Court Opinion

ID: 854403
Source: CourtListenerOpinion
Date Created: 2013-03-06 01:02:29.968317+00
Date Added: 2024-06-11T13:08:04.825673
License: Public Domain

IN THE SUPREME COURT, STATE OF WYOMING

                                    2013 WY 19

                                                     OCTOBER TERM, A.D. 2012

                                                           February 14, 2013

SHIRLEY R. CASE, an individual,

Appellant
(Plaintiff),

v.

SINK & RISE, INC., a Wyoming
                                               S-12-0111
corporation; CALE CASE, an individual;
GUION and DARLA NIGHTINGALE,
individuals; and TANGEMANN
BENEDICT CORP., a Wyoming
corporation.

Appellees
(Defendants).

                  Appeal from the District Court of Fremont County
                      The 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 of 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.

Before KITE, C.J., and HILL, VOIGT, BURKE, and DAVIS, JJ.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be
made before final publication in the permanent volume.
HILL, Justice.

[¶1] This case involves 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.

[¶2] 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

[¶3]   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 3 were 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?

                                          FACTS

[¶4] A May 24, 2011 shareholder meeting of Sink & Rise is central to this case. Sink
& Rise has 84 shares of voting, common stock outstanding. There exists only one class
of stock in the corporation, giving each stockholder the same voting rights. The stock
ownership in Sink & Rise is as follows:

              Cale Case – 20 shares

                                              1
                Cale Case and Shirley Case, Husband and Wife with Rights
                of Survivorship – 16 shares
                Clarene Law, Trustee, Clarene Law Revocable Trust (4/4/89)
                – 16 shares
                Creed Law, Trustee, Creed Law Revocable Trust (4/4/89) –
                16 shares
                Guion Nightingale – 16 shares1

[¶5] At the May 24, 2011 shareholder meeting, only Cale Case appeared in person.
Appellee Guion Nightingale (Nightingale) appeared by proxy. No one else was present,
either in person or by proxy. During the meeting, several resolutions were passed,
including reauthorizing and securitizing debts, and electing Nightingale and Cale Case as
the only members of the corporation’s board of directors. A board of directors meeting
followed, where the board passed another resolution electing Cale Case as president of
the corporation and replacing Shirley Case as secretary. To pass these resolutions, Cale
Case and Nightingale determined that a quorum existed by counting Cale Case’s 20
shares, Nightingale’s 16 shares, and the 16 shares held jointly by Cale Case and Shirley
Case as husband and wife.

[¶6] Shirley Case filed suit two weeks later on June 9, 2011 in district court. Her
complaint contained three counts and challenged the validity of the decisions made at the
Sink & Rise shareholder meeting and the ensuing Sink & Rise board of directors
meeting. The complaint brought (Count I) derivative claims against Sink & Rise (Count
II) a claim asking for declaratory judgment that the corporate actions taken at both the
shareholder and board of directors meetings were done so in violation of Wyoming law,
and (Count III) a claim asking for injunctive relief. After filing an answer to the
complaint, Sink & Rise filed a motion for partial summary judgment seeking dismissal of
Counts I and III of the complaint. The remaining Appellees joined the motion, and on
November 7, 2011, the district court granted it, dismissing the shareholders’ derivative
claim in Count I and the claim for injunctive relief in Count III.

[¶7] Count II proceeded to a bench trial on November 15-16, 2011. The decision letter
of the court concluded that a quorum was reached at the shareholder meeting, that shares
were not improperly voted, and that the decisions made at the shareholder meeting were
valid.

                                           DISCUSSION

1
  The parties disagree about the status of the stock held by Appellee Guion Nightingale, but the issue is
not raised by Shirley Case.

                                                    2
[¶8] Shirley Case’s first issue on appeal alleges that the trial court committed
reversible error when it found that the transactions contemplated by Sink & Rise
Shareholder Resolutions 1, 2, and 3 and Board of Director Resolutions 1, 2, and 3 were
not void, and ultra vires as directors’ conflicting interest transactions under Wyo. Stat.
Ann. § 17-16-860, et. seq. (LexisNexis 2011).

