Simenstad v. Hagen
| Decision Date | 03 March 1964 |
| Parties | Lien O. SIMENSTAD, Respondent, v. Iver M. HAGEN et al., Appellants. |
| Court | Wisconsin Supreme Court |
Faegre & Benson, Armin M. Johnson, Minneapolis, Minn., E. Nelton, Balsam Lake, for appellants.
Doar & Knowles, New Richmond, for respondent.
Henry C. Oakey, Osceola, amicus curiae.
The record reveals the following facts. On November 14, 1947, the parties were all directors of the Bank of Osceola, and owned the following number of shares of the bank's stock:
Lien O. Simenstad 28 shares
Iver M. Hagen 48 shares
B. J. Zimmerman 51 shares
Eugene L. Beyl 32 shares
There were 600 shares of capital stock then outstanding, 301 of which were owned by the Segregated Trust of the Bank of Osceola. On the aforementioned date, the parties entered into a written contract which contained the following provisions:
'Whereas, the said parties are purchasing certain other shares of stock of the Bank of Osceola so that when such additional shares are purchased, said Zimmerman, Hagen, and Simenstad will each have an equal number of shares in said bank and said Beyl will have two times the number of shares he now has.
'Now therefore, it is agreed by and between the parties as follows:
'1. That such additional shares shall be purchased by the parties hereto and apportioned as above set forth * * *.
'2. As, if, and when said shares are acquired by the said parties as above set forth, the said parties hereto agree to and with each other that on all matters regarding the policy of the bank including the election of the board of directors, but excepting matters relating to passing on lease [loans], the parties hereto will vote unanimously so that all the stock of said parties will vote on such questions as determined by the unanimous decision of such persons and when determined by such unanimous decision, the question determined shall be supported by a vote of all the stock of said persons.
'3. The said parties hereto agree to and with each other that if at any time during the life of this agreement any of the said parties desire to sell all or any part of their stock in said bank, said stock shall first be offered to the remaining signers of this agreement and said remaining signers of this agreement shall have the option to purchase said stock at the value of 80 percent of the book value of said stock determined at the end of the proceding current month and said signers of this agreement may have 20 days after notice of the offer of the sale of said stock within which to accept the offer to purchase said stock and when accepted said offer shall be closed and payment shall be made for said stock in cash within 10 days thereafter. If said offer is not accepted, then the said stockholder so offering his stock for sale may sell such stock at private sale to any person that he chooses and at such figure as he may choose * * *.
'5. It is understood and agreed by the parties hereto that there shall be firmly attached to all of the stock certificates of each of the parties signing this agreement a rider containing the following language:
"The ownership and sale of this stock is subject to the terms and conditions of a certain agreement between B. J. Zimmerman, Iver M. Hagen, Eugene L. Beyl, and L. O. Simenstad, dated November 14, 1947, a copy of which is on file with the cashier of the Bank of Osceola, Osceola, Wisconsin."
Other portions of the contract provided that all stock certificates shall contain a rider mentioning the option agreement; that any party breaching the agreement shall become liable to the remaining signers in the sum of $1,000 each, which shall be considered as liquidated damages; and that in case of the death of any of the signers, the executor or administrator shall offer the stock to the remaining signers pursuant to the provisions of Paragraph 3.
The parties acquired additional shares of stock in the bank from the Segregated Trust subsequent to the signing of the agreement, and thereafter their holdings which, taken together, constituted a majority of the outstanding stock--were as follows:
Lien O. Simenstad 110 shares
Iver M. Hagen 110 shares
B. J. Zimmerman 110 shares
Eugene L. Beyl 66 shares
The stock certificates held by Hagen, Beyl and Zimmerman have never contained any reference to the option provisions of the 1947 contract, although Simenstad testified that he attached a statement of the restriction on his certificates at the time the agreement was entered into. Simenstad made no effort to determine whether the others had attached any such statement to their certificates.
Bernard R. Otto testified that he was employed as assistant cashier at the bank in 1955; that prior to his moving to Osceola he discussed purchasing some of the bank's stock from Zimmerman and Hagen; and he also discussed these plans with Simenstad and Simenstad did not object. On March 8, 1960, a letter was sent to Hagen, Beyl and Zimmerman by Simenstad's attorney advising them that none of the parties to the 1947 contract had any right to sell their stock to any third person without first offering it to the others. The letter also referred to the contract provision requiring statements of the restriction to be attached to the individual share certificates, and enclosed statements to be used for this purpose. Hagen and Beyl testified that they received the letter and that they were aware of the terms of the contract. B. J. Zimmerman testified that he may have received the letter and that he may have discussed it with his attorney, but that he did not specifically recall these events.
In November, 1961, Hagen, Beyl and Zimmerman, and another shareholder by the name of Henry Oakey, entered into an agreement granting Otto the option to purchase a total of 309 shares of the bank's stock. There were at that time 600 shares oustanding, 391 of which were owned by the parties to the action. The remaining 206 shares were held by about 30 other shareholders in blocks of from one to 35 shares. Eugene Beyl testified that Otto was acquiring the option on behalf of one Erling Larson and that Simenstad did not object to the proposed option until after Erling Larson's name came in. The option to Otto expired without being exercised.
There are three questions raised on the appeal: (1) Whether the option restriction is void because the individual certificates contain no reference to it; (2) whether Paragraph 2 of the 1947 agreement is void as against public policy, and, if so, whether the entire agreement must then fail; and (3) whether equitable relief is appropriate in the instant action.
(1) Absence of reference to restriction on the certificates.
The appellants contend that sec. 183.14, Stats., as construed in Larson v. Superior Auto Parts, Inc. (1955), 270 Wis. 613, 72 N.W.2d 316, governs the issue and renders the restriction unenforceable. Sec. 183.14, Stats., reads as follows:
Larson v. Superior Auto Parts, Inc., supra, was an action commenced to compel the defendant corporation to purchase the plaintiff's stock pursuant to contract between the corporation and its shareholders to the effect that when any member severs his connection with the company, his stock shall revert to the company, or in the alternative, be purchased by the remaining members. After setting out the provisions of sec. 183.14, Stats., this court stated that the agreement was not enforceable for the reason that the restrictions of the contract were not stated upon the plaintiffs' stock certificates. 1
However, neither sec. 183.14, Stats., nor the Larson Case have any application to the facts of the instant action. The statute deals with liens in favor of a corporation, and with stock restrictions whereby the option of first purchase is given to the corporation, and Larson v. Superior Auto Parts, Inc., supra, involved a contract between a corporation and its shareholders. The contract in the instant action, however, is an agreement only among four shareholders; it is not a contract between the corporation and its members, and sec. 183.14 and the Larson Case do not apply to such a situation.
In any event, the appellants' argument misses the point, for the question in the instant action is not whether the restriction clause may be enforced where no riders have been attached to the certificates, but only whether the appellants should be made to comply with the terms of the contract--one of which requires such riders to be affixed to the individual certificates. The trial court determined that they should, and we...
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