State ex rel. Weede v. Bechtel

Citation239 Iowa 1298,31 N.W.2d 853
Decision Date06 April 1948
Docket NumberNo. 46686.,46686.
PartiesSTATE ex rel. WEEDE v. BECHTEL et al. (THATCHER et al., Intervenors).
CourtUnited States State Supreme Court of Iowa

239 Iowa 1298
31 N.W.2d 853

STATE ex rel. WEEDE
v.
BECHTEL et al. (THATCHER et al., Intervenors).

No. 46686.

Supreme Court of Iowa.

April 6, 1948.


Appeal from District Court, Jasper County; Henry N. Graven, Judge.

Action in equity to cancel certain shares of stock issued by the defendant, Iowa Southern Utilities Company of Delaware, to dissolve such corporation and to appoint a receiver to wind up its affairs. The trial court ordered certain stock cancelled and denied any further relief. Appeal by plaintiff and certain defendants.

Affirmed on both appeals

[31 N.W.2d 854]

Cross & Hamill, of Newton, and Cook, MacLaughlin, Blair & Balluff, of Davenport, for appellants.

Havner & Powers, of Des Moines, F. A. Ontjes, of Mason City, and V. H. Morgan, of Newton, for plaintiff-appellee and intervenor-appellees.


Valentine & Valentine, of Centerville, Bradshaw, Fowler, Proctor & Fairgrave, of Des Moines, and Cook, MacLaughlin, Blair & Balluff, of Davenport, Iowa, for defendant-appellees.

Lane & Waterman, of Davenport, for defendant-appellees Celia Carson and Davenport Bank & Trust Co.

MANTZ, Justice.

The action is in equity. Plaintiff, State of Iowa ex rel. J. B. Weede, brought suit against various parties including the Iowa Southern Utilities Company of Delaware, Martha R. Bechtel, George M. Bechtel, Harold R. Bechtel, et al. The action was instituted under the provisions of Chapter 387, Code of 1935 (Chapter 495, Code 1946), and in its petition plaintiff claims that in various transactions, beginning about the year 1916 and continuing down to the time the petition was filed, the Iowa Southern Utilities Company, together with George M. Bechtel and his interests, conducted the affairs of said Utility Company in an illegal and unlawful manner and in violation of the statutes of Iowa. Plaintiff prayed that the court determine the stock entitled to be recognized as having voting rights in stockholders' meeting; that the officers be restrained from further illegal action in connection with the defendant Utility Company; that said corporation be dissolved and a receiver be appointed to wind up its affairs and for general equitable relief. This claim of plaintiff was denied by said defendant who alleged that all of such proceedings were in accord, not only with the laws of Delaware, but those of the State of Iowa.

Following the filing of the petition, various motions to strike were directed towards plaintiff's petition. These motions were ruled upon by the trial court and certain parts of such petition were ordered stricken. Following this, a motion to dismiss containing eighteen separate grounds, was filed. This motion to dismiss was sustained generally and without specification upon the particular ground. Plaintiff appealed to this court and this court reversed the action of the trial court. State ex rel. Weede v. Iowa Southern Utilities Co., 231 Iowa 784, 2 N.W.2d 372,4 N.W.2d 869.

[31 N.W.2d 855]

Following the filing of the opinion of this court said cause was remanded to the lower court for trial upon the merits. In the concluding paragraph of that opinion this court said: ‘The relief to which the appellant (plaintiff herein) may be entitled will necessarily depend upon the facts established by the evidence.’

We will briefly outline the proceedings in the cause following the filing of the opinion mentioned above.

Following remand, plaintiff's petition was amended in various particulars. On February 15, 1940, Ila Faye Thatcher and Nancy Rosseau filed a pleading denominated by them as intervening answer. This they later amended admitting the allegations of plaintiff's petition except as to the invalidity of the stock held by the intervenors in the Iowa Southern Utilities Company. On February 12, 1943, there was filed by defendants, Celia Carson, executrix of the estate of George S. Carson, deceased, and the Davenport Bank & Trust Co., trustee under the will of George S. Carson, an answer to the petition of plaintiff. On February 25, 1943, said defendants filed an amended and substituted answer to plaintiff's petition. On February 13, 1943, there was filed by the defendants, Iowa Southern Utilities Company of Delaware, an answer to plaintiff's petition. On February 15, 1943, the defendants, Martha R. Bechtel, George M. Bechtel, Harold R. Bechtel, Edward L. Shutts, H. W. Deininger, D. D. Bentzinger, M. G. Stover and Charles Westbrook, filed a separate answer to plaintiff's petition. On March 1, 1943, the defendant, Elery Scott, filed a substituted answer appearing in said answer pro se.

