Title: EWING v. HLADKY CONSTRUCTION, INC.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

EWING v. HLADKY CONSTRUCTION, INC.2002 WY 9548 P.3d 1086Case Number: 01-131Decided: 06/25/2002

APRIL TERM, A.D. 2002

                                                                                                            

VAN 
EWING, on behalf of himself

and all 
other similarly-situated shareholders

of 
Hladky Construction, Inc., a Wyoming corporation, 

Appellant(Plaintiff),

v.

HLADKY 
CONSTRUCTION, INC., a

Wyoming 
corporation and MIKE HLADKY,

majority 
shareholder of Hladky Construction, Inc.,

                                                                                                          

Appellees(Defendants).

Appeal 
from the District Court of Campbell County

The 
Honorable Gary P. Hartman, Judge 

Representing 
Appellant:

James L. 
Edwards of Stevens, Edwards & Hallock, P.C., Gillette, Wyoming. 

Representing 
Appellee:

Paul J. 
Drew of Drew & Carlson, P.C., Gillette, Wyoming. 

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ. 

  

GOLDEN, 
Justice. 

[¶1]           
While 
Appellant Van Ewing (Ewing) was employed by Appellee Hladky Construction, Inc., 
(company), he received one thousand shares of stock in the company from Appellee 
Mike Hladky (Hladky).  Upon Ewing's 
resignation, Hladky demanded the return of the stock, and Ewing refused, 
insisting he was entitled to compensation for the return of the stock.  Litigation ensued, and, after a bench 
trial, the trial court determined that the stock was a conditional gift with a 
reversionary interest and must be returned without compensation.  In his appeal, Ewing contends that the 
evidentiary record does not support the determination that a condition was 
attached at the time that the gift was made, and no evidence was presented that 
the stock must be returned without compensation.  This appeal 
followed.

[¶2]           
We 
affirm.

ISSUES

[¶3]           
Ewing 
presents this issue for our review:

Whether 
the decision of the district court to require the stock owned by Appellant to be 
returned without compensation is supported by the evidence and is correct as a 
matter of law?

Company 
and Hladky rephrase the issue as:

Whether 
the judgment entered in favor of the appellees is supported by the 
evidence.

FACTS

[¶4]           
Ewing 
filed a shareholder derivative action, and Hladky counterclaimed asserting that 
Ewing was not a shareholder because the stock transfer was a gift conditioned on 
Ewing's continued employment.  An 
unreported bench trial was held to determine Ewing's status.  The parties have submitted a statement 
of the evidence approved by the district court in accordance with W.R.A.P. 
3.03.  

[¶5]           
Ewing 
testified that he began his employment with the company in 1991 and submitted a 
letter of voluntary resignation in 1998.  
During his employment with the company he held various positions, 
including foreman, foreman's superintendent, supervisor, and, at the time of his 
resignation from the company, as project manager for the company.  Additionally, Ewing was a vice-president 
of the corporation and had held that position for about three years.  

[¶6]           
In 1993 
and 1994, Ewing received cash bonuses from the company and paid federal income 
tax.  On March 23, 1995, he received 
a certificate for one thousand shares of the company's corporate stock from 
Hladky.  The shares were reported as 
a gift to avoid income tax liability, and Ewing did not pay income tax on the 
value of the stock and never received any dividends or additional stock.  Both Ewing and Hladky met with the 
company's accountant, Garland Marso, before the stock was given to Ewing to 
discuss transfer of the shares, and Marso suggested that the shares be gifted to 
Ewing to avoid tax consequences for Ewing.  
Marso also advised Ewing and Hladky to contact an attorney to prepare a 
buy-sell agreement of the stock and for the purpose of providing life insurance 
to fund such a purchase; however, no such written agreement was ever 
prepared.  After the stock was 
transferred as a gift, the company purchased life insurance on each man in order 
to fund the purchase of each other's shares in the event of disability or 
death.  Hladky prepared and 
delivered the stock certificate to Ewing stating, "now you can't quit."  After Ewing resigned, he and Hladky met 
at a restaurant and Hladky demanded the return of the stock.  Ewing stated that he would return the 
stock upon receipt of compensation.  

