Court Opinion

ID: 9530166
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:57:52.130664+00
Date Added: 2024-06-11T13:28:00.951674
License: Public Domain

URBIGKIT, Chief Justice,
concurring in part and dissenting in part.
I generally concur with the decision and the court’s opinion except in one aspect with which I cannot agree. That subject is characterized in the majority as “Validity of Corporate Debt.”
My review of the entire record and proper understanding of the proceeding determines that, except for the separately defined dispute about the validity of a promissory note as to legality of execution, the parties here neither tried nor did the trial court decide what amounts in liquidation either litigant may be entitled to be repaid as corporate advances from loans and what amounts will constitute investment as a purchase of equity.
This significant discord is created by our difference of opinion about what the trial court decided in paragraph twenty-five of its Findings of Fact, Conclusions of Law, Judgment and Order Appointing Receiver:
On or about May 26, 1988, Donald K. Harger executed a Promissory Note, * * * in the principal amount of $247,-402.07 as President of the Corporation, obligating the Corporation to pay the amount of the Promissory Note to Donald K. and Irene Frances Harger of Jackson, Wyoming. The execution of this Note and any other documents in conjunction therewith was not authorized by the Board of Directors of the Corporation and therefore it is not a valid debt of the Corporation and the Corporation is not obligated on said Promissory Note to Donald K. Harger and Irene Frances Harger.
The difference is whether the trial court only invalidated the promissory note or also determined the invalidity of any claimed debt in whatever amount that might have been owed to appellants for loans advanced to the corporation for operational funding.
The litigation pathway of this case was unusual. What we now address is essentially what has been done to date by the trial court and what remains to be determined in the future by additional hearings and a future trial court decision. The strangeness of this adjudicatory pathway is now matched by the confusion we now find at this way station in progression toward an ultimate conclusion.
*863This lawsuit started with a complaint filed by the “closed corporation” essentially owned by two shareholders, Donald K. Harger and Irene F. Harger (Hargers), appellants, against shareholder Joanna Johnson (Johnson), appellee. The complaint in essence addressed a claim of a fiduciary duty violation by Johnson in engaging in a competitive wild game processing business which was the same business in which this corporation, J Bar H, Inc., was involved. Remedies requested in the complaint included accounting, damages from lost profit and injunction. The answer alleged shareholder/director exclusion by lockout and, by general denial and affirmative allegation, claimed absence of any violation of the claimed fiduciary duty to the corporation in which Johnson was a shareholder and a director. Johnson first filed a motion for summary judgment.
Pursuant to an order for pretrial conference, both litigants filed pretrial memoran-da asserting issues presented and their posture relative thereto. The Hargers restated their thesis of the original complaint asserting shareholder/director Johnson’s violation of a fiduciary duty. Johnson summarized in her pretrial submission a posture defined in the original answer and she rejected any litigable fiduciary duty violation. The pretrial order granted leave to the Hargers to add a shareholders’ derivative action to the complaint since by that time the question had been raised as to whether the proper party should be the corporation under the 50-50 share ownership division or whether a shareholder’s derivative action might be appropriate.
The amended complaint adding the shareholders’ derivative element was duly filed essentially continuing the same theory of recovery originally presented. The Har-gers then followed with their own summary judgment motion. Johnson reciprocated with another motion for summary judgment and the Hargers filed a revised amended complaint which still did not essentially change the case theory or their strategy.
A first complexity was then introduced by the responsive pleading filed by Johnson entitled “Answer to Second Amended Complaint.” Johnson continued the thesis of shareholder/director exclusion and lockout and restated as an affirmative defense that the litigation was ultra vires. Then within the “answer,” she alleged and prayed in part:
22. Complete relief cannot be accorded between the Plaintiff corporation and Defendant Johnson without the joinder of Donald K. Harger and Irene Frances Harger as directors, officer and shareholders of Plaintiff, pursuant to Rule 19 of the Wyoming Rules of Civil Procedure.
