Wolff v. Arctic Bowl, Inc.

• Decision Date: 16 February 1977
• Docket Number: No. 1380,1380
• Citation: 560 P.2d 758
• Parties: Rodney L. WOLFF, Appellant, v. ARCTIC BOWL, INC., a corporation, et al., Appellees.
• Court: Alaska Supreme Court

Page 758

560 P.2d 758

Rodney L. WOLFF, Appellant, v. ARCTIC BOWL, INC., a corporation, et al., Appellees.

No. 1380.

Supreme Court of Alaska.

Feb. 16, 1977.

Appeal from the Superior Court of the State of Alaska, Fourth Judicial District, Fairbanks, Edmond W. Burke, Judge.

Clem H. Stephenson, Fairbanks, for appellant.

Albert Maffei, Anchorage, for appellees.

Before BOOCHEVER, C. J., and RABINOWITZ and CONNOR, JJ.

OPINION

CONNOR, Justice.

This appeal concerns a shareholder's suit brought against Arctic Bowl, Inc., its directors and its shareholders by Rodney Wolff, a minority shareholder, for alleged fraudulent misconduct by the directors and officers of the corporation.

In 1958 Arctic Bowl, Inc. (Bowl) was formed by appellant Wolff and others for the purpose of developing and operating a bowling center in Fairbanks. At that time Alaska Overland, Inc. (Overland) had an interest in an airline hangar located at Weeks Field which it was thought could be converted to a bowling alley. In order to raise money to obtain a complete interest in the hangar, and to finance its remodeling, Bowl stock was offered to the public. On May 19, 1958, 12 stock certificates in Bowl were issued for 216 shares at a par value of $100.00. Certificate No. 1 was issued to Rodney Wolff for 50 shares. The incorporators of Bowl encountered difficulty in selling the stock and obtaining loans to complete the remodeling. At about this time, Paul Sandifur, the President of Metropolitan Mortgage and Securities Company, Inc. (Metropolitan), a Washington corporation, contacted Victor Hart and told him Metropolitan would be interested in financing the remodeling of the hangar.

As a condition of financing Metropolitan required that all of the original owners of the stock certificates of Bowl endorse their certificates and return them so that Metropolitan would have a controlling interest in Bowl. Although the other original shareholders complied, Wolff elected to remain a shareholder. He alleges he did, however, turn in his certificate with the understanding that he would be reissued the same number of shares on a form satisfactory to Metropolitan. It is unclear when Wolff actually turned in his certificate. The back of the certificate indicates and Wolff testified that it was transferred to Overland on August 8, 1958. Victor Hart testified that Metropolitan did not even enter the picture until 1959, though the back of another shareholder's certificate has an August 25, 1958 date on it. In any event, Wolff apparently turned his certificate in and was reissued a certificate in 1959 for only ten shares.

In March of 1959 a Bowl shareholders meeting was held at which officers and directors were purportedly elected. Appellant Wolff challenges the validity of this election. At this time. Metropolitan and Overland entered into an agreement which was supplemented by a later agreement in April of 1959. In this later agreement, Overland gave Metropolitan a 52% interest in Bowl. The terms of this agreement were then reiterated in a September 20, 1959, agreement which provided that Metropolitan would improve the airline hangar and sell it to Arctic Bowl for its cost plus 25%. The purchase price, based on construction costs, was to be $575,000 with $52,000 as a down payment.

Approximately one year later, the cost of a shopping center, which was located on the property contiguous to the bowling alley, was added to the existing balance due on the bowling alley. The total purchase price was $878,773.77.

The bowling alley was leased by defendant Victor Hart who subsequently filed a petition in bankruptcy. Bowl suffered financial losses ¹ and in 1961, Charles H. Sandifur, Vice President of Metropolitan, advised the shareholders, directors and officers of Bowl that the corporation was insolvent and in danger of suffering a forfeiture on the contract of purchase.

The instant suit was filed in 1971. Wolff, who had managed the bowling alley for approximately one year, alleged that Hart fraudulently converted the 40 shares of stock which were not reissued to him and that he had been unable to inspect the books and records of Bowl. He requested that the interest of the defendants and their stock be cancelled and set aside. He contended that none of the other appellees paid for their stock, and that he was the only stockholder of the corporation. He further alleged that all of the defendants fraudulently manipulated the books of the corporation.

After a trial without a jury, the trial court found for the defendants. Judge Burke concluded that Wolff failed to sustain his burden of proof with respect to the transfer of stock to Bowl and the inflation of construction costs. He held that Wolff was barred from relief by laches. However, he did conclude that Wolff was entitled to the return of the 40 additional shares of stock.

