Summary 2013 WY 19

Summary of Decision February 14, 2013

Justice Hill delivered the opinion for the Court. Affirmed.

Case Name: SHIRLEY R. CASE v. SINK & RISE, INC., a Wyoming corporation; CALE CASE, an individual; GUION and DARLA NIGHTINGALE, individuals; and TANGEMANN BENEDICT CORP., a Wyoming corporation.

Docket Number: S-12-0111

URL: http://www.courts.state.wy.us/Opinions.aspx

Appeal from the District Court of Fremont County, Honorable Wade E. Waldrip, Judge.

Representing Appellant: Glenn M. Ford, Wilson, WY; and Amy Wallace Potter, Jackson, WY. Argument by Mr. Ford.

Representing Appellees: J. Denny Moffett & Associates, P.C., and Heather Noble, Jackson, WY for Appellee Sink & Rise, Inc. Argument by Mr. Moffett.

Scott W. Meier, Lucas Buckley, and Marianne K. Shanor of Hathaway & Kunz, P.C., Cheyenne, WY for Appellees Cale Case, Guion and Darla Nightingale, and Tangemann Benedict Corp. Argument by Mr. Meier.

Date of Decision: February 14, 2013

Facts: This case involved a dispute over corporate action during a shareholder meeting of Appellee Sink & Rise, Inc., (Sink & Rise) a Wyoming corporation. Appellee James Caleb Case (Cale Case) was the only shareholder present at the meeting. He concluded that a quorum existed and thus voted on and passed several resolutions. Cale Case also elected himself and another shareholder as the directors of the corporation, and replaced his estranged wife, Appellant Shirley Case, as the corporation’s secretary.

Shirley Case took issue with her estranged husband’s actions during the shareholder meeting and filed a complaint in district court to set aside the corporate action that occurred at the shareholder meeting. After trial, the court held that joint stock held by Cale Case and Shirley Case, as husband and wife as tenants by the entirety with rights of survivorship, were “entitled to vote” during the shareholder meeting and could thus be counted for quorum purposes, although they were not voted to pass the resolutions. Nevertheless, the district court concluded that the resolutions were passed with requisite authority and thus they were not set aside after trial. This appeal followed.

Issues: Shirley Case presents two issues for our consideration:

1. Did the trial court commit reversible error in finding that the transactions contemplated by Sink & Rise Shareholder Resolutions 1, 2, and 3 and Board of Director Resolutions 1, 2, and 3were not void and ultra vires as directors’ conflicting interest transactions under W. S. § 17-16-860, et. Seq.?

2. Did the trial court commit reversible error in finding that the jointly held stock held by James Caleb Case and Shirley Case could be counted for purposes of a quorum of shareholders in the absence of either personal attendance or a proxy from both owners?

Holdings: The Court affirmed the district court’s decision holding that the 16 shares of stock co-owned by Cale Case and Shirley Case as husband and wife were “entitled to vote” pursuant to the bylaws of Sink & Rise. The district court was correct in its characterization of Cale Case and Shirley Case holding the stock as tenants by the entirety. Because of the stock’s representation in person at the shareholder meeting, the stock could be counted for quorum purposes. Consequently, the resolutions of the May 24, 2011 meeting were passed with requisite authority.

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

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it was issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. You will also note when you look at the opinion that all of the paragraphs are numbered. When you need to provide a pinpoint citation to a quote the universal portion of the citation will use that paragraph number. The pinpoint citation in the P.3d portion will need to have the reporter page number. If you need assistance in putting together a citation from this, or any future opinion using the Universal Citation form, please contact the Wyoming State Law Library and we will provide any needed assistance]

Summary 2010 Wy 158

Summary of Decision December 7, 2010

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it is issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. You will also note when you look at the opinion that all of the paragraphs are numbered. When you need to provide a pinpoint citation to a quote the universal portion of the citation will use that paragraph number. The pinpoint citation in the P.3d portion will need to have the reporter page number. If you need assistance in putting together a citation from this, or any future opinion using the Universal Citation form, please contact the Wyoming State Law Library and we will provide any needed assistance]

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

Case Name: Steiger v. Happy Valley Homeowners Association

Citation: 2010 WY 158

Docket Number: S-07-0260, S-09-0081

URL: http://tinyurl.com/2dmtq96

Appeal from the District Court Laramie of County, Honorable Peter G. Arnold, Judge

Representing Appellants (Defendants): Peter B. Steiger and Sylvia Steiger, pro se

Representing Appellee (Plaintiffs): William D. Bagley of Frontier Law Center, Cheyenne, Wyoming

