State ex rel. Weede v. Bechtel

• Citation: 244 Iowa 785,56 N.W.2d 173
• Decision Date: 16 December 1952
• Docket Number: No. 47986,47986
• Parties: STATE ex rel. WEEDE v. BECHTEL et al.
• Court: United States State Supreme Court of Iowa

Page 173

56 N.W.2d 173

244 Iowa 785

STATE ex rel. WEEDE v. BECHTEL et al.

No. 47986.

Supreme Court of Iowa.

Dec. 16, 1952.

F. A. Ontjes, of Mason City, Havner & Powers, of Des Moines, for interveners and defendant-cross-petitioner, appellants.

Campbell & Campbell, of Newton, for Charles Morgan, Administrator of the Estate of V. H. Morgan, deceased, and for Elery Scott, defendant-cross-petitioner, appellants.

F. A. Ontjes and Havner & Powers, Des Moines, and John Hale, Burlington, applicants-appellants.

Valentine & Valentine, of Centerville, Bradshaw, Fowler, Proctor & Fairgrave, of Des Moines, Cross & Hamill, of Newton, Cook, Blair & Balluff, of Davenport, for appellee.

BLISS, Justice.

The prayer of the application is for judgment and decree against the Iowa Southern Utilities Company, for services rendered and expense disbursements made, for and in behalf of said Company, by F. A. Ontjes, Havner & Powers, V. H. Morgan and John Hale, as attorneys for the interveners and the defendant-cross-petitioner, in the institution of their actions and in the preparation for and the trial in the district court and on appeal in this court in the above entitled action, being cause No. 46,686 in this court, reported in State ex rel. Weede v. Iowa Southern Utilities Co., 231 Iowa 784, 2 N.W.2d 372, 4 N.W.2d 869, and in 239 Iowa 1298, 31 N.W.2d 853, 8 A.L.R.2d 1162. Recovery was also asked for expenses, and for services rendered in resistance to petition to the Supreme Court of the United States for a writ of certiorari to the Supreme Court of Iowa filed by the Bechtels. Other defendants, among the 'et al.' in the title hereof, were Edward L. Shutts, President and Treasurer and a director of the Iowa Southern Utilities Company since June 8, 1937, H. W. Deininger, a Vice President since April, 1938, D. D. Bentzinger, General Manager, Celia Carson, Executrix of the Estate of George S. Carson, Deceased, Davenport Bank & Trust Company, Trustee under the Will of George S. Carson, M. G. Stover, Charles Westbrook, and Elery Scott. The last three owned preferred stock in the Utilities Co., at the time of the recapitalization of the Company and reclassification of its stock, on or about August 1, 1938. George S. Carson, or his estate, owned approximately 2400 shares of preferred stock. George M. Bechtel had been Chairman of the Board of Directors of the appellee since in 1934, and also a director. Harold R. Bechtel was Secretary and a director and had been for many years.

The action originally was brought as a suit in equity under chapter 387 of the 1935 Code of Iowa I.C.A. § 495.1 et seq., in the name of the State of Iowa, on the relation of J. B. Weede, a citizen of Iowa, but not a stockholder of the Company who filed his petition in the district court of Jasper County, Iowa, on November 29, 1939. In this petition certain of the statutory provisions were referred to and their violation by the defendants was alleged. It was alleged: that certificates were issued without receiving par value therefor; that the new common stock issued under the recapitalization plan was void; that under said plan the exchange of the existing preferred and existing common stock for the new common stock as fixed by the officers, directors and others was all on an arbitrary basis without reference to the legal rights of any of the stockholders; that when this was done said officers, directors and others knew that a large part of the preferred stock had been issued without payment of par value, and knew that the 100,000 shares of common stock were worthless and without value, and knew that the corporation had never received any value for said 100,000 shares of common stock; that to permit said officers and directors to continue in control of the corporation, its records, and finances, would defeat plaintiff's rights; and that a receiver should be appointed.

The prayer of the petition asked that the Court determine what stock had been validly issued, and what had been issued contrary to the statutes, and to declare the latter to be void, and that a receiver be appointed to take possession of the corporate property and wind up its affairs. Other relief, as might be equitable was prayed for. For a fuller statement of the petition and its prayer, see the opinions in the appeals in this case as noted above.

