Title: In re Estate of Croonberg

State: wyoming

Issuer: Wyoming Supreme Court

Document:

In re Estate of Croonberg1999 WY 130988 P.2d 41Case Number: 98-266Decided: 09/27/1999Supreme Court of Wyoming
 
IN 
THE MATTER OF THE ESTATE OF FRANK P. CROONBERG, deceased:

BELINDA J. CROONBERG and 
CROONBERG RANCH, INC., Appellants (Petitioners),

v.

ESTATE OF FRANK P. 
CROONBERG; and THE BENEFICIARIES, LARAMIE SENIOR CENTER and THE HARMONY 
FOUNDATION, Appellees (Respondents).

 

Appeal from the District 
Court of Albany County, The Honorable Jeffrey A. Donnell, 
Judge.

Jerry A. Yaap of 
Bishop, Bishop & Yaap, Casper, Wyoming, representing 
appellants.

Ronald D. 
Copenhaver, Laramie, Wyoming; and Donald P. Prehoda, Jr. and Laurie Edwards 
Janack of Prehoda, Leonard and Janack, LLC, Laramie, Wyoming, representing 
appellees. 

Before 
LEHMAN, C.J., and THOMAS, MACY, GOLDEN & HILL, JJ.

MACY, 
Justice.

[¶1]      Appellants 
Belinda Croonberg and Croonberg Ranch, Inc. appeal from the district court's 
summary judgment orders which found generally in favor of Appellees Estate of 
Frank P. Croonberg, Laramie Senior Center, and The Harmony 
Foundation.

[¶2]      We reverse and 
remand.

ISSUES

[¶3]      The appellants 
present the following issues for our review:

Did the trial 
court err in finding that there were no genuine issues of material fact, as a 
matter of law, and that a summary judgment was proper in favor of appellees 
concerning:

I. Whether the 
1995 amendment to the corporate bylaws relative to amending the restriction on 
transfer of stock does not affect and is not binding on the shareholders with 
respect to the shares of stock issued before the 
amendment.

II. Whether the 
court construed the bylaws so as to give effect to the intention of the 
parties.

III. Whether the 
personal representative is bound by the bylaws, Article VIII Section 2(b)(1), to 
offer the decedent's shares to the corporation which has the exclusive right and 
option to purchase the decedent's shares within 30 days after the date of the 
offer.

IV. Whether the 
board of directors determined the value of the corporate shares at the 
directors['] meeting on October 3, 1995, in accordance with the amended 
bylaws.

FACTS

[¶4]      Croonberg Ranch, 
Inc. was incorporated as a Wyoming corporation in 1973. During all times 
relevant hereto, the only shareholders of the corporation were Frank Croonberg, 
Jean Croonberg, and Belinda Croonberg. Frank and Jean were married from 1955 
until 1988, and Belinda was one of their children. The corporation's original 
bylaws contained share transfer restrictions. Article VIII, Section 2b of the 
original bylaws provided in pertinent part:

b. Restrictions 
on Right of Transfer. (1) No shareholder, while living, shall transfer . . . any 
share of the Corporation unless such share shall have first been offered in 
writing for sale to the Corporation. The Corporation reserves and shall have the 
exclusive right and option to purchase within thirty days after the date of the 
offer such shares at the value per share determined annually by the Directors. . 
. . If the shares of the shareholder desiring to make disposition thereof are 
not so purchased by the Corporation as aforesaid, then the shares not so 
purchased shall be offered in writing for sale to and shall be subject to an 
option on the part of each of the remaining shareholders to purchase a 
proportionate share at the price herein provided, which said option shall be 
exercised, if at all, within thirty days from the date of such offer to them. 
After the expiration of the terms herein provided, the shareholder, if the 
Corporation and the remaining shareholders shall not have exercised their 
options to purchase such shares, shall be free to transfer . . . such share[s] 
without any restrictions whatsoever.

(2) Upon the 
death of a shareholder, . . . all of the shares held by him . . . shall be sold 
to the company at the price determined and in the manner set forth in b(1) of 
this section. . . .

Article XIII of 
the original bylaws allowed the board of directors to alter, amend, or repeal 
existing bylaws and to adopt new bylaws.

[¶5]      The shareholders 
held a meeting on October 3, 1995. All three shareholders were present and were 
elected as directors during the meeting. Immediately following the shareholders' 
meeting, a meeting of the board of directors was convened. One of the items 
considered during the directors' meeting was a proposal to amend the transfer 
restrictions contained in the bylaws. The proposed amendment set forth a new 
method for valuing the shares and explicitly gave the surviving shareholders an 
option to purchase a deceased shareholder's shares.

