Wipf v. Hutterville Hutterian Brethren, Inc.

• Citation: 2013 S.D. 49,834 N.W.2d 324
• Decision Date: 03 July 2013
• Docket Number: 26566.,Nos. 26554,s. 26554
• Parties: Johnny WIPF, Alvin Hofer, Jake Hofer, Sr., Jonathan Waldner, Pauly Waldner, John P. Waldner, Hans Waldner Ronnie Waldner, Jake Hofer, Jr., Marvin Hofer, Dave Hofer, Glen Wipf and Johnny Wipf, Jr., Individually, As Voting Members and As Directors and/or Officers, of Hutterville Hutterian Brethren, Inc., Plaintiffs and Appellees, v. HUTTERVILLE HUTTERIAN BRETHREN, INC., A South Dakota Corporation, John G. Waldner, George Waldner, Sr., Tom Waldner and Kenneth Waldner, Individually, As Purported Officers and/or Directors and As Current and Former Voting Members of Hutterville Hutterian Brethren, Inc., Defendants and Appellants.
• Court: Supreme Court of South Dakota

834 N.W.2d 324

2013 S.D. 49

Johnny WIPF, Alvin Hofer, Jake Hofer, Sr., Jonathan Waldner, Pauly Waldner, John P. Waldner, Hans Waldner Ronnie Waldner, Jake Hofer, Jr., Marvin Hofer, Dave Hofer, Glen Wipf and Johnny Wipf, Jr., Individually, As Voting Members and As Directors and/or Officers, of Hutterville Hutterian Brethren, Inc., Plaintiffs and Appellees,

v.HUTTERVILLE HUTTERIAN BRETHREN, INC., A South Dakota Corporation, John G. Waldner, George Waldner, Sr., Tom Waldner and Kenneth Waldner, Individually, As Purported Officers and/or Directors and As Current and Former Voting Members of Hutterville Hutterian Brethren, Inc., Defendants and Appellants.

Nos. 26554, 26566.

Supreme Court of South Dakota.

Considered on Briefs May 20, 2013.

Decided July 3, 2013.

Edwin E. Evans, Shane E. Eden of Davenport, Evans, Hurwitz & Smith, LLP, Sioux Falls, South Dakota and William D. Gerdes, Aberdeen, South Dakota, Attorneys for plaintiffs and appellees.

Steven D. Sandven, Sioux Falls, South Dakota, Attorney for defendants and appellants.

KONENKAMP, Justice.

[¶ 1.] This is the third appeal from the embattled factions at Hutterville Colony. Both sides challenge the circuit court's actions following our last decision ordering dismissal of the suit for corporate dissolution.

I.

[¶ 2.] Hutterville Colony is owned by Hutterian Brethren, Inc. (Hutterville). It is a registered nonprofit religious corporation and one of South Dakota's several Schmiedeleut Hutterian colonies. Hutterville's bylaws state its purpose as promoting the Hutterian faith through communal living. Members include persons at least eight years old who reside on the corporate property and are dependent upon the community fund. Living a communal life, members have no individual property rights. Corporate officers and directors receive no compensation and hold no corporate assets, but they control the community fund and all corporate businesses.

[¶ 3.] Hutterville has two opposing factions, paralleling the broader schism among Schmiedeleut Hutterians. While leaders on each side—the Wipf faction and the Waldner faction—have proclaimed themselves members of the “true Schmiedeleut,” they lived in peace until a few years ago, when both factions sought exclusive power over Hutterville. Wipf faction members tried to take control through corporate meetings and elections; Waldner faction members maintained control by refusing to recognize the new leaders. Both factions sought temporary restraining orders against the other. Their schism spawned two lawsuits: Hutterville Hutterian Brethren, Inc. v. Waldner, 2010 S.D. 86, 791 N.W.2d 169 and Wipf v. Hutterville Hutterian Brethren, Inc., 2012 S.D. 4, 808 N.W.2d 678.

[¶ 4.] In the first action, members of the Wipf faction sued members of the Waldner faction, asking the circuit court to install Johnny Wipf and other Wipf faction members as Hutterville's directors and officers. Waldner, 2010 S.D. 86, ¶ 9, 791 N.W.2d at 172. On the Waldner faction's motion, the circuit court dismissed for lack of subject matter jurisdiction. Id. ¶ 17. We affirmed on appeal, holding that resolution of the dispute would require a secular court to become unconstitutionally entangled in a religious controversy. Id. ¶ 34.

[¶ 5.] While an appeal was pending in the first action, the Wipf faction commenced a second suit seeking judicial dissolution of Hutterville. Since the members were deadlocked over the management and control of corporate affairs, the Wipf faction asserted that the deadlock was preventing Hutterville from carrying out its corporate purposes, causing irreparable injury to Hutterville's financial status and existence, and threatening the health and safety of its members. A receiver was needed, the Wipf faction contended, to preserve corporate assets and carry on business pending dissolution.