On June 17, 1974, Wolff moved for a new trial under Alaska Rule of Civil Procedure 60 on the basis of newly discovered evidence. The newly discovered evidence was that on March 14, 1973, the Grand Jury at Fairbanks, Alaska, returned an indictment against appellee C. Paul Sandifur, charging him with perjury in his testimony in the instant case. Sandifur later pleaded guilty to the reduced charge of wilfully concealing evidence. Based on this, Judge Burke granted a new trial. Upon reviewing the case and Sandifur's conviction, Judge Burke vacated his order granting a new trial.

Appellant Wolff raises five issues on appeal:

1. Whether the trial court erred in vacating the order granting the new trial because that order had become the law of the case;

2. Whether the trial court erred in finding that the original stock issued by Bowl was purchased by Overland and that Overland was the owner of this stock;

3. Whether the findings of fact and conclusions of law that Wolff, as plaintiff, did not sustain his burden of proving fraudulent inflation of construction costs are erroneous;

4. Whether the trial court erred in finding appellant guilty of laches with respect to bringing issues (2) and (3), above, before the court; and

5. Whether the trial court should have rendered a judgment for appellant for an accounting and examination and inspection of books, records and accounts of Bowl.

The trial court's conclusions of law were not based solely on the affirmative defense of laches, but also dealt with the substantive issues raised by the parties. Even if the trial court committed error in finding laches, we must affirm its judgment unless it erred with respect to the other findings of fact or conclusions of law as well.

I

Judge Burke entered an order granting plaintiff's motion for new trial on October 3, 1974. Defendants filed a petition for review of that order, which we denied. On May 30, 1975 Judge Burke vacated his earlier order sua sponte, having decided that he was mistaken in ordering a new trial. ²

Plaintiff asserts that the original order granting a new trial 'became the 'law of the case' when defendants' petition for review was denied,' and hence the order could not be vacated.

The doctrine of the law of the case prohibits the reconsideration of issues which have been adjudicated in a previous appeal in the same case. Patrick v. Sedwick, 413 P.2d 169, 173 (Alaska 1966). See also Watts v. Seward School Board, 421 P.2d 586, 618 (Alaska 1966)(Rabinowitz, J., concurring in part and dissenting in part), rehg. denied, 423 P.2d 678 (Alaska 1967), vacated 391 U.S. 592, 88 S.Ct. 1753, 20 L.Ed.2d 842 (1968), reinstated, 454 P.2d 732 (Alaska 1969), cert. denied, 397 U.S. 921, 90 S.Ct. 899, 25 L.Ed.2d 101 (1970). Even issues not explicitly discussed in the first appellate opinion, but directly involved ³ with or 'necessarily inhering' ⁴ in the decision will be considered the law of the case. This doctrine is akin to the doctrine of res judicata, ⁵ in that it requires that a final judgment be rendered with respect to the issues at hand. See United States v. United States Smelting Refining & Mining Co., 339 U.S. 186, 199, 70 S.Ct. 537, 94 L.Ed. 750 (1950).

A denial of a petition for review does not constitute a determination of the issue in a case nor is it a final judgment for the purposes of res Judicata. A petition will be denied where the issue is simply not important or urgent enough to warrant a departure from the usual appellate procedure. The petitioner is not foreclosed by such denial in bringing up the issue later in an appeal, since there has been no determination of the merits of the issue. See Alaska R.App.Proc. 24(a); ⁶ Contento v. Alaska State Housing Authority, 398 P.2d 1000 (Alaska 1965).

Therefore, we hold that the trial court was not bound by the law of the case when it originally granted the new trial.

II

Wolff contends that the trial court erred in finding that the original stock issued by Arctic Bowl, Inc. was purchased by Alaska Overland, Inc. and paid for with its money and that Alaska Overland, Inc. was the owner of the stock. Wolff claims the trial court's finding is contrary to and is not supported by the evidence. He alleges that he was the only owner of Bowl stock on March 19, 1959 and, therefore, that the purported election of Victor Hart, C. Paul Sandifur and Charles H. Sandifur as officers of Bowl was illegal.

The defendants maintain that the endorsements on the back of the stock certificates to Overland as assignee constitute prima facie evidence that Overland was the actual transferee and true owner of the stock. Judge Burke found that Wolff had not received his new certificate at the time of the March 1959 meeting, and therefore Overland, as assignee was the only shareholder at that time. However, the secretary of Metropolitan, Howard Frissel, testified that the certificates were not actually signed over to Overland until after the March, 1959 meeting According to the testimony of Mr. Patton, one of the incorporators of Bowl, stock was not issued to Overland until September of 1959, at which time Overland...