Title: Adam v. Mt. Pleasant Bank & Trust Co.

State: iowa

Issuer: Iowa Supreme Court

Document:

355 N.W.2d 868 (1984) Robert D. ADAM, et al., Appellants, v. MT. PLEASANT BANK & TRUST CO., et al., and Blake Phelps, Appellee. No. 69291. Supreme Court of Iowa. September 19, 1984. Rehearing Denied October 15, 1984. *869 James P. Hoffman, Keokuk, and James Walker, Bloomington, Ill., for appellants. G.R. Krekel of Hirsch, Link, Adams, Hoth & Krekel, Burlington, for appellee. Considered by REYNOLDSON, C.J., and UHLENHOPP, HARRIS, LARSON, and SCHULTZ, JJ. HARRIS, Justice. We granted further review of a decision of the court of appeals which reversed a partial summary judgment entered by the trial court in favor of defendant Blake Phelps. The facts were well stated by the court of appeals: *870 Plaintiffs are one hundred and four farmers who delivered grain to the elevator which could not be returned due to shortages. They have sued the grain company, the officers and directors, two banks, an accounting firm, and the state of Iowa. Most of these claims have been disposed of in various ways, but the claim against the state of Iowa, among others, remains. See Adam v. Mt. Pleasant Bank & Trust Co., 340 N.W.2d 251 (Iowa 1983). This appeal involves the portion of the case against defendant Blake Phelps, allegedly an `owner' of the company. I. The court of appeals recognized a serious preservation of error problem and resolved it in favor of plaintiffs. On appeal plaintiffs assert that Phelps can be found personally liable by piercing the corporate veil of Prairie Grain. It must be conceded that no such theory is apparent from a reading of the petition. Plaintiffs can point only to the following allegations: With the advent of notice pleading under Iowa R.Civ.P. 69, as amended in 1976, our pleading requirements were drastically reduced. To raise or preserve a claim, the petition need not plead ultimate facts, Schmidt v. Wilkinson, 340 N.W.2d 282, 283-84 (Iowa 1983), or identify a specific legal theory. I.G.L. Racquet Club v. *871 Midstate Builders, Inc., 323 N.W.2d 214, 217 (Iowa 1982). Although our opinions on the question have not been unanimous, it is now well established that a petition is sufficient if it apprises the opposing party of the incident from which the claim arose and the general nature of the action. Northwestern Nat. Bank of Sioux City v. Metro Center, Inc., 303 N.W.2d 395, 401 (Iowa 1981). Northwestern Nat. Bank of Sioux City even supports the proposition that pleading the wrong theory is not necessarily fatal. There, the cross-petitioner sought an in rem judgment when he should have brought an action on contract. The opposing party argued that the effect was to limit the cross-petitioner to the contract theory. We responded: 303 N.W.2d at 401 (citing Iowa R.Civ.P. 67 and 69(a)). We cannot say, under notice pleading practice, that the claim was lost here by reason of faulty pleading. II. In justifying the relaxation of strict pleading requirements, the majority in Lamantia v. Sojka, 298 N.W.2d 245 (Iowa 1980), relied heavily on the fact that we now have other tools with which to fairly and effectively focus on the issues: Id. at 247. A start was made on such a narrowing here. A pretrial conference was held under Iowa R.Civ.P. 136 and an order was entered compelling the parties to file in turn pretrial briefs stating the facts and legal theories relied upon. Plaintiff was to file first, defendant second, and plaintiff was to file a reply. Finally, the order stated: Plaintiffs filed a brief which did not further disclose the theory of recovery based on piercing the corporate veil. Defendant replied. Plaintiffs did not file a reply brief and, hence, the court did not enter an order under Iowa R.Civ.P. 138: Accordingly, the dimensions of plaintiffs' claim were not limited by a final pretrial order. See Kester v. Bruns, 326 N.W.2d 279, 284 (Iowa 1983) (The pretrial order controls the subsequent course of the action unless subsequently modified to prevent manifest injustice.). III. There is a quo warranto issue, on which we adopt the court of appeals opinion: IV. The principles which control appellate review of summary judgment were stated in Drainage District No. 119, Clay County v. Incorporated City of