COURT OF APPEALS DECISION DATED AND FILED August 25, 2009 David
R. Schanker Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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APPEAL
from a judgment of the circuit court for
Before Curley, P.J., Fine and Kessler, JJ.
¶1 KESSLER, J. Sylvia A. Shovers and her
grandson, Daniel E. Shovers, by his guardian ad litem, each appeal from a
judgment declaring that Harold J. Shovers (Sylvia’s husband) did not own fifty
shares in Soref’s Carpet City, Inc. (hereafter, “Carpet City”) at the time of
his death and that the shares therefore would not be included in the inventory
of Harold’s estate.[1]
Sylvia raises three issues on appeal.[2] First, she argues that the trial court erred
when it appointed her son, Gary Shovers, as personal representative. Second, Sylvia argues that, as a matter of
law, Harold owned fifty shares of stock in
BACKGROUND
¶2 This case concerns fifty shares, or one-half of the
authorized stock in
Sylvia contends that she has standing to seek declaratory relief because she has an equitable interest in the assets of her husband’s estate under their joint will, and “an interest that Soref’s shares be declared part of the assets of Harold’s estate based on her right to elect deferred marital property.” Based on the assumption that she does have standing, Sylvia contends that the competent evidence shows that Harold died owning fifty shares of Soref’s, because: (1) the dead man’s statute bars Gary from testifying about transactions with Harold; (2) a 1993 agreement, allegedly setting forth a transfer of the shares from Harold to Gary, by itself, is insufficient; and (3) Gary never paid Harold the consideration cited in the 1993 agreement. As a result, Sylvia asks this court to reverse the trial court’s order dismissing her claim and award her summary judgment.
Shovers v. Shovers, 2006
WI App 108, ¶1, 292
¶3 While Sylvia was litigating Shovers I, she also filed a petition in probate court seeking the appointment of a special administrator for Harold’s estate. Specifically, she asked that Bradley (Daniel’s father) be appointed special administrator.[4]
¶4 The trial court[5]
ordered that a special administrator be appointed, but did not assign that role
to Bradley or Gary. Instead, the trial court
appointed attorney Patricia D. Jursik, who had no prior involvement in the
case, as the special administrator.
Jursik’s assigned role was to “conduct discovery for purposes of
determining whether reasonable grounds exist for the Estate to pursue a claim”
against
¶5 The trial court accepted Jursik’s report and discharged her. Further proceedings were put on hold pending the resolution of Shovers I, which eventually occurred in April 2006. Once the hold was lifted, the parties filed briefs in support of or objecting to Jursik’s conclusions. The trial court overruled the objections, reaffirmed Jursik’s discharge and dismissed the case because the special administration proceedings had concluded.
¶6 Three days later, Sylvia and Daniel both filed petitions for
formal administration of the estate and sought to have Bradley appointed
personal representative of the estate.[6]
¶7 After considering the appointment of a personal
representative and whether Jursik’s conclusions were binding, the trial court
on December 5, 2006, decided that it was appropriate both to have formal
administration of the estate and to appoint a personal representative. The trial court further decided that Jursik’s
report would not be binding on whoever was appointed personal representative,
but that the report should be given some weight. The trial court indicated that it believed
¶8 In January 2007, the trial court appointed
The good cause shown is the determination by [the] Special Administrator[,] appointed on Sylvia’s petition for special administration, in which Bradley joined and with which he agreed, concluded that the position Bradley promotes in this case is incorrect from a neutral, unbiased view of the Estate.
The trial court further found
that
¶9 Next, based on
¶10 The parties engaged in discovery and ultimately all filed
extensively briefed motions for summary judgment. Sylvia moved in limine pursuant to Wis.
Stat. § 885.16, commonly referred to as the dead man’s statute, to
prohibit
¶11 The case was tried to a jury.
