S W Co. v. John Wight, Inc.
| Decision Date | 11 December 1978 |
| Docket Number | S-W,No. 14033,14033 |
| Citation | 179 Mont. 392,35 St.Rep. 1674,587 P.2d 348 |
| Parties | COMPANY, a Montana Corporation, on behalf of itself and all other Stockholders of John Wight, Inc., a Nevada Corporation similarly situated, Plaintiff and Appellant, v. JOHN WIGHT, INC., a Nevada Corporation, John Wight, Theora Wight, and E. A. Wight, Defendants and Respondents. |
| Court | Montana Supreme Court |
Cannon & Gillespie, Richard E. Gillespie (argued), Donald Garrity (argued), Helena, for plaintiff and appellant.
Fillner & Pitet, Patrick G. Pitet (argued), Billings, for defendants and respondents.
This appeal comes to us from a final judgment of the District Court of the Thirteenth Judicial District, in and for the County of Yellowstone, which adopted findings of fact and conclusions of law made by a special master resulting in the dismissal of 21 of plaintiff's 22 causes of action on various grounds as specified below.
The history of the current litigation is extremely complex and involves eight prior law suits. For this reason we have set forth the facts leading to this appeal in chronological order.
This is a shareholder's derivative action against John Wight, Inc. and its directors. John Wight, Inc. was organized as a Nevada corporation in 1957 and was authorized to issue 2,500 shares of stock. As of June 24, 1957, all of the stock in the corporation had been issued to the following individuals:
John Wight 10 shares
Theora Wight 1,000 shares
Patricia Wight 198 shares
S-W Company 500 shares
John Wight, Jr. 198 shares
Mildred Beadle 198 shares
Marvel Lowrance 198 shares
Aleen Baxter 198 shares
On May 15, 1970, Theora Wight agreed to transfer her 1,000 shares to the corporation in exchange for various payments and an agreement that she and her husband John could live, rent free, in a house owned by the corporation for as long as they chose.
Five days later, on May 20, 1970, 999 shares were issued to John Wight. Theora Wight retained one share of stock.
John Wight, Jr. never accepted the 198 shares of stock issued to him and took no part in the affairs of the corporation. On December 23, 1972, the John Wight, Jr. stock certificate was canceled, and these additional 198 shares were also issued to John Wight.
On January 22, 1973, Marvel Lowrance sued the corporation and its directors (District Court Cause No. 61413) to nullify the issuance of the 999 shares and 198 shares to John Wight.
On the same date, Suzanne McCormick, who owned 50 shares of stock, filed an action against the corporation (District Court Cause No. 61422) seeking an accounting and injunctive relief.
Marvel Lowrance filed another action on February 1, 1973, to collect from the corporation on a promissory note to her (District Court Cause No. 61496).
On February 14, 1973, a new stock certificate (No. 24) was issued to John Wight to replace the earlier certificate of 999 shares "in the event that any error was found by the court in respect of the issuance of said certificate; otherwise Certificate No. 24 was to include any unissued shares which would become available in the near future."
On November 26, 1973, the shareholders voted to dissolve the corporation. On the same day John Wight and E. A. Wight, as a majority of the board of directors (the third member being absent) agreed to transfer the residence to John and Theora Wight in exchange for $36,000 in promissory notes from the corporation to Theora Wight. The directors voted to give the shareholders 30 days' written notice of the transfer, but the transfer was effected without notice by warranty deed signed November 21, 1973, and recorded November 28, 1973. At the November 26, 1973 directors' meeting, John Wight also informed the directors that he and Theora had loaned the corporation $120,000 for the redemption of the corporation's oil refinery in Shelby, Montana, and in addition that there was $90,000 of other indebtedness of the refinery.
On May 11, 1974, the directors held a special meeting and declared that half of the original stock issue was intended to be issued to E. A. Wight. They canceled the original stock certificates and reissued them for half the number of shares they originally represented. At the same meeting the directors accepted a reconveyance from E. A. Wight of all but one of his shares of stock in exchange for an assignment of 20 percent of the corporation's net income from a refinery and oil field.
S-W Company sued John Wight, Inc., for collection of a $3,993.72 debt on August 7, 1974 (District Court Cause No. 64961). On August 27, 1974, S-W Company and Marvel Lowrance sued for the appointment of a receiver for John Wight, Inc. and the dissolution of the corporation (District Court Cause No. 65072).
On December 13, 1974, S-W Company sued the corporation and John and Theora Wight to set aside the transfer of the residence (District Court Cause No. 65792).
In July, 1975, Marvel Lowrance amended her complaint in Cause No. 61413 to challenge the cancellation of half her shares and the issuance of the shares to E. A. Wight.
In November, 1975, two more suits involving the parties to this action were filed. District Court Cause No. 68240 was an action by the corporation against Marvel Lowrance and Northwest Crude concerning royalty payments. Marvel Lowrance counterclaimed in that action. District Court Cause No. 68269 was an action for unpaid wages filed by Marvel Lowrance against John Wight, Inc.