Spencer, 268 N.W.2d 493, 499-500 (Iowa 1978): We also subscribe to that part of the court of appeals opinion which outlined the law relating to the piercing of corporate veils: V. Although it does not seem to have been briefed on appeal, the court of appeals commented upon a matter that was disputed in trial court: a gap in the corporate existence of Prairie Grain. It was originally incorporated for 20 years, ending August 14, 1978, and was not reincorporated until February 7, 1980. Relying on Kessler Distributing Co. v. Neill, 317 N.W.2d 519, 522 (Iowa Ct.App.1982) the court of *873 appeals determined that the reestablishment of the corporate charter did not retroactively restore the privilege of limited liability during the gap in corporate existence. Because the question will undoubtedly arise on remand, we address it. We can find no cases of our own on the question but other courts, interpreting various statutes, have reached differing conclusions on whether limited liability persists through a gap in corporate existence. The answer is easy under statutes which expressly spell out the answer. For example, in Frederic G. Krapf & Son, Inc. v. Gorson, 243 A.2d 713, 715 (Del.1968) a Delaware statute controlled. It provided that all contracts and all other matters done and performed while the corporate charter was inoperative "shall be validated, and be the exclusive liability of the corporation." Id. A contrasting Florida statute was involved in Nessim v. De Loache, 384 So. 2d 1341, 1342-43 (Fla.App.1980). That statute provided that "[t]he reinstatement shall have no effect upon the personal liability upon the directors, officers, or agents of the corporation on account of actions taken during the period between dissolution and reestablishment ...." Id. at 1343. But see Panax of Florida Inc. v. Publishers Service Corp., 472 F. Supp. 444, 446 (S.D. Fla.1979) (Because shareholders were not listed with "directors, officers, or agents" in the statute, they were not personally liable for actions taken during gap.) The Iowa statute, section 496 A. 102, is silent on the subject. We should note that Iowa has two corporation Acts, chapter 491 (the old act) and chapter 496A (the new act). Prairie Grain elected on August 3, 1978, to be chartered under the new act. See § 496 A. 142. The only reference to extension of expired corporate charters in the new act[1] appears in the first of the two paragraphs that make up section 496A.102: The second paragraph of section 496 A. 102 authorizes winding up the affairs of dissolved corporations. There is no claim that the matters in this litigation qualify under the second paragraph. In the absence of a statutory expression, the authorities are not entirely clear on the existence of limited liability during suspension after a corporate charter has expired and before it has been reinstated. One authority states: H. Hann & J. Alexander, Laws of Corporations § 144 at 342 (3d ed. 1983). We think the better reasoned view was expressed in Moore v. Occupational Safety And Health Review Comm'n, 591 F.2d 991 (4th Cir.1979). The court there stated that, in the absence of statutory direction, a majority of jurisdictions suspend limited liability and find personal liability for occurrences during suspension of a corporate charter, notwithstanding a later reinstatement. Id. at 995-96. *874 One authority suggests that the question turns on whether local law recognizes the suspended entity as having de facto status after corporate (de jure) existence has expired. 13A W. Fletcher, Cyclopedia of the Law of Private Corporations § 6658 (Rev. perm. ed. 1980). If so, the answer remains the same because, under the circumstances here, we recognize no de facto corporate existence. The court of appeals was correct in determining that limited liability for Prairie Grain's officers, agents, and shareholders does not exist for matters occurring during suspension of the corporate charter. The judgment of the trial court is accordingly reversed and the case remanded for further proceedings. DECISION OF COURT OF APPEALS AFFIRMED; JUDGMENT OF DISTRICT COURT REVERSED; CASE REMANDED. [1] There is a retroactive validation provision for up to three months under the old act. Iowa Code § 491.25. It is not involved here.