The jury heard the following testimony.[10] While in high school,
¶12 In 1975, after a falling-out between Harold and Soref, Harold
convinced Soref to sell his shares to
¶13 Harold and Gary continued working together until 1984 when
Harold underwent life-threatening surgery. On February 6, 1984, nine days before the
surgery, Harold prepared and signed Certificate 104, which represented the
transfer of fifty shares of
¶14
¶15 The Agreement, dated May 6, 1993, was executed in duplicate originals. It is signed by Harold and notarized by Attorney J. Patrick Ronan, who testified that he did not draft the Agreement and did not remember Harold, but was sure, based on his review of the document, that he had notarized it. The Agreement provides in relevant part:
I, HAROLD J. SHOVERS … hereby sell my fifty (50) shares of SOREF’S CARPET CITY, INC. stock to my son, GARY D. SHOVERS … for and in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration, already granted to BRADLEY T. SHOVERS and JUDITH SHOVERS adequately providing for each of them financially.
After completion of this agreement, GARY D. SHOVERS will own one hundred (100) shares of SOREF[’S] CARPET CITY, INC. stock. As a result, GARY D. SHOVERS will be the One Hundred percent (100%) owner of SOREF'S CARPET CITY, INC.
This Agreement takes effect immediately upon the date the agreement is executed by HAROLD J. SHOVERS.
(Capitalization as in the original.)
¶16 The jury was also shown copies of the four stock certificates.[12] The assignment form on the reverse of
Harold’s original stock certificate, number 102, was not filled out at the time
Harold created Certificate 104 or when he delivered the Agreement to
¶17
¶18 Ultimately, the jury was asked to answer a single question: “Did Harold Shovers own 50 shares of Soref’s stock when he died?” The jury’s answer was no.
¶19 Sylvia moved for judgment notwithstanding the verdict. She made three arguments: (1) the transfer of shares to
DISCUSSION
¶20 On appeal, Sylvia presents three arguments. First, she argues that the trial court erred
when it appointed
I. Appointment of
¶21 Sylvia argues that the trial court was required by Wis. Stat. § 856.21[13] to appoint Bradley as personal representative because he was nominated in the will and was not disqualified under Wis. Stat. § 856.23. She argues that Gary, who was also nominated in the will, had a conflict of interest because he claims to own the stock which she asserts was part of Harold’s estate.[14]
¶22 Wisconsin Stat. § 856.21
directs the trial court to appoint as personal representative, unless
disqualified, anyone “named in the will to act as personal
representative.”
¶23 Here, the trial court noted that Gary and Bradley “simply cannot agree on what day of the week it is, much less what assets are going to be a part of the estate.” The trial court concluded that the level of hostility between the two brothers would result in a stalemate in the estate. A trial court may disqualify a nominee as unsuitable based on a conflict which did not exist when the testator executed the will or a situation which the testator could not reasonably have anticipated. See id. at 53-54. We consider the trial court’s finding of animosity to be good cause for the implicit conclusion that it would be problematic to have Gary and Bradley serve as co-personal representatives. See Wis. Stat. § 856.23(1)(e).
¶24 It is apparent from the record before us that Harold strove to avoid court involvement in his financial matters after his death. Although Harold enjoyed substantial personal wealth, from which he made significant gifts to his children during his life, no clearly identifiable probate assets were located. Harold left two pages of detailed handwritten instructions for distribution of personal property and various other actions to be taken at his death (e.g., searching his pockets before disposing of his clothes), but the instructions did not mention Carpet City’s stock. Harold’s two wills,[15] likewise, include no mention of the stock.
¶25 The trial court then reasoned that the report of the special administrator, while not controlling, was entitled to some weight and concluded that the “special administrator process did not allow the issue of the ownership of the stock to get litigated.” The trial court next considered whether Gary or Bradley individually could perform the role of personal representative appropriately. The trial court observed Sylvia and Bradley were “allied shoulder to shoulder in all respects throughout,” having initiated both the prior litigation and the special administration proceedings which produced the report and inventory to which they now object. Thus, the trial court reasoned, if only Bradley was appointed, no weight would be given to Jursik’s report because Bradley would file an estate inventory that included the stock described in Certificate 102.
¶26
¶27 The trial court’s decision to appoint Gary balanced Harold’s wishes as to appointment of a personal representative, insofar as reasonably practicable under the circumstances, against the need to fashion a practical solution to the animosity between the two nominees for personal representative that would allow reasonable and efficient administration of the court’s calendar to obtain final resolution of the disputed stock ownership. The trial court properly exercised its discretion.
