption at any time at the option of the Board of Directors of the company upon the payment of $100.00 per share and accumulated dividends.'

The written guaranty agreement and the stock certificates were dated February 11, 1958.

Mahaska Industries, Inc. has paid no dividends. Defendant paid to holders of preferred stock the semiannual payments up to and including the one due June 1, 1962 'in accordance with said guaranty agreement.'

Nothing has been paid since that date. This action was started in march, 1963.

Plaintiffs sought a decree declaring defendant liable for the payment of dividends due and payable on December 1, 1962 and to become due on June 1st and December 1st of each year thereafter if not paid by the corporation within 10 days after the same become due. Plaintiffs also asked for declaration of right to judgment for the par value of the preferred shares on liquidation or dissolution within 10 days thereafter. Judgment in praesenti for accrued and unpaid dividends was sought, together with judgment for payments accruing in the future.

Defendant filed Motion to Dismiss, Motion for Production of Books and Papers and Motion to Strike. Each motion was overruled and no error is claimed nor appeal taken from these rulings.

On July 9, 1963 plaintiffs filed Motion for Summary Judgment. The motion appears to be in proper form and was supported by affidavit.

Defendant filed Resistance to Motion for Summary Judgment. In his resistance defendant alleged that any agreement of his was conditional. He then denied specifically or on information and belief each allegation in plaintiffs' motion. The motion then said:

'Defendant contends that under the provisions of Exhibits A & B incorporated by reference in the plaintiffs' petition, defendant is liable, if at all, to pay cumulative preferred dividends of Mahaska Industries, Inc., only to the extent net profits and/or undivided surplus of the said Mahaska Industries, Inc., since the date of incorporation is less in the aggregate than to cumulative preferred dividends which in the aggregate become due in December, 1962 and June, 1963.'

In the affidavit attached to defendant's resistance defendant said:

'I further contend that under the provisions of Exhibits A and B, incorporated by reference in the plaintiffs' petition, I am only liable to pay cumulative preferred dividends only to the extent net profit and/or undivided surplus of said Mahaska Industries, Inc., since the date of incorporation, is less in the aggregate than the cumulative preferred dividends which have in the aggregate become due in December, 1962 and June, 1963.

'Under the terms of the agreement entered into by and between Mahaska Industries, Incorporated, and myself and other stockholders there was and is provided and a part of said agreements that Mahaska Industries shall pay cumulative preferred dividends if there is any net profit and/or undivided surplus of said corporation.

'Upon information and belief and as a member of the Board of Directors of said corporation this affiant is advised that the Mahaska Industries, Inc., is in a position to pay said dividends. That within the last year they have shown a net profit of $26,000.00.'

From his resistance and affidavit it is apparent that defendant denies liability only in the event Mahaska Industries, Inc., has the money with which to pay the obligation he has guaranteed. He recognized his obligation and paid to and including June 1, 1962. He does not deny his future obligation to pay if the corporation cannot pay. He merely claims that Mahaska Industries, Inc. is in a position to pay and has shown a net profit of $26,000.00 within the past year. Defendant says plaintiffs have failed to show that they have met conditions precedent to his liability.

To what extent, if at all, the claimed profits were absorbed by prior losses does not appear.

On July 19, 1963 defendant moved to join Mahaska Industries, Inc. as a party defendant. The motion urged the obligation of the corporation to pay from net profits and undivided surplus. It urged that the corporation was an indispensable party, that its interests were not severable and the corporation should be a party if complete relief was to be accorded between those already parties. Following the submission of a resistance and defendant's motion to strike the motion was overruled.

Finally after submission and consideration plaintiffs' Motion for Summary Judgment was sustained. On July 31, 1963 judgment entry was filed. Judgment for the amount of dividends to date was entered and plaintiffs were awarded declaratory judgment for future payments not paid by the corporation.

I. As we stated in the beginning we have no testimony to consider. We have no answer by defendant. We have the uncontroverted allegations of plaintiffs' petition, the exhibits attached thereto and the position of defendant as disclosed by his own affidavits. '* * * we are limited to the record as made in the lower court, and by the errors assigned here.' Best v. Yerkes 247 Iowa 800, 811, 77 N.W.2d 23, 30, 60 A.L.R.2d 1354. It is not for us to write a new contract for the parties beyond their intent or contemplation.

Two errors are assigned i. e. (1) That the court erred in overruling defendant's motion to add Mahaska Industries, Inc., as a party defendant, and, (2) That the court erred in sustaining plaintiffs' Motion for Summary Judgment.

II. It was within the trial court's discretion to refuse to bring in a new party defendant.

Rule 33(b), Rules of Civil Procedure, provides:

'Against New Parties. When a defendant to a petition, cross-petition or counter-claim will, if held liable thereon, thereby be entitled to a right of action against one not already a party, he may move to have such party brought in, to the end that the rights of all concerned may be determined in one action. Such motion must be supported by affidavit.' (Emphasis supplied.)

No supporting affidavit appears. Defendant's motion does not comply with the rule. We consider it briefly and only as a matter of grace.

A motion to bring in a third party defendant under Rule 33(b) is addressed to the trial court's sound judicial discretion. The rule does not require the trial court to sustain such a motion. The exercise of the trial court's discretion is not reviewable for the purpose of substituting our...