23. Donald K. Harger and Irene Frances Harger have been omitted from this lawsuit because they are the directors, officer and shareholders who initiated the lawsuit on behalf of the Plaintiff corporation against Defendant Johnson.
WHEREFORE, Defendant prays that:
1. Donald K. Harger and Irene Frances Harger be joined as third-party defendants herein, and judgment be rendered against them for all wrongs alleged against Defendant Joanna Johnson; or in the alternative;
2. That the Complaint of Plaintiffs and all causes of action herein be dismissed.
3. That Plaintiff corporation be ordered to pay all costs of suit.
4. That Plaintiff corporation be ordered to pay such further sum as the Court may deem reasonable for attorney fees for services in this action.
5. And for such other and further relief as this Court deems proper.
On the date of filing the answer, Johnson also filed a motion to dismiss the amended complaint. The argument was presented by the motion that filing by the corporation was ultra vires while the shareholders’ derivative segment of the complaint was attacked for procedural noncompliance. W.S. 17-16-740; W.R.C.P. 23.1. The trial court denied that motion.
The case was scheduled for trial on the merits and the trial court followed with an order denying all pending motions by a . *864finding in part that issues of fact existed. Before trial, Johnson filed a trial brief which again restated her litigative status that her right to compete was validated by a breach of her interest as a shareholder/director by the exclusion and lockout.
This sequential analysis of the pleadings demonstrates that the trial commenced on the closely defined issue last outlined by Johnson’s trial brief. Opening argument was not reported and the first notice that the case was faced with a metamorphosis occurred when Johnson had rested and the following colloquy ensued:
[DEFENDANT’S COUNSEL]: The defense rests, and I have a motion to amend the pleadings to conform to the evidence.
THE COURT: All right. State your motion then, please.
[DEFENDANT’S COUNSEL]: My motion is to amend the pleadings to conform to the evidence in this case. And the motion is that this action be treated as a shareholders action by JoAnna Johnson for the purpose of enjoining the corporation first of all from bringing this action; and second of all, asking that all reasonable costs be paid as a result of this action having been brought.
I further ask, Your Honor, that the pleadings be amended to ask for removal of Donald and Irene Harger as directors pursuant to Wyoming Statute 17-16-809, and I also ask, Your Honor, that this corporation be dissolved pursuant to 17-16-1430(a)(ii).
I’m also asking, Your Honor, that the personal loan and any acts which have caused indebtedness or potential liability on behalf of the corporation taken during the time that JoAnna Johnson has been locked out of the corporation be set aside, and that the parties, Irene Harger and Donald Harger, be held responsible for those actions pursuant to 17-16-304(c). And that any costs that have resulted from their actions in bringing this matter, this case against JoAnna Johnson, be deemed ultra vires pursuant to that section of the law, and that all costs that have been incurred including attorney’s fees as a result of that, of their actions, be ordered to be paid back to the corporation.
THE COURT: All right. [Plaintiffs’ counsel], you wish to respond?
[PLAINTIFFS’ COUNSEL]: Yes, sir. Your Honor, I believe the defendant’s motion is inappropriate and out of line in the sense, number one, they’re asking for things that are beyond the jurisdiction of the Court and outside the scope of the pleadings such as dissolution of the corporation; that the act taken by Mr. Harger be declared ultra vires; that Don and Irene declared to be personally responsible for these and that costs of the action be awarded. Did I miss any?
THE COURT: They asked for six things.
[PLAINTIFFS’ COUNSEL]: Cost of the action.
THE COURT: They addressed costs twice.
[PLAINTIFFS’ COUNSEL]: Lastly, if I understood their motion, they’re asking JoAnna Johnson be indemnified, I think that was part of the motion, since this was brought against her as director. And the statute, Wyoming Statute 17-16-852 which was cited does provide for indemnification of a director when they’re acting as a director. And the intent of that here is that it encourages people to act as directors. For instance, I sit as a director on the * * *. For people to serve as directors of private corporations there has to be some protection for them for liability. The statute does not contemplate indemnifying directors when they are doing actions against the interests of the corporation and actions brought by the corporation such as performing a competing business.