¶28 Sylvia complains that she had to assume a burden of proof when she chose to continue litigation under Wis. Stat. § 879.63. The trial court did not assign Sylvia a burden of proof. The additional litigation was her choice. The burden of proof was created by statute. At most, its allocation is a collateral consequence of the trial court’s proper exercise of its discretion in appointing a personal representative. Sylvia offers no argument that she was prejudiced by her decision to proceed under § 879.63, except that the jury found her evidence did not rise to the level of a preponderance. Because we have affirmed the trial court’s exercise of discretion in appointing a personal representative, we do not consider this complaint further.
II. Impact of
¶29 Sylvia asserts that Harold’s undisputed failure to follow the corporate bylaws relating to transfer of corporate stock means that, as a matter of law, Harold still owned the stock represented by Certificate 102 at the time of his death. Therefore, Sylvia concludes, the stock is an asset of Harold’s estate and she was entitled to summary judgment to that effect and, after the jury trial, to judgment notwithstanding the verdict.
¶30 In response,
¶31 Assuming that Harold had title to the stock at his death, title
alone does not determine ownership of the stock. See,
e.g., Hoffmann v. Wausau Concrete
Co.,
58 Wis. 2d 472, 207 N.W.2d 80 (1973) (certificates prepared, but dominion,
control and benefit not relinquished); Dahlke v. Dahlke, 25
Wis. 2d 559, 131 N.W.2d 362 (1964) (certificate stub from corporate record
book, without dominion and control over stock is insufficient); State
v. Heller, 210 Wis. 474, 246 N.W. 683 (1933) (certificate prepared but
not delivered does not establish ownership).
“It is a general rule that the principles which govern the construction
of contracts also govern the construction and interpretation of corporate
bylaws.” State ex rel. Siciliano v.
Johnson, 21
¶32 Here, the bylaws in effect when Harold created Certificate 104 in 1984 and when he executed the Agreement in 1993, made the following provisions for issuance and transfer of shares.
ARTICLE VI
Section 1 – Certificates for Shares.
Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President or the Vice President and by the Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled….
Section 2 – Transfer of Shares.
Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof … who shall furnish proper evidence of authority to transfer … and on surrender for cancellation[[17]] of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
¶33 None of the four stock certificates issued on behalf of
¶34 It is apparent from the conduct of the shareholders that they
modified the bylaws by their conduct.
Neither Soref nor Harold followed all the bylaws’ requirements. Harold never removed Soref as registered
agent, even after Soref died. After Soref
left, Harold did not follow all of the transfer requirements in 1984 when he
issued Certificate 104. In 1993, Harold
left the business, and thereafter
¶35 Although Gary continued after 1984 to file reports with the
State of
¶36 Beginning no later than when Gary bought Soref’s shares in 1975 and Certificate 103 was issued, Harold and Gary ignored most of the bylaws’ record-keeping requirements. As the only shareholders, they had the power and authority to modify the bylaws by their conduct and they did so. Essentially, they ignored many parts of the bylaws which described a process for transferring ownership of shares of stock. Gary and Harold worked together, in the same office, and/or Harold regularly visited the store, from 1975 through May 1993. There is no indication in the record that either ever objected to the lack of compliance with the bylaws. By their conduct over the course of those eighteen years, the record demonstrates their agreement to substantially ignore the bylaws, including the requirements for transfer of stock ownership. Although incorporated, this was a small family business. It was never owned by more than two people. The shareholder(s) were also the managers, who, after formal incorporation, paid more attention to running a profitable business than to complying with all of the corporate bylaws. A clearer example of mutual waiver of the bylaws conditions by the conduct of the shareholders is hard to imagine. If Harold or Sylvia had believed themselves to still be owners or officers of the corporation after 1993 and before Harold’s death, they could have, but did not, attempt to enforce conduct described in the bylaws.
¶37 For these reasons, we conclude that Sylvia was not entitled to
summary judgment based on Gary and Harold’s failure to follow Carpet City’s
corporate bylaws to the letter. Whether
the stock was transferred to
III. Competency of the evidence
in light of the dead man’s statute.