Date of Decision: December 7, 2010

Facts: Appellants owned a tract of land in a subdivision governed by restrictive covenants. The Appellee filed a complaint against them alleging that they were violating the covenant prohibiting homeowners from occupying a modular or mobile home without a permanent foundation. The district court granted summary judgment for the Appellee and the Appellants appealed. The Court reversed the summary judgment and remanded the case to the district court after concluding that by failing to timely respond to a request for admission, the Appellee was deemed to have admitted it lacked the authority to bring the legal action. On remand, the district court entered an order allowing the Appellees to withdraw the admission and submit a response. The district court also entered an order awarding the Appellants the costs for the appeal. The Appellants appealed both orders. The appeal from the order allowing withdrawal of the admission as an improper interlocutory appeal was dismissed. The appeal from the order awarding costs because a trial had been held in the interim and another appeal from the district court judgment seemed likely was stayed. As anticipated, the Appellants have appealed the district court’s judgment enforcing the covenant and dismissing their counterclaims.

Issues: Whether the district court erred in allowing the Appellee to withdraw its admission and respond to the discovery request. Whether the district court’s findings were supported by the evidence. Whether the district court was prejudiced or biased against Appellants or unfairly failed to require Appellees to comply with the Wyoming Rules of Civil Procedure.

Holdings: District courts have broad discretion to manage pretrial discovery matters. Therefore, a district court’s decision on a motion to withdraw or amend admissions under W.R.C.P. 36(b) is reviewed under an abuse of discretion standard. An abuse of discretion occurs when a court acts in a manner which exceeds the bounds of reason under the circumstances. In determining whether there has been an abuse of discretion, the ultimate issue is whether or not the court could reasonably conclude as it did.

Appellants served their request for admissions on August 19, 2004. The Appellee did not serve written answers to the requests until September 24, 2004, and there is no indication the district court allowed the Appellee additional time to serve its answers. Thus, in Steiger v. Happy Valley Homeowners Association (Steiger I) 2007 WY 5, 149 P.3d 735 (2007) it was held that the Appellee admitted that it was not legally constituted and that any action the Board might have taken to authorize this suit was invalid. Without proper authorization, the Appellee lacked capacity to prosecute the suit. On remand to the district court, the Appellee filed its motion for an order allowing it to withdraw its admissions and serve responses. In its motion, the Appellee cited the provision in W.R.C.P. 36(b) allowing the court to permit withdrawal or amendment of admissions and asserted that its original responses to the eighty-eight requests for admission, which it served within a week after the thirty day time period, were late because of the volume of Appellants’ discovery requests. After considering the parties’ respective arguments, the district court granted the motion, allowing the Appellee to withdraw its admissions and serve responses.

Appellants contend the order allowing the withdrawal is contrary to the authorization in W.R.C.P. 6(b) allowing the district court to enlarge the time prescribed in other rules only when the request is made before expiration of the period prescribed or when the request is made after expiration of the time and excusable neglect is shown for the failure to act within the time prescribed. The difficulty with Appellants’ argument is that it requires a limiting of the language in Rule 36(b) expressly authorizing the district court to permit withdrawal or amendment of admissions “when the presentation of the merits of the action will be subserved” and “the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice” them. Allowing the Appellee to withdraw its admission and serve its response promoted presentation of the merits of the controversy. Denying the motion would have prevented presentation of the case. Allowing the withdrawal simply placed the burden back where it belonged on the Appellee to prove it was authorized to bring the enforcement action.

Appellants maintain that they relied on the admission for two and a half years and the amount of time a party relies on an admission is a key factor in showing prejudice. The amount of time a party relies on an admission may be an important factor in determining prejudice. Under the facts of this case, however, the reliance factor does not outweigh the preference for deciding a controversy on its merits. Much of the time that passed between the deemed admission and the Appellee’s request to withdraw it resulted from Appellants’ appeal to this Court from the district court’s summary judgment order, time that is not attributable to any action or inaction on the Appellee’s part. The record does not indicate any reliance left Appellants unprepared for trial. To the contrary, the record suggests Appellants were well prepared for trial and had spent untold hours preparing to defend against the Appellee’s claim. The district court could reasonably have concluded as it did that allowing withdrawal of the admission would further resolution of the controversy on the merits and not prejudice Appellants. There was no abuse of discretion in the order granting the motion.