[¶9] The Appellees argue that only Count I of Shirley Case’s Verified Complaint
sought relief on whether a directors’ conflict of interest transaction occurred under § 17-
16-860, et. seq. Neither Count II (a declaratory judgment claim) or Count III (a
temporary restraining order/injunction claim) discussed directors’ conflicting interest
transactions. The Appellees point out that Sink & Rise filed a motion for partial
summary judgment requesting Counts I and III be dismissed, and that Shirley Case did
not respond. As a result, on November 7, 2011, the court entered an Order Granting
Motion for Summary Judgment and Dismissing Counts I and III of Plaintiff’s Complaint
with Prejudice, and stated:

                     The Court finds that the Plaintiff has failed to file a
             response or otherwise controvert the assertions in the
             Defendants’ Motion and Joinder by the October 13[sic], 2011
             deadline which was set forth in the Court’s July 18, 2011,
             Scheduling Order and Order Setting Trial. The Court further
             finds that Plaintiff has not moved for or otherwise requested
             an enlargement of time within which to file a response.
             Accordingly, the Court, having reviewed the Motion and the
             Joinder, and being duly advised in the premises, finds that the
             Motion and the Joinder are well taken and therefore
             GRANTS the same.
                     IT IS HEREBY ORDERED that Count I and Count III
             of Plaintiff’s Verified Complaint are dismissed with prejudice
             as to all Defendants herein.

The Appellees also emphasize the fact that the district court discussed and ruled directly
on this very issue when it refused to permit evidence and testimony regarding the conflict
of interest during trial:

             THE COURT: … My point in making that point was that we
             are only talking about the corporate authority for those
             resolutions. We are not talking about issues such as conflict
             of interest or skullduggery by a corporate officer. Those, as
             to Count II, seem to be clearly irrelevant.
                    You have asked for relief in Count II that the Court
             rule that the resolutions were not passed with authority, the

                                             3
resolutions are void and ultra vires. And Count II deals solely
with the issues of which shares of stock can be voted.

MR. FORD: Well, that’s where my confusion comes in, Your
Honor. If you look at the various facts we pleaded, we
pleaded the specific facts that were conflicted, not just the
resolutions.

THE COURT: I agree with you.

MR. FORD: And we have asked that the – that the acts
themselves – and I guess this is – this is wordsmithing and
perhaps inappropriately – or incomplete wordsmithing on our
point – but we are asking that the conflicted transactions
would be ruled upon. But if, in fact, the resolutions were
voted on by the directors who had direct conflicts, then that
would get to the same point. It becomes circular at that point.

THE COURT: I don’t – I guess I disagree with you, Mr. Ford.

MR. FORD: I get that.

THE COURT: I’m looking at Count II, Declaratory Judgment
– Unauthorized Corporate Actions. I am looking at
paragraphs 25 through 32 and they deal only with voting of
specific shares of stock and the issue of quorum.
       Next, I look at the November 7, 2011, Order granting
summary judgment and dismissing Counts I and III. And I
think that clearly, in my mind, precludes you from
introducing evidence to this Court concerning issues of
conflict of interest. And I think those are now irrelevant, and
I won’t allow them. I want you to understand the position of
the Court.

MR. FORD: Okay. If I might just point out that the first
paragraph of Count 25 (sic) incorporates all of the
proceedings.

THE COURT: I understand that. But I’m not going to allow
you to bootstrap a cause of action that got tossed out because
you didn’t reply to summary judgment. And that is what
happened on I and III.

                               4
              MR. FORD: Well –

              THE COURT: That is what it is. I’m stuck with it. So with
              that understanding, I assume if you need to make an opening,
              I will begin evidence and testimony.

Although Shirley Case contends that the trial court’s Order on Summary Judgment did
not address the conflicting interest issue and remains unresolved, her failure to respond to
Appellees’ Motion for Partial Summary Judgment resulted in the lower court fully
adjudicating Count I, which included her claims relating to conflicting interest
transactions, and thus prevented her resurrection of the issue at trial. We agree with this
conclusion.

[¶10] The Wyoming Rules of Civil Procedure grant district courts authority to set the
timing for the filing of summary judgment motions and responses. W.R.C.P. 56(c)
provides that “[u]nless the court otherwise orders, the motion and any response and other
papers relating thereto shall be served pursuant to Rule 6(c).” Here, the district court
issued its scheduling order that required all dispositive motions to be filed on or before
October 3, 2011, and all responses to be filed on or before October 14, 2011. Shirley
Case never responded to the Motion for Partial Summary Judgment, precluding the
district court from trying the conflicting interest issue alleged in Count I.

[¶11] This Court has noted the importance of parties’ compliance with the rules of civil
procedure in the context of a party’s failure to timely respond to a motion for summary
judgment: “Compliance with the rules of civil procedure ‘is mandatory, not optional.’”
Sandstrom v. Sandstrom, 884 P.2d 968, 970-971 (Wyo. 1994). Further, “[t]he district
court should not receive or consider untimely filed affidavits in summary judgment
matters. To condone a practice which permits parties to simply ignore the Wyoming
Rules of Civil Procedure would defeat the purpose for the rules.” Weber v. McCoy, 950
P.2d 548, 553 (Wyo. 1997) (internal citation omitted).

