Unertl v. Bezanson

• Citation: 414 N.W.2d 321
• Decision Date: 21 October 1987
• Docket Number: No. 86-1171,86-1171
• Parties: Michael W. UNERTL; Deborah J. Unertl; Marvin G. Sutton, Sr.; Norma J. Sutton; and Bernard W. Gross, On Behalf of Themselves and All Those Similarly Situated, Appellants, v. Peter F. BEZANSON, Individually and in His Capacity as a Director and Chairman of the Board of Directors of The Morris Plan Company of Iowa; John D. Wolfe, Individually and in His Capacity as President of the Morris Plan Company of Iowa; and Robert L. McGannon, Jerry S. Maples, Melvin Struthers, Jr., Irene B. Konecny, Robert E. Johnson, John H. Vaughn, and Loras J. Kregel, All Individually and in Their Capacity as Members of the Board of Directors of The Morris Plan Company of Iowa; Peter F. Bezanson, Individually and in His Capacity as a Director and Chairman of the Board of Directors of The Morris Plan Company; Jerry S. Maples, Individually and in His Capacity as the President and a Member of the Board of Directors of The Morris Plan Company; Robert L. McGannon, Individually and in His Capacity as an Officer and Member of the Board of Directors of The Morris Plan Company; Randall P. Bezanson, Kenneth Hastie, John J. Bryant, Allan C. Peremsky, Robert E. Johnson and John D. Wolfe, Individually and in Their Capacity as Members of the Board of Directors of The Morris Plan Company; and the Morris Plan Company, An Iowa Corporation; and Peter F. Bezanson, Individually and in His Capacity as a Director and Chairman of the Board of Directors of MorAmerica Financial Corporation; Jerry S. Maples, Individually and in His Capacity as President and a Member of the Board of Directors of MorAmerica Financial Corporation; Larry Kroemer, Individually and in His Capacity as an Officer and a Member of the Board of Directors of MorAmerica Financial Corporation; and Randall P. Bezanson and Robert L. McGannon, Individually and in Their Capacity as Members of the Board of Directors of MorAmerica Financial Corporation; and an Unknown Number of Jane Does and John Does, Hereinafter More Particularly Identified, Individua
• Court: United States State Supreme Court of Iowa

Page 321

414 N.W.2d 321

Michael W. UNERTL; Deborah J. Unertl; Marvin G. Sutton, Sr.; Norma J. Sutton; and Bernard W. Gross, On Behalf of Themselves and All Those Similarly Situated, Appellants, v. Peter F. BEZANSON, Individually and in His Capacity as a Director and Chairman of the Board of Directors of The Morris Plan Company of Iowa; John D. Wolfe, Individually and in His Capacity as President of the Morris Plan Company of Iowa; and Robert L. McGannon, Jerry S. Maples, Melvin Struthers, Jr., Irene B. Konecny, Robert E. Johnson, John H. Vaughn, and Loras J. Kregel, All Individually and in Their Capacity as Members of the Board of Directors of The Morris Plan Company of Iowa; Peter F. Bezanson, Individually and in His Capacity as a Director and Chairman of the Board of Directors of The Morris Plan Company; Jerry S. Maples, Individually and in His Capacity as the President and a Member of the Board of Directors of The Morris Plan Company; Robert L. McGannon, Individually and in His Capacity as an Officer and Member of the Board of Directors of The Morris Plan Company; Randall P. Bezanson, Kenneth Hastie, John J. Bryant, Allan C. Peremsky, Robert E. Johnson and John D. Wolfe, Individually and in Their Capacity as Members of the Board of Directors of The Morris Plan Company; and the Morris Plan Company, An Iowa Corporation; and Peter F. Bezanson, Individually and in His Capacity as a Director and Chairman of the Board of Directors of MorAmerica Financial Corporation; Jerry S. Maples, Individually and in His Capacity as President and a Member of the Board of Directors of MorAmerica Financial Corporation; Larry Kroemer, Individually and in His Capacity as an Officer and a Member of the Board of Directors of MorAmerica Financial Corporation; and Randall P. Bezanson and Robert L. McGannon, Individually and in Their Capacity as Members of the Board of Directors of MorAmerica Financial Corporation; and an Unknown Number of Jane Does and John Does, Hereinafter More Particularly Identified, Individually and in Their Capacities as Officers and/or Directors of The Morris Plan Company of Iowa, The Morris Plan Company or MorAmerica Financial Corporation, Appellees.

No. 86-1171.

Supreme Court of Iowa.

Oct. 21, 1987.

James W. Hall and Joe H. Harris of Hall & Irvine, Cedar Rapids, for appellants.

Carl Schuettpelz, Cedar Rapids, for appellee Morris Plan Co.

Michael Helms, Omaha, Neb., and Minor Barnes of Pickens, Barnes & Abernathy, Cedar Rapids, for all other appellees.

Considered en banc.

LARSON, Justice.

These plaintiffs lost the savings they had deposited with a corporation called Morris Plan Company of Iowa (hereafter Morris Plan of Iowa), an "industrial loan company" under Iowa Code chapter 536A. The plaintiffs claim the loss was largely the result of imprudent loans made by Morris Plan of Iowa to two related corporations, Morris Plan Company and MorAmerica Financial Corporation (hereafter MorAmerica). The plaintiffs sued the Morris Plan Company and its officers and directors, as well as the officers and directors of Morris Plan of Iowa and MorAmerica. (Apparently, because Morris Plan of Iowa and MorAmerica had filed for reorganization under the bankruptcy laws, those corporations were not joined as defendants.)