[¶6]      The minutes of 
the directors' meeting reveal that the directors unanimously approved the 
proposed amendment. The amendment provided in relevant 
part:

ARTICLE VIII, 
SECTION 2, SUBSECTION B RESTRICTIONS ON RIGHT OF TRANSFER

[¶7]      1. No shareholder 
shall have the right to sell, assign, pledge, encumber, transfer, or otherwise 
dispose of any of the shares of the corporation without first offering the 
shares for sale to the corporation. The purchase price for each share of stock 
shall be the fair market value of each such share as shown on the balance sheet 
of the corporation as of the end of the fiscal year last preceding the event 
causing said option to be exercisable, prepared and certified by the firm of CPA 
Consulting Group . . . adjusted, however, for operations of the corporation from 
the end of the last preceding fiscal year to the date of the event which gave 
rise to the particular option then involved.

[¶8]      2. [Provision 
outlining how share price was to be determined].

[¶9]      3. If the 
corporation fails or refuses within a period of 90 days to make reasonable 
arrangements for the purchase of the shares, then the existing shareholders 
shall have the right to purchase such shares for the same price for which the 
corporation could purchase such shares.

[¶10]   4. In the event the shareholders 
fail or refuse within a period of 90 days after the corporation has failed or 
refused to purchase such shares, to make reasonable arrangements for the 
purchase of the shares, the offering shareholder may obtain from a third party a 
bona fide . . . offer to sell such shares and either the corporation or the 
existing shareholders shall then have the option of purchasing such shares upon 
the same terms and conditions and for the same price as that offered by a third 
party. . . .

[¶11]   5. On the death of any shareholder, 
the corporation shall have the right to purchase all shares owned by the 
shareholder immediately prior to his or her death on the same terms set forth 
above, and this provision shall be binding on the personal representatives of 
each shareholder. Upon the death of any shareholder, then the corporation, or 
the surviving shareholders shall have the right to purchase such shares. . . . 
The purchase price shall be paid to the personal representative. . . . In the 
event neither the corporation nor the living shareholders desire to purchase 
such shares from the estate of a deceased shareholder, within 120 days from the 
death of a deceased shareholder, then such shares of the deceased shareholder 
may be sold to a third party and within 30 days from the date the corporation 
and the existing shareholders have been informed in writing as to the terms, 
conditions and price to be paid by the third party, the corporation or the 
living shareholders shall have said 30 day period upon receiving the bona fide 
offer from a third party to purchase a deceased shareholder[']s shares upon the 
same terms, conditions and purchase price as that offered by a third party. In 
the event either the corporation or shareholders fail or refuse within said 30 
day period to purchase such shares upon the same terms, conditions and purchase 
price as that offered by a third party, then such shares may be sold to such 
third party.

The corporation 
did not issue any new shares after the 1995 amendment to the 
bylaws.

[¶12]   Frank died on December 28, 1996. 
Shortly thereafter, his will was admitted to probate, and one of Frank's 
friends, Clynn Phillips, was appointed as the personal representative of the 
estate. Frank devised one dollar to Belinda and the remainder of his estate to 
the Laramie Senior Center and The Harmony Foundation (the 
beneficiaries).

[¶13]   Croonberg Ranch, Inc.'s board of 
directors held a special meeting on March 10, 1997, and decided that the 
corporation would not purchase Frank's shares. Belinda then petitioned the 
district court to allow her to purchase Frank's shares for $73,479.10, which was 
the value of the shares as calculated by the corporation's accountant pursuant 
to the terms of the 1995 amendment. Jean consented to Belinda's purchase of 
Frank's shares. The personal representative and the beneficiaries of Frank's 
estate objected to Belinda's petition. They claimed that Belinda's proposed 
purchase price did not represent the fair market value of the shares; that the 
1995 amendment to the bylaws was not effective; and that, even if the amendment 
was effective, it did not apply to Frank's shares because they were issued prior 
to the amendment and the shareholders did not approve the 
amendment.

[¶14]   Both sides filed motions for 
summary judgment. The district court held a hearing and subsequently granted in 
part and denied in part each motion for summary judgment. The district court 
determined that the 1995 amendment to the bylaws was effective but that it did 
not apply to Frank's shares. It concluded that the transfer restrictions in the 
1973 bylaws applied to Frank's shares and that a genuine issue of material fact 
existed as to the value of the shares.