[¶12] Given this discussion, given that the Motion for Partial Summary Judgment went
unopposed, and given that the district court did not entertain argument on this issue, we
conclude that the district court’s rulings on the issues raised in Counts I and III were
final, and stand.

Joint Stock and the Quorum

[¶13] In her second and final issue, Shirley Case argues first that Cale Case was not
entitled to vote the jointly held shares due to her absence and, consequently, those same
shares could not be counted for quorum purposes. According to Shirley Case, only
shares “entitled to vote” are to be counted in establishing a quorum.          Cale Case

                                              5
maintains that the district court’s decision that the shares could be counted for quorum
purposes is valid.

                              STANDARD OF REVIEW

[¶14] We recently stated in Redland v. Redland, 2012 WY 148, ¶ 48, 288 P.3d 1173,
1185 (Wyo. 2012) as follows:

                      Following a bench trial, this court reviews a district
             court’s findings and conclusions using a clearly erroneous
             standard for the factual findings and a de novo standard for
             the conclusions of law. Piroschak v. Whelan, 2005 WY 26,
             ¶ 7, 106 P.3d 887, 890 (Wyo. 2005).
                   The factual findings of a judge are not entitled to the
                   limited review afforded a jury verdict. While the
                   findings are presumptively correct, the appellate court
                   may examine all of the properly admissible evidence in
                   the record. Due regard is given to the opportunity of the
                   trial judge to assess the credibility of the witnesses, and
                   our review does not entail re-weighing disputed
                   evidence. Findings of fact will not be set aside unless
                   they are clearly erroneous. A finding is clearly erroneous
                   when, although there is evidence to support it, the
                   reviewing court on the entire evidence is left with the
                   definite and firm conviction that a mistake has been
                   committed.
                 Piroschak, ¶ 7, 106 P.3d at 890. Findings may not be set
                 aside because we would have reached a different result.
                 Harber v. Jense[n], 2004 WY 104, ¶ 7, 97 P.3d 57, 60
                 (Wyo. 2004). Further,
                   we assume that the evidence of the prevailing party
                   below is true and give that party every reasonable
                   inference that can fairly and reasonably be drawn from
                   it.
                 Id.
             Claman v. Popp, 2012 WY 92, ¶ 22, 279 P.3d 1003, 1012
             (Wyo. 2012) (quoting Pennant Serv. Co. v. True Oil Co.,
             LLC, 2011 WY 40, ¶ 7, 249 P.3d 698, 703 (Wyo. 2011)). We
             review the district court’s conclusions of law de novo.
             Lieberman v. Mossbrook, 2009 WY 65, ¶ 40, 208 P.3d 1296,
             1308 (Wyo. 2009).

                                             6
[¶15] Although Cale Case urges us to summarily affirm the district court because he
alleges Shirley Case’s brief is not “presented with cogent argument or supported by
pertinent authority,” we will proceed to decide this case on the merits of the issue
presented, having concluded that the briefs presented meet the standards required by this
Court.

[¶16] Turning to the issue, Shirley Case argues that because her estranged husband was
not entitled to vote the jointly held shares, those same shares could not be counted for
quorum purposes. She reasons that because she was absent from the meeting and
because only shares “entitled to vote” are to be counted in establishing a quorum, the
shares in question were essentially useless at the meeting.

[¶17] Although each party cites several secondary sources and other jurisdictions in
support of their respective arguments, we find the answer in the Sink & Rise corporate
documents, and within Wyoming law. First, we reiterate the characterization of the stock
as being owned by husband and wife with rights of survivorship. We agree with the
district court’s further classification of the stock as creating a presumption of tenancy by
the entirety under Wyoming law. Witzel v. Witzel, 386 P.2d 103, 105 (Wyo. 1963) (the
conveyance of property to husband and wife creates the presumption of a tenancy by the
entirety). As tenants by the entirety, each owns an undivided 100% interest in the 16
shares.

              In an estate of the entirety, the husband and the wife during
              their joint lives each owns, not a part, or a separate or a
              separable interest, but the whole, and therefore the death of
              one leaves the other still holding the whole title as before,
              with no one to share it.

Talbot v. United States by & Through Secretary of the Treasury, 850 F. Supp. 969, 975
(D. Wyo. 1994).