THE COURT: Yes. I understand your position in that regard, [Plaintiffs’ counsel]. I don’t understand the issue of indemnification raised by their motion before the Court at this time. I understand their motion to amend the pleadings to conform to the proof, and so that’s what I’m asking you to speak towards.
*865[PLAINTIFFS’ COUNSEL]: All right. I don’t mean to look lost, but I’m lost. They ask the pleadings be amended in what way? First of all, to dissolve the corporation?
THE COURT: That’s correct. To state a cause of action for dissolution of the corporation.
[PLAINTIFFS’ COUNSEL]: Well, Your Honor, we haven’t prepared our case along those lines. We’re without notice and I don’t think the proof is such that that’s what should be done. In fact, what has been done here has been allowed by arbitration.
I think Mr. Harger has performed in good faith and there are numerous, numerous issues that have not been brought before the Court that need to be taken care of before we can get to the dissolution.
THE COURT: All right. Well, the motion is granted. The pleadings are amended to conform to the proof, and the Court deems that there has been a case stated regarding dissolution and perhaps some of these other matters, and the Court is going to consider those in arriving at its judgment.
[DEFENDANT’S COUNSEL]: Thank you, Your Honor.
THE COURT: All right. Do you have anything in rebuttal, [Plaintiffs’ counsel].
[PLAINTIFFS’ COUNSEL]: Yes, sir. For clarification, did I understand what the Court’s ruling was. All six things that they asked for ha[ve] been granted?
THE COURT: The pleadings are amended to request those things. I haven’t granted the relief at all. I’ve just amended the pleadings so that they state a cause of action and request that relief, * * *. That’s where we’re at there.
Immediately following conclusion of the trial, the trial court issued a standstill thirty-day order leaving the decision in abeyance while the parties were given time to negotiate a buy out settlement. Lacking consummation of any settlement within the limited time, the trial court’s decision came by a “Findings of Fact, Conclusions of Law, Judgment and Order Appointing Receiver” in September 1990 from which this appeal is taken. In addition to the contested paragraph twenty-five of the findings quoted earlier, the trial court adjudged and decreed:
IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:
1. Plaintiffs’ Complaint be and it is hereby dismissed and Plaintiffs shall take nothing thereby.
2. Defendant Johnson is hereby granted judgment upon her orally amended Complaint praying for dissolution of the Corporation.
3. Notice is hereby given of the intention of the Court to appoint a Receiver to wind up and liquidate the Corporation’s business and affairs. The person the Court intends to appoint as the Receiver is George L. Thompson, CPA.
4. A hearing with regard to the appointment of George L. Thompson as the Receiver in this case shall be held in the Courtroom of the Teton County Courthouse, Jackson, Wyoming on the 18th day of September, 1990 at 9:30 a.m.
5. The Court reserves the right to enter such further orders, judgments or decrees as may be appropriate in this matter until such time as the Corporation is fully dissolved.
The Hargers, individually and through the corporation, filed a notice of appeal September 26, 1990, the trial court appointed the receiver on October 4, 1990, and then on December 13, 1990, the Hargers filed a motion for hearing concerning resolution of the debts of the corporation which was set for hearing by order of the trial court. That hearing was apparently not held until this appeal can be resolved.
It is concluded from a review of the record and careful consideration of the text of the transcript that validity of the note of $247,402.07 could have been considered to have been properly litigated and decided.1 *866In no context, however, have debts of either shareholder due from the corporation for advances been litigated or determined in the proceedings. As a matter of fact, until defense counsel moved to dissolve the corporation at the close of Johnson’s evidence, the issue of dissolution had never been presented as a subject for consideration by the trial court. It seems doubly clear that the trial court was similarly directed as to the scope of initial decision when it granted the Hargers’ motion to set a hearing on this specific subject of corporate debts to the shareholders after entry of the decision from which appeal was taken.
I write this detailed exception to the majority’s opinion to make clear that no preclusion from law of the case concept should offend the trial court’s further proceedings for corporate dissolution and settlement of asset distribution based upon an adequate hearing directed specifically to provide justice to all shareholders. Repayment for advances and a division of equity are clearly issues that remain unresolved and available for further evidentiary presentation.