[¶15]   The appellees subsequently filed a 
motion in which they sought dismissal of Belinda's petition to purchase the 
shares or, in the alternative, a summary judgment. They argued that, under the 
1973 bylaws, the surviving shareholders did not have the right to purchase a 
deceased shareholder's shares. The appellees maintained that only the 
corporation had the right to purchase the shares and that the corporation waived 
its purchase option when it declined at the March 10, 1997, board meeting to 
purchase the shares. The appellants also filed a motion for a summary judgment, 
contending that the 1973 bylaws did allow the surviving shareholders to purchase 
a deceased shareholder's shares. They also maintained that the corporation did 
not knowingly waive its right to purchase the shares. The district court granted 
the appellees' summary judgment motion, dismissed Belinda's petition to purchase 
Frank's shares, and ordered the estate to distribute the shares to the 
beneficiaries. The appellants appealed to the Wyoming Supreme 
Court.

DISCUSSION

[¶16]   The appellants maintain that the 
district court erred when it determined that the 1995 amendment to the bylaws 
did not apply to Frank's shares and granted a summary judgment in favor of the 
appellees. The appellees contend that the district court's decision was correct 
because the shareholders did not vote on the transfer restriction contained in 
the 1995 amendment and they did not enter into an effective shareholders' 
agreement. We agree with the appellants.

[¶17]   A summary judgment is appropriate 
when no genuine issue exists as to any material fact and the moving party is 
entitled to be awarded a judgment as a matter of law. Marchant v. Cook, 967 P.2d 551, 553 (Wyo. 1998); Covington v. W.R. Grace-Conn., Inc., 952 P.2d 1105, 1106 
(Wyo. 1998). The Wyoming Supreme Court evaluates the propriety of a summary 
judgment by employing the same standards and by using the same materials as the 
district court employed and used. Covington, 952 P.2d  at 1106. We examine the 
record in the light most favorable to the party who opposed the motion for a 
summary judgment, and we give that party the benefit of all the favorable 
inferences that may be fairly drawn from the record. Marchant, 967 P.2d  at 554. 
We do not accord deference to the district court's decisions on issues of law. 
Ahearn v. Tri-County Federal Savings Bank, 948 P.2d 896, 897 (Wyo. 
1997).

[¶18]   Wyo. Stat. Ann. § 17-16-1020(a) 
(LEXIS 1999) states in pertinent part:

(a) A 
corporation's board of directors may amend or repeal the corporation's bylaws 
unless:

(i) The articles 
of incorporation or this act reserve this power exclusively to the shareholders 
in whole or part . . .

Croonberg Ranch, 
Inc.'s corporate documents authorized the board of directors to amend the 
bylaws. The district court acknowledged that the board of directors had the 
authority to amend the bylaws but determined that the 1995 amendment did not 
apply to the shares which were issued prior to its adoption. The district court 
relied on Wyo. Stat. Ann. § 17-16-627(a) (LEXIS 1999) in reaching its decision. 
That statute provides:

(a) The articles 
of incorporation, bylaws, an agreement among shareholders, or an agreement 
between shareholders and the corporation may impose restrictions on the transfer 
or registration of transfer of shares of the corporation. A restriction does not 
affect shares issued before the restriction was adopted unless the holders of 
the shares are parties to the restriction agreement or voted in favor of the 
restriction.

Section 
17-16-627(a) (emphasis added).

[¶19]   The district court stated that the 
shareholders did not enter into a shareholders' agreement when they, as 
directors, voted for the amendment to the bylaws. It also stated that the 
shareholders did not vote in favor of the amendment because "a vote as a 
director, in a separate meeting for directors, does not render such vote into a 
shareholder's vote merely because a director is also a shareholder." The 
district court concluded, therefore, that, because Frank's shares were issued 
before the 1995 amendment was adopted and the shareholders did not expressly 
approve the restriction, it did not apply to Frank's 
shares.

[¶20]   Our well established rules of 
statutory construction require us to give effect to the legislature's intent as 
expressed in the plain and unambiguous language of the statute. Lyles v. State 
ex rel. Division of Workers' Compensation, 957 P.2d 843, 846 (Wyo. 1998); State 
Department of Revenue and Taxation v. Pacificorp, 872 P.2d 1163, 1166 (Wyo. 
1994). The plain language of § 17-16-627(a) requires only that the shareholders 
either participate in a shareholders' agreement approving the restriction or 
vote in favor of the restriction in order for the restriction to apply 
retroactively to shares issued before it was adopted. The statutory language 
does not require that the vote be taken at a separate shareholders' 
meeting.