The district court dismissed the petition on two grounds: (1) it failed to state a claim on which any relief could be granted, Iowa R.Civ.P. 104(b); and (2) the bankruptcy proceedings by MorAmerica and Morris Plan of Iowa automatically stayed further proceedings in state court. The plaintiffs appealed, and we now affirm. Because we affirm on the first issue, we do not address the second.

The petition first identifies the five named plaintiffs as "depositors" of Morris Plan of Iowa and states that there are common interests of all other depositors (alleged to exceed 15,000 in number, and representing over $50,000,000 in deposits), in order to obtain certification as a class action under Iowa Rule of Civil Procedure 42.1. The district court reserved ruling on the certification request, and that matter is not involved in this appeal.

The petition alleged that MorAmerica is a financial holding company and that all of its outstanding stock is owned by defendant Peter F. Bezanson. Morris Plan Company is a wholly owned subsidiary of MorAmerica. The third corporation, Morris Plan of Iowa, is an Iowa corporation which is a wholly owned subsidiary of Morris Plan Company. The officers and directors of the three corporations are highly interlocked, and it is alleged that virtually all of the ownership of the three corporations is in defendant Peter F. Bezanson.

It is alleged that, as an industrial loan company, Morris Plan of Iowa "is engaged in the business of receiving deposits upon which it pays interest, and making loans for which it charges interest." It is only this corporation, Morris Plan of Iowa, with which the plaintiffs had direct dealings through the investment of their savings. The plaintiffs' claims against the other defendants arise as a result of the loans made by Morris Plan of Iowa to them.

The petition alleges that, over a period of time prior to the filing of the bankruptcy proceedings by MorAmerica and Morris Plan of Iowa, the officers and directors of Morris Plan of Iowa dissipated the corporation's assets, including the plaintiffs' deposits, by making "imprudent, unsecured" loans in the approximate amount of $50,000,000 to Morris Plan Company. They allege that Morris Plan Company, in turn, made imprudent and unsecured loans of approximately the same amount to MorAmerica and other affiliated corporations and entities in such a way as to amount to self-dealing. It further alleged that MorAmerica and Morris Plan of Iowa had filed for reorganization under chapter 11 of the federal bankruptcy law. (Morris Plan Company was apparently only a conduit for the transfer of money and had no assets of its own. The plaintiffs suggest this is the reason Morris Plan Company did not petition for reorganization.)

It is upon these facts that the plaintiffs assert claims of negligence, breach of fiduciary duty, gross negligence, and breach of implied contract. The district court held that, even if the facts alleged are considered to be true, and taken in the light most favorable to the plaintiffs, they still do not establish a legal duty to the plaintiffs on any of these bases.

I. Iowa Rule of Civil Procedure 69(a)(1) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," and rule 67 provides that "[t]he form and sufficiency of all motions and pleadings shall be ... construed and enforced to secure a just, speedy and inexpensive determination of all controversies on their merits."

We have discussed the effect of these rules on the summary dismissal of plaintiffs' claims in several of our recent cases. See, e.g., Lakota Consol. Indep. School v. Buffalo Center/Rake Community Schools, 334 N.W.2d 704, 708 (Iowa 1983); Van Meter v. Van Meter, 328 N.W.2d 497, 497 (Iowa 1983); Soike v. Evan Matthews and Co., 302 N.W.2d 841, 842 (Iowa 1981); Lamantia v. Sojka, 298 N.W.2d 245, 247-48 (Iowa 1980).

In Soike, we said that a petition

[is] not required to identify a specific legal theory; it is sufficient if the prima facie elements of a claim are stated, and this statement is "fair notice" to the defendant.... Under such "notice pleading," Iowa R.Civ.P. 69(a), it is sufficient if the petition apprises a defendant of the incident giving rise to the claim and of the general nature of the action. Id. The petition here was sufficient to apprise the defendant of the facts out of which the claim arose and of the general nature of the action, i.e., a claim for negligent placement of the house. To require the plaintiffs to go further and identify the specific legal theory underlying the claim would be inconsistent with the notice pleading concept in rule 69(a), requiring only "a short and plain statement of the claim showing that the pleader is entitled to relief."

302 N.W.2d at 842 (citations omitted). In addition, the allegations of the petition are construed in the light most favorable to the plaintiff, who is given the benefit of all doubts in the petition. Curtis v. Board of Supervisors, 270 N.W.2d 447, 448 (Iowa 1978).

The impact of this philosophy of pleading has virtually emasculated the motion to dismiss for failure to state a claim. For such a motion to be sustained, it must be concluded that no state of facts is conceivable under which the plaintiff might show a right of recovery. Schmidt v. Wilkinson, 340 N.W.2d 282, 284 (Iowa 1983); Lakota Consol. Indep. School, 334 N.W.2d at 708; Citizens for Washington Square v. City of Davenport, 277 N.W.2d 882, 885 (Iowa 1979). See generally 5 C. Wright & A. Miller, Federal Practice and Procedure § 1215, at 113 (1969) (discussing similar federal rules).

Despite these liberal rules of pleading, however, it is clear they cannot create a duty where one does not otherwise exist. See Bawek v. Kawasaki Motors Corp., 313 N.W.2d 501, 502 (Iowa 1981). This is the situation in which the plaintiffs in the present case find themselves; the liberality of our pleading rules cannot overcome the fact that the plaintiffs have failed to show the existence of a legal duty owed to them.

II. As already noted, the gist of the plaintiffs' petition is that their savings had been lost through a series of imprudent investments by Morris Plan of Iowa to Morris Plan Company which, in turn, made loans to other entities. According to the petition, these loans were "imprudent" and amounted to self-dealing, because of the highly interlocked interests of the defendants in the various corporations.

A. The general rule is that

[d]irectors or officers may be liable to the corporation or stockholders for mismanagement of the business of the corporation or waste of its assets; but according to a number of cases, they are not liable to its creditors for...