[¶ 6.] In October 2010, the Waldner faction moved to dismiss for lack of subject matter jurisdiction: judicial dissolution would again require the court to unconstitutionally intrude into a religious dispute. It also sought summary judgment because, in its view, the Wipf faction members had no standing to seek dissolution as they were neither company directors nor colony members, having been excommunicated by the Waldner faction. Both motions were denied.

[¶ 7.] Following a bench trial, the circuit court ruled that Hutterville would be dissolved under SDCL chapter 47–26. It identified Hutterville's members and found that the directors were deadlocked, that the conduct of the Waldner faction was illegal and oppressive, and that Hutterville was not functioning in accord with its corporate purposes. In pondering whom to appoint as a receiver, the court announced that “the receiver would not be someone from either side; not the plaintiff, not the defendant, not members of the plaintiff, not members of the defendant, but some independent third party who could collect the assets, sell the assets, pay all the bills that exist and divide the proceeds.” If they were unable to agree, then each faction could submit proposed names with credentials. The Wipf faction proposed two names; the Waldner faction declined to submit names. Nor would the Waldner faction agree or object to the names the Wipf faction submitted. The court appointed Harvey Jewett, one of the individuals proposed by the Wipf faction.

[¶ 8.] A week later, the Waldner faction appealed the dissolution order, asserting the circuit court's lack of subject matter jurisdiction. While that appeal was pending, the Waldner faction petitioned the circuit court to set a supersedeas bond. During the hearing, the parties and the court discussed whether the appointment of the receiver would need to be stayed pending the appeal. Citing SDCL 15–6–62(a), the court ruled that a receivership action need not be stayed pending appeal. Thereafter, the parties agreed that Receiver Jewett would be in control of Hutterville's assets and be responsible for overseeing bill payments and other corporate affairs. In lieu of a supersedeas bond, the court ruled that Receiver Jewett would continue to control Hutterville until the outcome of the appeal. At the conclusion of the hearing, counsel for the Wipf faction indicated that it would provide a written oath for the receiver to be filed with the circuit court.

[¶ 9.] In April 2011, Receiver Jewett moved to modify the appointment order to further define and clarify his authority. Represented by new counsel, the Waldner faction argued that the circuit court did not have jurisdiction to consider the motion because an appeal was pending. The court responded that the Waldner faction's predecessor counsel agreed that the receiverwould, in the interim, be permitted to act, gather the assets, and oversee Hutterville's day-to-day operations. Counsel for the Waldner faction then questioned Jewett about a purported conflict of interest from his affiliation with a law firm that had represented Hutterville before the dissolution action. Interjecting, the court explained to counsel that both sides were afforded an opportunity to suggest a receiver, and the Waldner faction submitted no names and offered no objections to the Wipf faction's two proposed names. The court declared the issue waived and granted Receiver Jewett's motion to modify.

[¶ 10.] Later in April 2011, Receiver Jewett sought an order that all assets of the entity known as Hutterville Cabinet Co. be subject to the control and administration of the receivership. The Waldner faction objected on grounds that the circuit court did not have jurisdiction while the case was pending before the Supreme Court, the receiver had a conflict of interest, and the court had no jurisdiction over Hutterville Cabinet Co. The court granted Receiver Jewett's request.

[¶ 11.] On January 25, 2012, we issued our decision on the Waldner faction's appeal, ruling that the circuit court lacked subject matter jurisdiction to order judicial dissolution of Hutterville because “the underlying religious controversies over church leadership so pervade the dissolution of the religious corporation that the dissolution is beyond a secular court's jurisdiction.” Wipf, 2012 S.D. 4, ¶ 27, 808 N.W.2d at 686. We reversed and remanded, with instructions “to dismiss the case for lack of subject matter jurisdiction.” Id. ¶ 28.

[¶ 12.] Before the case was remitted to the circuit court, Receiver Jewett moved for approval of his accounting, for payment of his fees and expenses, and for payment of a bill from Siegel, Barnett & Schutz, LLP. The Waldner faction retained additional counsel and argued that because this Court had ruled that there was no subject matter jurisdiction, the circuit court had had no power to initially appoint Jewett as a receiver, and therefore “must restore property subject to the receivership to the true owner as soon as possible and in an orderly proceeding.” The faction requested that Receiver Jewett provide a full and complete accounting. Yet it opposed any payment for his fees and expenses, asserting that the fees “are properly taxable to the [Wipf faction] as the non-prevailing party in this matter.” Repeating its previous arguments, the Waldner faction persisted in its claim that Jewett had a conflict of interest.

[¶ 13.] At a hearing held in February 2012, Receiver Jewett gave a report to the circuit court on his accounting. In response to questions from the Waldner faction's counsel, Jewett indicated that he had not taken an oath or obtained a bond. At the conclusion of the hearing, the court orally ordered that Receiver Jewett be paid his fees and expenses. But the court denied payment to Siegel, Barnett & Schutz from receivership funds because the receiver did not employ the services of the law firm. Jewett was directed to retain $100,000 from the receivership to cover incidental bills, but otherwise to deliver all remaining assets to Hutterville Hutterian Brethren, Inc.¹ [¶ 14.] Essentially switching positions, the Wipf...