The first finding Appellants assert is not supported by the evidence is the finding that the Appellee’s action was duly authorized by its members. However, from the evidence, the court was not left with the definite and firm conviction that the district court committed a mistake in finding that legal action against Appellants was duly authorized by the Appellee members. Three past or current board members testified that they believed a quorum was present, and the testimony of one of those witnesses went unchallenged. Although Appellants were able to raise a doubt on cross-examination about whether ten percent of the lot owners were present, it cannot be said that doubt was sufficient to overcome the other testimony. In light of the other testimony and the fact that the district court had the opportunity to observe the witnesses and assess their credibility, the district court’s finding was not clearly erroneous.

Appellants also contend the district court’s finding that the Appellee did not abandon the covenants by failing to uniformly enforce them was clearly erroneous. Appellants assert that they provided evidence of numerous violations by other lot owners that the Appellee allowed to go uncorrected, thereby proving the covenants were abandoned. A protective covenant is abandoned by failure to enforce it when it is violated, the violations are ignored or acquiesced to, and the violations are “so great, or so fundamental or radical as to neutralize the benefits of the restriction to the point of defeating the purpose of the covenant. In other words, the violations must be so substantial as to support a finding that the usefulness of the covenant has been destroyed, The evidence presented in this case does not support Appellants’ contention that the other violations were so substantial that the Appellee effectively had abandoned the covenants.

Appellants further contend the district court displayed bias and prejudice against them, decided every issue in favor of the Appellee and required them to comply with the Wyoming Rules of Civil Procedure while not requiring the Appellee to do so. Prejudice is prejudgment or the forming of an opinion without sufficient knowledge or examination; bias is a leaning of the mind or an inclination toward one person over another. Mere allegations will not suffice to show bias or prejudice; the party alleging a claim of bias or prejudice must present specific facts showing prejudgment or a leaning of the mind to the extent that the district court’s decision was based on grounds other than the evidence before it. The fair meaning of any remark made by the trial judge must be interpreted in light of the context in which it was made. A review of the entire record designated in this case, and the comments of the district court in the context in which they were made, indicate that Appellants have not shown the district court was biased or prejudiced. That is, they have not shown the district court formed an opinion about the claims without sufficient knowledge or information, or had leanings in favor of the Appellee and against them. They have not shown the district court’s findings were based on grounds other than the evidence before it. While it is clear from the record that the district court was frustrated at times with both parties, it is equally clear that the court went out of its way to allow the parties, and particularly Appellants, to present their evidence and defend fully against the claim that they violated the covenant.

Affirmed.

J. Kite delivered the opinion for the court.

J. Voigt filed a specially concurring opinion. I concur in the result reached by the majority, but I write separately because, although I agree with the majority’s treatment of the district court’s granting of the Appellee’s motion to withdraw the admission, I have a concern with something not even mentioned in the opinion. The appellants clearly violated that rule and W.R.A.P. 3.05(b) when, in filing their Designation of Records for Transmittal on Appeal, they included no portion of the trial transcript. That bears repeating more simply: there is no transcript of the trial evidence in the record. Without a trial transcript, there is nothing before us from which we can ascertain that a factual finding of the district court is or is not clearly erroneous. I would summarily affirm for that reason.

J. Hill dissented with whom J. Golden, joined. I dissent because I am convinced the majority fails to rely on the “best evidence” available to the Court, in resolving the only thorny issue in this case. From the outset, Appellants contended that the Appellee did not have the legal authority to pursue this action. As is often the case with such Appellees, it is sometimes difficult to get out “the base” when it comes time to vote. However, the Appellee only needed 10% of the lot owners in order to constitute a quorum. There were 95 lots, so rounding off (and upward) it took 10 lot owners to constitute a quorum. The best evidence of attendance was the minutes of the critical meeting and those minutes reflected that 13 “persons” were present. Appellee testified that most were couples who represented only a single lot. The president agreed that that would not amount to 10 lots, which is the absolute minimum needed to conduct such serious business. Despite “memory” testimony somewhat to the contrary, I believe Appellants were entitled to rely on the official records of the Appellee since such records existed, rather than on the vagaries of memory. I would reverse and remand this case to the district court with instructions that the complaint be dismissed.

Summary 2010 WY 147

Summary of Decision November 16, 2010

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it is issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. You will also note when you look at the opinion that all of the paragraphs are numbered. When you need to provide a pinpoint citation to a quote the universal portion of the citation will use that paragraph number. The pinpoint citation in the P.3d portion will need to have the reporter page number. If you need assistance in putting together a citation from this, or any future opinion using the Universal Citation form, please contact the Wyoming State Law Library and we will provide any needed assistance]

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.