[¶7]           
Hladky 
testified that he is the owner of all shares of the company and had made a gift 
of a thousand shares of stock to Ewing in March of 1995.  His 1995 gift tax return reflected the 
transfer of a thousand shares of stock from himself to Van Ewing and his spouse. 
The gift's purpose was intended to provide Ewing a portion of stock that he 
would not later have to purchase if something happened to Hladky.  Hladky admitted that Ewing had earned 
the stock but claimed that the gift carried a condition.  Hladky testified that it was always 
understood between himself and Ewing that the continued ownership of Ewing's 
shares in the company was conditioned on Ewing's continued employment   At the time that he issued and 
delivered the share certificate to Ewing, Hladky advised Ewing, "now you can't 
quit," because Hladky intended that the gift of shares would terminate in the 
event Ewing quit his employment with the company.  

[¶8]           
Marso 
testified that as the company's accountant he prepared the gift tax return and 
met with both parties on several occasions regarding a buy-sell agreement for 
the shares of the company.  He also 
advised both men that if the shares were transferred as a gift rather than a 
bonus, Ewing would not have to pay income tax for receiving them. 

[¶9]           
In its 
decision letter, the trial court stated:

The 
parties disagree as to the reason the stock certificate was given to the 
Plaintiff.  The Plaintiff contends 
it was a bonus for work he performed for the Defendant.  The Defendant argues that it was 
pursuant to a corporate arrangement; in the event of Mike Hladky's death, 
Plaintiff would be able to purchase the remainder or other 90 percent of the 
business. 

The 
trial court determined that both parties agreed that the stock transfer was a 
gift and not a bonus, and ruled that the law recognized that a gift may have a 
reversionary interest if delivered with the manifested intention that the donee 
acquire an ownership that terminates on the occurrence or non-occurrence of some 
special event or condition.  The 
trial court found that the gift was delivered with the intent that it should be 
returned to Hladky in the event that Ewing's employment terminated.  The trial court entered judgment that 
the stock be set over to Hladky without compensation to Ewing, and this appeal 
followed.

DISCUSSION

[¶10]      
In this 
appeal, Ewing does not dispute the trial court's ruling as a matter of law that 
Hladky could make this gift with the condition that ownership revert to him upon 
the termination of Ewing's employment.  
Ewing instead contends that the evidence does not support the trial 
court's conclusion that Hladky expressly manifested an intent that the stock was 
a conditional gift that was to be returned without compensation upon employment 
termination.  

Standard 
of Review

[¶11]      
Essentially, 
Ewing's contentions challenge the trial court's determination of Hladky's intent 
at the time that the stock was transferred.  "Whether an oral contract exists, the 
terms and conditions of the oral contract and the intent of the parties are 
generally questions of fact."  
Roussalis v. Wyoming Medical Center, Inc., 4 P.3d 209, 250 (Wyo. 
2000) (quoting  Wilder v. Cody 
Country Chamber of Commerce, 868 P.2d 211, 218 (Wyo. 1994)).  This Court will not set aside a trial 
court's factual findings unless the findings are clearly erroneous or contrary 
to the great weight of the evidence.  
Stansbury v. Heiduck, 961 P.2d 977, 978 (Wyo. 1998); Sowerwine 
v. Nielson, 671 P.2d 295, 301 (Wyo. 1983);.  When reviewing the record, we keep in 
mind the following principles:

The 
judge who presided at the trial heard and saw the witnesses.  He is in the best position to determine 
questions of credibility and weigh and judge the evidence, both expert and 
non-expert.  Thus, on appeal, it is 
a firmly established and oft-stated rule that we must accept the evidence of the 
successful party as true, leave out of consideration entirely the evidence of 
the unsuccessful party in conflict therewith, and give to the evidence of the 
successful party every favorable inference that may fairly and reasonably be 
drawn from it.

Id.

[¶12]      
In its 
decision letter, the district court found:

On one 
point, the parties were not mistaken and that is they both agreed that the stock 
certificate was a "gift."  
Therefore, the only question that remains is whether the gift was 
completed or whether the gift had some reversionary interest.  Here again the Court must turn to the 
testimony of the parties to determine the intent therein.  The testimonies of Mike Hladky and the 
accountant were quite clear as was the IRS Form 709.  The stock was a gift.  It was not a bonus.  The gift had a reversionary interest--to 
be returned to the donor upon the happening of an event--i.e. termination.  The Court notes that the Section 4552 of 
the Restatement of the Law Second, Property 2d, donative transfers, states in 
Section 31.2 that:

"The 
owner of personal property may make a gift thereof to another person (the donee) 
in which the donor retains a reversionary interest by delivering the personal 
property to the donee . . . with the manifested intention that the donee acquire 
an ownership that terminates . . . on the occurrence or non-occurrence of some 
special event or condition."