In June, 1976, the directors agreed to restore the original shareholders to their full stock ownership. As a result, Marvel Lowrance stipulated that that portion of her complaint in Cause No. 61413 could be dismissed with prejudice. This stipulation was filed on June 18, 1976. By amended judgment dated July 12, 1976, the balance of this action was dismissed as to Marvel Lowrance in an individual capacity. This was in response to defendants' motion for summary judgment on the ground that Lowrance could not bring action in her individual capacity.
Suzanne McCormick's action against the corporation (Cause No. 61422) was dismissed by stipulation on June 22, 1976.
Cause No. 65072, the action by S-W Company and Marvel Lowrance was dismissed with prejudice by stipulation of the parties on June 18, 1976.
Cause No. 65792, the action by S-W Company to set aside the transfer of the residence, was dismissed with prejudice against S-W Company in its individual capacity only by judgment dated July 12, 1976. Defendants had moved for summary judgment on the ground that S-W Company could not bring action as an individual shareholder.
The remaining actions were settled and dismissed by stipulation on June 22, 1976.
At the June 22, 1976, meeting of the board of directors of John Wight, Inc., John Wight informed the directors that the corporation owed him $458,200. On June 25, 1976, he submitted claims indicating the corporation had total obligations of $564,161.39 of which $478,190 was owed to John Wight.
On September 11, 1976, John Wight told the board that the corporation's total debt was $894,661.39 and claimed the corporation owed him $680,364.75. At about the same time, John Wight was negotiating a sale of the Shelby refinery for $900,000. The directors called a special meeting of the shareholders for October 20, 1976, to consider the transfer of the refinery to John Wight "in satisfaction of certain indebtedness and mortgages to him."
On October 15, 1976, the S-W Company, on behalf of itself and all other shareholders in John Wight, Inc., filed the action which is the subject of this appeal. As of this time, it appears that defendant corporation had issued 2,499 shares. Defendant directors controlled 1,207, or 48 percent and plaintiff represents shareholders controlling 1,098 shares (44 percent). Patricia Kane, a nondirector shareholder, owns 198 shares but is not aligned with plaintiff in this action.
The complaint contained 22 causes of action and sought: to invalidate the issuance of 999 shares and 198 shares in the corporation to John Wight; a return of the residence and other assets of the corporation; an accounting; the appointment of a receiver; and an order enjoining the special shareholders' meeting and transfer of the oil refinery. The injunction was not granted, and the matter was referred to a special master for hearing.
The special master concluded that, except for the cause of action challenging the transfer of the oil refinery, defendants were entitled to summary judgment on the grounds of Res judicata and collateral estoppel. He also concluded that 18 of the causes of action were barred by various statutes of limitation; that the board of directors were not in full, complete and exclusive control of the corporation; and that the action could not be maintained as a shareholder's derivative action because plaintiff did not adequately represent the minority shareholders and because plaintiff represented the majority of the shareholders in the defendant corporation. These findings and conclusions were adopted by the District Court, which entered its judgment dismissing Counts 1 through 21 of the complaint.
The following general issues and specific sub-issues are presented on this appeal:
1. Is this action maintainable as a shareholder's derivative action if one or more of the following is the case:
(a) Not all of the nondirector shareholders agree that the party bringing the suit "fairly and adequately represent" their interests as required by Rule 23.1, Mont.R.Civ.P.
(b) The board of directors of the corporation do not own outright a majority of the shares of the corporation.
(c) No demand was made on the board of directors by plaintiff to obtain the action it desires as required by Rule 23.1, Mont.R.Civ.P.
2. Was the District Court correct in holding that the instant suit was barred on the basis of Res judicata if either or both of the...
To continue reading
Request your trial
-
Associated Mgmt. Servs., Inc. v. Ruff
...a 392 Mont. 160right of the corporation as a whole. See § 35-1-541, MCA. See also § 35-1-462(1), MCA ; S-W Co. v. John Wight, Inc ., 179 Mont. 392, 399, 587 P.2d 348, 352 (1978). ¶46 As a threshold matter of law, §§ 35-1-461 and -463, MCA (narrow definition of director conflict of interest ......
-
Fox v. 7L Bar Ranch Co.
......and Fox Ranches, Inc., which were not parties to the action and were not mentioned in the complaint or amended ...v. John Wight, Inc. (1978), 179 Mont. 392, 405, 587 P.2d 348, 355, quoting from Smith v. County of ......
-
Sax v. World Wide Press, Inc., 85-4306
...enforce a corporate right in a derivative action if certain conditions are met. Mont.R.Civ.P. 23.1; see S-W Co. v. John Wight, Inc., 179 Mont. 392, 402-03, 587 P.2d 348, 354 (1978). As a general rule, an action enforces a corporate right "if the gravamen of the complaint is injury to the co......
-
State Medical Oxygen and Supply, Inc. v. American Medical Oxygen Co.
......John Wight, Inc. (1978), 179 Mont. 392, 407, 587 P.2d 348, 356. A final judgment on the merits. .. is a finality as to the claim or demand in ......