[¶21]   The purpose of § 17-16-627(a) is to 
protect shareholders from having their shares of stock devalued by restrictions 
that are adopted without their consent after their shares were issued. See Di 
Loreto v. Tiber Holding Corporation, 1999 WL 316900, at *6 (Del. Ch. May 12, 
1999) (interpreting a Delaware statute that is similar to § 17-16-627(a)). 
Although this Court has not ruled on what kind of shareholder approval is 
necessary in order to apply a transfer restriction retroactively, courts from 
other jurisdictions have suggested that shareholders may consent in various ways 
to a transfer restriction. The New Mexico Supreme Court indicated that, in order 
to make a restriction applicable to shares issued prior to its adoption, the 
shareholders must be given an opportunity to participate in the decision to 
adopt the restriction or they must consent to the restriction. Lett v. Westland 
Development Co., Inc., 815 P.2d 623, 626 (N.M. 1991); see also Kerr v. Porvenir 
Corporation, 889 P.2d 870, 875 (N.M. Ct. App. 1994), cert. denied, 889 P.2d 203 
(N.M. 1995). Similarly, the United States District Court for the District of 
Delaware stated that a corporation could obtain its shareholders' consent for a 
transfer restriction by having them vote on the restriction or by negotiating 
agreements with individual shareholders. Joseph E. Seagram & Sons, Inc. v. 
Conoco, Inc., 519 F. Supp. 506, 514 n.5 (D. Del. 1981).

[¶22]   In this case, Croonberg Ranch, Inc. 
had only three shareholders, and they were all elected as directors at the 
October 3, 1995, shareholders' meeting. The shareholders/directors wanted the 
shares to remain in the Croonberg family. The 1995 amendment to the bylaws was 
aimed at accomplishing that goal by giving the surviving shareholders and the 
corporation options to purchase a deceased shareholder's shares at a reasonable 
price. The corporation's accountant, Tom Creager, informed all the 
shareholders/directors at the directors' meeting that the new method of 
valuation contained in the amendment could result in a diminished share value. 
All three shareholders/directors had the opportunity to, and actually did, 
participate in the decision to adopt the amendment. We conclude, therefore, 
that, when the directors/shareholders voted in favor of the amendment, they 
consented, in accordance with § 17-16-627(a), to having the transfer restriction 
apply to all the corporation's shares.

[¶23]   The district court also implied 
that a disputed issue of fact existed as to whether or not Frank actually voted 
in favor of the restriction. We do not agree. Six persons attended the October 
3, 1995, meetings: Belinda; Jean; Frank; Phillips; Creager; and the 
corporation's attorney, Marvin Bishop III. Belinda, Jean, Creager, and Bishop 
averred that Frank voted in favor of the amendment. Phillips testified during 
his deposition that he did not think Frank voted in favor of the amendment, but 
he conceded that he was not looking at Frank when the vote was taken.1 Phillips' equivocal statement did 
not create a genuine issue of material fact. We conclude that, on the record 
before us, it is clear that Frank voted in favor of the amendment and that he, 
therefore, consented to have the transfer restriction apply to his 
shares.

[¶24]   We do not need to address the 
remainder of the appellants' issues because we have determined that the 1995 
amendment to the bylaws applied to Frank's shares.

[¶25]   Reversed and remanded for further 
proceedings consistent with this decision.

Footnotes

1 It is 
interesting to note that Frank had given Phillips a proxy to vote his shares at 
the October 3, 1995, shareholders' meeting. Apparently, Phillips voted, in some 
instances, in Frank's place at the directors' meeting. Phillips testified that 
he voted Frank's proxy in favor of the amendment, although the minutes of the 
directors' meeting do not state that he voted on that issue. We make no decision 
here concerning the general validity of a proxy vote at a directors' meeting. As 
to Phillips' vote concerning the amendment, we note that, as a general rule, a 
proxy is revoked when the shareholder attends the meeting and votes. 18A Am. 
Jur. 2d Corporations § 1094 (1985). Consequently, when Frank voted on the 
amendment to the bylaws, he effectively revoked Phillips' authority, if any, to 
vote as his proxy.