Tuesday, November 16, 2010

Summary 2010 WY 147

Summary of Decision November 16, 2010

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Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: Zubrod v. CWCCapital Asset Management, LLC

Citation: 2010 WY 147

Docket Number: S-10-0075

URL: http://tinyurl.com/2db3eyh

W.R.A.P. 11 Certified Question from the United States Bankruptcy Court for the District of Wyoming The Honorable Peter J. McNiff, Judge

Representing Appellant (Plaintiff): Paul Hunter, Cheyenne, Wyoming

Representing Appellee (Defendant): Gregory C. Dyekman of Dray, Thomson & Dyekman, Cheyenne, Wyoming.

Date of Decision: November 16, 2010

Facts: Appellee received a money judgment against a party who owned 100% of the stock of one corporation and 50% of the stock of another and was the president of both corporations. Appellee had the sheriff attempt to serve two writs of execution on him as the corporations’ president, in order to levy against his shares of stock in both corporations to satisfy the money judgment. He was neither at his business office nor his home when service was attempted, so the sheriff served both writs on an attorney who was the registered agent for service of process for one of the corporations. At the time process was served him, he was the law partner of a second attorney, who was the registered agent for the other. Subsequently, there was a Chapter 11 reorganization bankruptcy filed, which was later converted to a Chapter 7 liquidation bankruptcy and a trustee was appointed. After Appellee objected to the bankrupt’s use of cash collateral, the trustee filed an adversary proceeding requesting that the bankruptcy court find that Appellee had failed to perfect its interest in the stock from either corporation. That filing led to this certification

Certified Questions: Is a security interest in corporate stock perfected, pursuant to Wyo. Stat. 1-19-103, when service of a writ of execution is made on the corporation’s registered agent because a corporate officer is not present when service is attempted? Is a security interest in corporate stock perfected, pursuant to Wyo. Stat. 1-19-103, when service of a writ of execution is made on a law partner of the corporation’s registered agent?

Holdings: The trustee contends that under Wyo. Stat, 1-19-103, service on the corporation’s registered agent was invalid because service on a registered agent is proper only where there is no corporate officer, not where one exists but simply is not present or cannot be found.

In interpreting the intent of Wyo. Stat. 1-19-103, the general rules of statutory construction must be applied. That is: A statute is clear and unambiguous if its wording is such that reasonable persons are able to agree on its meaning with consistency and predictability. Conversely, a statute is ambiguous if it is found to be vague or uncertain and subject to varying interpretations. If it is determined that a statute is clear and unambiguous, the plain language of the statute will be given effect. In addition, several specific rules of statutory construction apply in the instant case. First, the general principles of statutory construction only if more than one reasonable interpretation exists. Second, the words contained in a statute must be considered in relation to one another. Third, a statute must not be given a meaning that will nullify its operation if it is susceptible of another interpretation. Fourth, a statute will not be interpreted in a manner that produces absurd results. Fifth, to determine whether a statute is ambiguous, the court will not be limited to the words found in that single statutory provision, but may consider all parts of the statutes on the same subject.

Applying these standards to the question at hand, Wyo. Stat. 1-19-103 is not ambiguous because it is susceptible to only one reasonable interpretation. The clear purpose of the statute, as evidenced by its title and by its language, is to provide the proper method of levying execution or attachment upon a corporation. The effect of such levy is to bind the shares of stock “from the time of the levy.” Wyo. Stat. 1-19-107 (2009). As evidenced by the battle in the instant case, the time of execution is critical when there is a contest among creditors over property seized. Given that context, it just would not be reasonable to interpret Wyo. Stat. 1-19-103 as allowing service upon a registered agent only in those rare cases where a corporation has no officers. Furthermore, the court cannot read into the statute a requirement that is not there; that is, a requirement that the sheriff exercise due diligence in attempting to locate a corporate officer before resorting to service upon the corporation’s registered agent. The only reasonable reading of the statute is that, where a corporate officer is not present to be served when service is attempted, service may be made upon the corporation’s agent for service of process.

Wyo. Stat. 17-16-501 (2009) requires that every corporation maintain a registered agent. The purpose of registered agent statutes is to require Wyoming corporations doing business within the state to maintain an office with a registered agent within the state and the jurisdiction of its courts where summons can be served and upon whom such service can be made. Wyo. Stat. 17-28-104 (LexisNexis 2009) and W.R.C.P. 4(d)(4) contemplate service upon a corporation via service upon its registered agent. A reading of Wyo. Stat. 1-19-103 that would limit service upon the agent to those cases where a corporation has no officers, or where the corporate officers have absconded, or are in hiding, or otherwise cannot be located, would nullify not only the general purpose of the registered agent statutes, but the purpose of the statutes designed to allow levy upon corporate stock.

The bankruptcy trustee contends that this interpretation of Wyo. Stat. 1-19-103 runs counter to the requirement in Wyo. Stat. Ann. 1-19-102 (2009) that a corporate officer, if there is one in the state, respond to the levy with “a certificate under his hand stating the number of rights or shares which the defendant holds . . .[,]” and that only if there is no officer within the state, the agent is to provide such information. However, the function of the registered agent is to accept service of process. It is the function of the corporate officers to respond substantively once the fact of service has been communicated to them. It is not illogical or unreasonable for the legislature to have committed the latter duty to the registered agent only in the absence of any corporate officer.

Wyo. Stat. 1-19-103 is also unambiguous in spelling out who may be served with a writ of execution. The statute allows for service of a writ of execution relating to corporations on one of three people: a corporate officer, and if a corporate officer is not present, a resident manager or resident agent. A law partner of a corporation’s registered agent is not the resident agent. Nothing in the phrase “resident agent” can be read to include anyone other than the resident agent. Because the right to subject corporate stock to levy and sale under execution is purely statutory, a levy which does not comply with the requirements of a state statute is invalid. Accordingly, a security interest in corporate stock cannot be perfected pursuant to Wyo. Stat. 1-19-103, 1-17-302, and 1-19-107 by serving a writ of execution on a law partner of a corporation’s registered agent.

This, a security interest in corporate stock is perfected, pursuant to Wyo. Stat. 1-19-103, where service of a writ of execution is made on the corporation’s registered agent because a corporate officer is not present when service is attempted. However, a security interest in corporate stock is not perfected, pursuant to Wyo. Stat. 1-19-103, where service of a writ of execution is made on a law partner of the corporation’s registered agent.

J. Voigt delivered the opinion for the court.

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