The issue addressed in the note validation to the contrary was totally distinct from questions of the existence of a debt from the corporation for any shareholder advanced funds. Within the closed corporation structure, the execution of a promissory note to the shareholder was properly subjected to attack to have its validity determined adversely to the executing shareholder who became the note payee. The note was put into evidence by Johnson without objection by the Hargers and was before the trial court during trial development of issues about its validity. Under admitted facts, the validity of the note was determinable as a principle of corporate law. This is what the trial court proceeded to do in its findings and decision.
The same concept regarding the case trial presentation and evidentiary status as a principle of accounting cannot be applied to any contended debt from the corporation to a shareholder. The only real connection between the two issues was the apparent expectancy of the Hargers to prove the note and, consequently, have no further obligation to prove the debt itself. Invalidation of the note by virtue of its method of execution did not determine what advances had been made and what rights were reserved for repayment by either shareholder.
If it is to be considered that the trial court determined that the Hargers made no advances to the corporation and consequently are entitled to no reimbursement, then the decision is totally contrary to the significant amount of disconnected evidence which is a matter of record. Obviously and without question, the Hargers made advances to the corporation for business operation. This second subject of accounting, liquidation and dissolution was not directly addressed in trial evidence because dissolution was not actually considered until the motion was made and the trial court’s decision was rendered in recognition of the deadlocked management and shareholder status. It is clear to me that the trial court was careful in reserving rights to a fair hearing on issues remaining in some future contested evidentiary development within which the accounting and debt obligations of the corporation to the shareholders would clearly occupy a prominent place.
I only concur with the majority on the basis that equity and debt resolution within the corporate dissolution has yet to be determined. Otherwise, any decision is improperly emplaced in a record without appropriate pleadings or any real opportunity for either litigant to address the subject by evidentiary presentation. If it is to be considered that the Hargers are foreclosed a right to prove their advances as is Johnson, then I would dissent on the basis in this case that the issue was not a pleaded controversy, was not tried and whatever evidence there is certainly demonstrates existence of <some advances and perhaps by both shareholders. How advanced, in what amounts, and with what rights of repay*867ment are simply issues not yet tried. It is my observation that the trial court made that clear by the text of its order in limiting it strictly to the validity of the note and reserving rights for further proceedings in order to decide remaining subjects required throughout the corporate liquidation process.
It is noteworthy that this confusion was created by briefing when the Hargers stated their issue as:
II. Whether the trial court erred in finding that certain money loaned to the corporation by appellants Donald and Irene Harger is not a valid debt of the corporation?
Johnson conversely stated:
II. Whether the trial court erred in finding that an unauthorized and unrati-fied promissory note signed by Donald K. Harger in behalf of the corporation, to himself and Irene Frances Harger, is not a valid debt of the corporation.
What we give Johnson by this decision is relief which she never claimed through written pleadings, in appellee brief or during oral argument. I agree with her concept of the stated issue and, accordingly, concur in this decision to affirm the trial court for what it actually did. However, this court should not consider on appeal questions not properly raised in the trial court. Matter of Estate of McCue, 776 P.2d 742 (Wyo.1989); ABC Builders, Inc. v. Phillips, 632 P.2d 925 (Wyo.1981); Boley v. Sears, Roebuck and Co., 582 So.2d 562 (Ala.Civ.App.1991); Pepsi-Cola Bottling Co. of Dothan, Ala., Inc. v. Colonial Sugars, a Div. of Borden, Inc., 423 So.2d 190 (Ala.1982). A liberal interpretative construction should not expand what the trial court neither did nor could do within the scope of the pleadings and documentary record developed thus far in the case.

. The promissory note, its validity and invalidity, was the subject of trial evidence; the instrument itself was handed to counsel for Johnson, who then tendered it for admission into evi*866dence which was done without objection. The document and its relation to the Hargers' conduct of the corporation was before the trial court.