[¶18] To further help us in our consideration, we turn to the corporate documents. We
first note that when considering corporate documents, it is well settled that “[b]ylaws are
contractual in nature.” Mueller v. Zimmer, 2005 WY 156, ¶ 35, 124 P.3d 340, 359
(quoting Skane v. Star Valley Ranch Ass’n, 826 P.2d 266, 271 (Wyo. 1992)).
“Unsurprisingly, bylaws are interpreted according to the principles applicable to the
interpretation of contracts.” Id. (citations omitted). Our standard for interpreting
contracts is well-established and straightforward:

                     According to our established standards for
              interpretation of contracts, the words used in the contract are
              afforded the plain meaning that a reasonable person would
              give them. Doctors’ Co. v. Insurance Corp. of America, 864

                                              7
             P.2d 1018, 1023 (Wyo. 1993). When the provisions in the
             contract are clear and unambiguous, the court looks only to
             the “four corners” of the document in arriving at the intent of
             the parties. Union Pacific Resources Co., 882 P.2d at 220;
             Prudential Preferred Properties, 859 P.2d at 1271. In the
             absence of any ambiguity, the contract will be enforced
             according to its terms because no construction is appropriate.
             Sinclair Oil Corp. v. Republic Ins. Co., 929 P.2d 535, 539
             (Wyo. 1996); Prudential Preferred Properties, 859 P.2d at
             1271.

Mueller, ¶ 35, 124 P.3d at 359.

[¶19] With the above law in mind, we consider Sink & Rise’s bylaws, which define
what constitutes a “quorum,” and relate the corporation’s rule on voting shares:

             6. Quorum. A majority of the outstanding shares entitled to
             vote, represented in person or by proxy, shall constitute a
             quorum at a meeting of Shareholders. If a quorum is present,
             the affirmative vote of the majority of shares entitled to vote
             at the meeting shall be the act of the Shareholders. If less
             than a majority of the outstanding shares are represented at a
             meeting, which a quorum is presented or represented, any
             business may be transacted which might have been transacted
             at the meeting as originally called. The Shareholders present
             at a duly organized meeting may continue to transact business
             until adjournment, notwithstanding the withdrawal of enough
             Shareholders to leave less than a quorum.

             7. Voting of Shares. Subject to the provisions of 7(c) hereof,
             each outstanding share is entitled to vote the number of shares
             owned by him/her on each matter submitted to a vote at a
             meeting of Shareholders.
                    (a) Neither treasury shares, nor shares of its own stock
             held by a corporation in a fiduciary capacity, nor shares held
             by another corporation if a majority of the shares entitled to
             vote for the election of such other corporation is held by the
             Corporation, shall be voted at any meeting or counted in
             determining the total number of outstanding shares at any
             given time.

                                            8
According to the bylaws, for the corporation to count shares in determining a quorum, the
shares must be (1) entitled to vote, and (2) represented in person or by proxy. From our
reading of the corporate documents, and because the joint stock was held by husband and
wife as tenants by the entirety, we conclude that the shares held jointly by Cale Case and
Shirley Case were “entitled to vote” at the meeting. Cale Case represented the stock in
person, as required by the bylaws.

[¶20] As the district court noted, and the parties agree here, the joint stock in question
cannot be, and was not, voted without agreement between Cale Case and Shirley Case.
“The stock itself is standard stock with full voting privileges. Whether the stock will be
voted at a meeting does not control whether it is ‘entitled to vote’ at that meeting.”
(Italics in original.) “The fact that Cale Case and Shirley Case must agree on how to vote
the stock before it can actually be voted does not strip it of its voting privileges.” Cale
Case did not attempt to vote the stock at the meeting, but instead considered it only for
quorum purposes because regardless of whether it was voted, its voting potential was still
full. For the corporation to count shares in determining a quorum, the bylaws are silent
regarding the shares actually being voted, as opposed to “entitled to vote.” The issue of
whether stock held in a tenancy by the entirety can be voted by proxy without the
signature of both owners is considerably different from, and does not control, the issue of
whether that same stock is represented at a shareholder meeting through a single owner.

[¶21] Sink & Rise’s bylaws do not prevent stock owned by a husband and wife as
tenants by the entirety from being voted at a shareholder meeting if agreed upon, nor do
the bylaws prevent the same kind of stock from being counted for purposes of a quorum
if represented in person. The stock in question was represented in person by Cale Case at
the May 24, 2011 shareholder meeting, and it was properly counted to establish a
quorum.

                                    CONCLUSION

[¶22] We affirm 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. Affirmed.

                                             9