Ewing 
contends that the trial court had no evidence that the conditions found were 
express and clearly understood by Ewing at the time that the stock was 
delivered.  Hladky contends that the 
district court's discussion indicates it had sufficient evidence that he 
expressly conditioned the gift upon continued employment, and if employment 
terminated, then the stock was to be returned without compensation.  

[¶13]      
Because 
it is supported by the record, we uphold the trial court's factual determination 
that the parties had agreed to a gift and not a bonus.  The trial court's conclusion that the 
law permits conditional gifts is supported by the law, as is Ewing's assertion 
that Hladky must have expressed his condition at the time that the gift was 
made.  We have recognized that a 
valid inter vivos gift requires the presence of three elements:  (1) a present intention to make an 
immediate gift;  (2) actual or 
constructive delivery of the gift that divests the donor of dominion and 
control; and (3) acceptance of the gift.  
Rose v. Rose, 849 P.2d 1321, 1324 (Wyo. 1993).  North Carolina has examined the law of 
conditional gifts and stated:   

A person 
has the right to give away his or her property as he or she chooses and "may 
limit a gift to a particular purpose,  
and render it so conditioned and dependent upon an expected state of 
facts that, failing that state of facts, the gift should fail with it.'"  Charlotte Park & Recreation 
Comm'n v. Barringer, 242 N.C. 311, 321, 88 S.E.2d 114, 123 (1955) 
(quoting Grossman v. Greenstein, 161 Md. 71, 155 A. 190 (1931)), cert. 
denied, Leeper v. Charlotte Park & Recreation Comm'n, 350 U.S. 983, 76 S. Ct. 469, 100 L. Ed. 851 (1956). An unconditional inter vivos 
gift, however, once given is irrevocable.  See Atkins v. Parker, 7 N.C. App. 
446, 450-51, 173 S.E.2d 38, 41 (1970); see also Thomas [v. Houston], 181 
N.C. [91] at 94, 106 S.E. [466] at 468 [(1921)] (a gift inter vivos is 
absolute and takes effect at the time delivery is completed, provided there are 
no conditions attached). The intent of the donor to condition the gift must be 
measured at the time the gift is made, as any "undisclosed intention is 
immaterial in the absence of mistake, fraud, and the like, and the law imputes 
to a person an intention corresponding to the reasonable meaning of his words 
and acts.  It judges of his 
intention by his outward expressions and excludes all questions in regard to his 
unexpressed intention." Howell v. Smith, 258 N.C. 150, 153, 128 S.E.2d 144, 146 (1962) (intent in context of a contract).

Courts 
v. Annie Penn Memorial Hosp., Inc., 431 S.E.2d 864, 866 (N.C. App. 1993).  
In Courts, the donor made a gift of stock to a hospital, and later 
sued for its return contending that the gift had been made on the condition that 
the hospital name its charitable foundation after her grandfather and the 
hospital had selected another name.  
The appellate court agreed that the relevant time period to examine her 
donative intent was at the time that the stock transfer was completed and, after 
examining the entire record, the court affirmed the trial decision that at the 
time that she made her donation, the donor placed no conditions upon her 
gift.  Id. at 
867-68.

[¶14]      
In 
contrast, the record before us shows that the trial court examined Hladky's 
intent at the time that he transferred the stock and found that he had placed 
conditions then.  Although at trial, 
Ewing contended that the stock was in lieu of a bonus and unconditional, Hladky 
claimed that the purpose was to effectuate a corporate arrangement, so that in 
the event of his death, Ewing would be able to purchase the remainder or other 
ninety percent of the business.  
Each party testified, accordingly, and the trial court was charged with 
credibility determinations.  The 
trial court's finding that Hladky had gifted the stock and placed conditions 
when it was made is supported by this record, and, under our proper standard of 
review, we must affirm the trial court's 
decision.