On March 5, 1943, plaintiff filed a reply to the separate answer of the Iowa Southern Utilities Company, and on March 6, 1943, plaintiff filed a reply to the answer of Martha R. Bechtel, George M. Bechtel, Harold R. Bechtel, Edward L. Shutts, H. W. Deininger, D. D. Bentzinger, M. G. Stover and Charles Westbrook.

On December 28, 1943, following trial, plaintiff filed an amendment to petition to conform pleading to proof. To this amendment the defendants filed answer and on January 10, 1944, plaintiff filed a reply to the answer of defendants to plaintiff's amendment to conform pleading to proof.

Briefly speaking, all of the answering defendants save Elery Scott, pleaded specifically to the petition of the plaintiff. Said petition is set forth in the opinion in the former appeal. (231 Iowa 784, 2 N.W.2d 372,4 N.W.2d 869). Certain parts of said petition are admitted particularly with reference to the organization of the Iowa Southern Utilities Company, its location, business and purposes; the acquisition of other property; the issuance of stock under the terms of its charter, denying fraud, or illegality in organization or conduct and alleging full compliance with the laws of Delaware and those of Iowa. By separate answers the Bechtels plead substantially along the same line as the Utility Company, deny any fraud or illegal action and plead full conformance to the statutes of Delaware in the issuance of stock and claim to be full owners of stock in said company as good faith holders thereof.

Defendants representing the estate of George S. Carson and the trustee under his will filed pleading along the same lines as those filed by the Utility Company and the Bechtels.

This court appointed Hon. Henry N. Graven, District Judge, to conduct the trial of said case. The record shows that the trial took approximately five months. On January 20, 1944, the trial court entered a finding of fact and conclusions of law and held therein that the 39,468 shares of new common stock issued in August, 1938, to Martha R. Bechtel in exchange for 100,000 shares of non-par common stock were void, invalid and of no force and effect and were not entitled to participate as valid shares in the control or management of the Iowa Southern Utilities Company of Delaware. Said decree found adversely to plaintiff on all other claims set forth in its petition.

I. Both plaintiff and the Bechtels (defendants) have appealed. The latter, having first given notice of such appeal, will be designated as appellants, while the plaintiff will be designated as appellee. As there are two appeals herein it will be necessary to keep in mind the situation and position of the parties appealing in giving

[31 N.W.2d 856]

consideration to the various questions and claims advanced by such parties.

The Iowa Southern Utilities Company of Delaware, defendant, has not appealed, and in this opinion we will refer to said defendant as the Utility Company. While not appealing, said Utility Company has filed herein a brief and argument wherein it seeks to sustain the holding of the trial court so far as same is favorable to its claims.

Briefs and arguments have been filed on behalf of the plaintiff-appellee, also on behalf of Ila Faye Thatcher and Nancy Rosseau, intervenors, and also by Elery Scott who appeared pro se and designates himself as defendant cross-petitioner.

II. The main controversy seems centered around the Utility Company, a Delaware corporation, its organization, structure, control, and activities since its organization in Delaware February 12, 1923. Prior to that time it had operated as a foreign corporation of the State of Maine for a number of years. When it was organized under the laws of Delaware it took over the property of the Maine corporation. Following its organization as a Delaware corporation, it applied for and received a permit from the proper officials of Iowa to conduct business within the State of Iowa. This permit was later renewed and was in effect when this case was tried.

As above set forth, the action designated as plaintiff, State of Iowa ex rel. J. B. Weede. The action was instituted pursuant to the provisions of section 8438. Code of 1935, Chapter 387 (Chapter 495, Code of 1946).

In the former appeal some question was raised as to the jurisdiction of the court to try the issues raised in the petition. In the opinion filed in that appeal it was held that the court had jurisdiction to try said issues. Appellants argue that as the action is one in the nature of quo warranto the relief sought and granted appellee cannot be sustained. Assuming that the point was properly raised, still we see no merit therein. Above, we have indicated the statute under which the action was properly brought.

III. The record is large. The issues and the evidence offered in support thereof cover a wide range. A very considerable part of the evidence was given by experts,-those engaged in corporation affairs, their organization, the financing thereof, the issuance and disposal of corporation securities; and public accountants.

In the consideration of the questions presented we shall endeavor to confine this opinion, so far as possible to the essential points involved and necessary to a disposition of such questions. In so doing, we will, to a considerable extent, deviate from the method used by the respective parties.

While many points are set forth and argued, still we think the controlling and decisive...

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