On February 15, 1940, by leave of the court, there was filed in the case for the Interveners, as parties defendant, by their said attorneys, an intervening answer. They alleged their joint ownership of seventeen shares of the 6% preferred stock of the Utilities Co., which they had not exchanged for the new common stock, and which they had bought directly from said company through its agents or employees and had paid the full par value therefor; that their stock was lawfully issued and is entitled to priority over all other stock issued by the Corporation except such preferred stock as may be held by persons similarly situated to these intervening defendants, but have not joined herein.

Interveners prayed in substance that their stock and that of stockholders similarly situated be decreed valid; that the voting rights of all stock be determined and that all stock illegally issued be decreed void and without right to vote; that the corporation be enjoined from making payments on dividend certificates; that a receiver be appointed, and for such other relief as might be equitable.

On December 7, 1942, interveners amended their intervening answer by adopting the allegations of plaintiff's petition. On March 16, 1940 the Court sustained motion of the Unilities Co. to dismiss as to it plaintiff's cause of action, which ruling was reversed by this court on February 10, 1942 and the action was remanded for trial. On January 27, 1943, the court--Judge Graven presiding--overruled the motion of the Utilities Co. to strike interveners' answer, which was not thereafter attacked or replied to. The Carson estate filed substituted answer on February 25, 1943 praying dismissal of plaintiff's petition and an adjudication of the validity of their stock. The Utilities Co. filed answer to plaintiff's petition denying that the 100,000 shares of old common stock, which had been exchanged for 39,468 shares of new stock, were worthless. The same attorneys who filed the answer of the company also filed a joint answer to said petition, with substantially the same allegations as in the company's answer, for Martha R., George M., and Harold R. Bechtel, Edward L. Shutts, H. W. Deininger, D. D. Bentzinger, Elery Scott et al.

On March 1, 1943, Elery Scott, one of said joint defendants, who had exchanged seven shares of preferred stock, for which he had paid full par value, for new common stock, filed a substituted answer alleging that he was entitled to priority over all other stock of the company except such preferred stock as might be held by others situated similarly to him; admitting all allegations of plaintiff's petition, except the allegation that his preferred stock was void. He also alleged that new common stock approximating $600,000 in par value had been issued for the company's old common stock, which was absolutely worthless, and without nominal or par value, and was subservient, as to dividends and assets, to the preferred stock held by himself and others 'that paid honest money for their stock.' He prayed that all stock illegally issued be declared void; that his preferred stock be returned; that the voting rights of the stock be determined; that a receiver be appointed and for general equitable relief. There was no attack upon or pleading to this answer. Plaintiff filed replies to answers of the Company and of Bechtel, et al.

Commencing on April 6, 1943, Judge Graven with his reporter, and with Havner, Ontjes, and Morgan appearing for plaintiff, and with power of attorney for Elery Scott, and with the Cook, Bradshaw, Valentine and Cross firms appearing for defendants, under an order to produce, held hearings steadily to August 6, 1943, at the Company's establishment in Centerville, Iowa, in the examination of the books, papers and records of the company, pertinent to the action which had been remanded. Many thousands of items were examined. The reporter's transcript had 314 typewritten pages.

The trial of the case before Judge Graven began September 1, 1943 and continued with little interruption until January 19, 1944, at which time, at considerable length, Judge Graven orally announced his tentative conclusions as to what his decision would be, stating that the exchange of 39,468 shares of the new common stock for 100,000 shares of the old common stock of the Bechtels which 'was absolutely worthless', was a transaction which met the court's condemnation. The court also said: 'We have intervenors here; true the plaintiff is not a stockholder, so far as that is concerned, but there are intervenors here and I think they have a right to protest against the $600,000 stock issue to the Bechtels.'

On January 21, 1944, the Court made its 'Findings of Fact, Conclusions of Law, Judgment and Decree.' The appearances noted were: Havner & Powers, F. A. Ontjes and V. H. Morgan for plaintiff; Cook, MacLaughlin & Blair, and the Valentine, Cross and Bradshaw firms, for the Utilities Co.; Cook, MacLaughlin & Blair for Martha R., George M. and Harold R. Bechtel et al.; Cook, MacLaughlin & Blair and the Bradshaw, Valentine, and Cross firms for Edward L. Shutts, H. W. Deininger and D. D. Bentzinger. The following entered their appearance of record but did not appear and take part in the trial: Lane & Waterman for the Carson Estate; Clark, Pryor, Hale, & Plock, for Ila Faye Thatcher and Nancy Rosseau, interveners; and Elery Scott appeared pro se.

The Court in its 'Findings of Fact, and Conclusions of Law, Judgment and Decree', stated that the reclassification plan of August, 1938, so far as the issuance of 39,468 shares of stock for the Bechtel common stock was...