¶38 Sylvia’s final argument is that “the competent evidence points
to only one conclusion: Harold died
owning” fifty shares of
¶39 The dead man’s statute, as applicable to the facts here,
prohibits a party who derives interest or title from a deceased person from
testifying as a witness “in respect to any transaction or communication by the
party … personally with a deceased … person in any civil action” if the
opposing party in that action “derives his or her title” from the deceased
person.
¶40 Before trial, Sylvia obtained an order in limine pursuant to Wis.
Stat. § 885.16 that prohibited Gary “from testifying about any
conversation he had with Harold at any time, about the transaction between Gary
and Harold regarding the document entitled the ‘Stock Sales Agreement’ dated
May 6, 1993, including both the execution and delivery of the agreement.” However, the trial court indicated that it
would permit “introduction of the [1993] Agreement and the stock certificates
for Soref’s at all times except when
[
¶41 Sylvia derives any interest she may have in Harold’s estate
from Harold.
¶42 Sylvia’s reliance on the dead man’s statute as a basis to
obtain judgment against
¶43 To the extent Sylvia attempted to reserve her right to appeal
the trial court’s failure to completely grant her motion in limine,[19]
she has not identified the specific testimony that was allowed by the order in limine and how that prejudiced
her. We do not consider undeveloped
arguments.
By the Court.—Judgment affirmed.
Not recommended for publication in the official reports.
[1] Because this case involves many family members with the last name Shovers, we will refer to each Shover using his or her first name.
[2] Although Sylvia and Daniel filed separate appeals and briefs, Daniel’s arguments differ in form but not substance from those made by Sylvia. Consequently, we do not explicitly address Daniel’s arguments; they are rejected for the same reasons we reject Sylvia’s.
[3]
[4]
[5] The Hon. Kitty K. Brennan considered Sylvia’s motion to appoint a special administrator. Subsequent proceedings were conducted by the Hon. Michael J. Dwyer.
[6] In his response to Sylvia and Daniel’s petitions, Gary noted that it was irregular to file the will and petition for formal administration in the same action that had just been dismissed, but he said he had no objection, especially because he had previously argued that Sylvia had no authority to bring a claim on behalf of the estate until probate proceedings were commenced.
[7] Wisconsin Stat. § 856.23 provides:
Persons who are disqualified. (1) A person including the person named in the will to act as personal representative is not entitled to receive letters if the person is any of the following:
….
(e) A person whom the court considers unsuitable for good cause shown.
All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.
[8] Wisconsin Stat. § 879.63 provides:
Action by person interested to secure property for estate. Whenever there is reason to believe that the estate of a decedent as set forth in the inventory does not include property which should be included in the estate, and the personal representative has failed to secure the property or to bring an action to secure the property, any person interested may, on behalf of the estate, bring an action in the court in which the estate is being administered to reach the property and make it a part of the estate. If the action is successful, the person interested shall be reimbursed from the estate for the reasonable expenses and attorney fee incurred by the person in the action as approved by the court but not in excess of the value of the property secured for the estate.
[9] Wisconsin Stat. § 879.45 specifically permits jury trials in probate proceedings in “all cases in which a jury trial may be had of similar issues under sec. 805.01(1).” No party has appealed the use of a jury.
[10] Because neither Sylvia nor Daniel sought a new trial or challenged the sufficiency of the evidence, we do not discuss all of the trial testimony. Rather, we provide the testimony that outlines the facts concerning the transfer of the stock.
[11] During the litigation this document was called the 1993 Agreement or the Stock Sale Agreement. In this opinion we refer to it as the Agreement. It appears undisputed that Harold, who had a law degree, drafted the Agreement himself.
[12] A
total of four stock certificates, each for fifty shares of stock, have been
issued by
[13] Wisconsin Stat. § 856.21 provides:
Persons entitled to domiciliary letters. Letters shall be granted to one or more of the persons hereinafter mentioned, who are not disqualified, in the following order:
(1) The person named in the will to act as personal representative.
(2) Any person interested in the estate or the person’s nominee within the discretion of the court.
(3) Any person whom the court selects.
[14] By his participation in Shovers I, and in the special administration proceedings, Bradley claimed the disputed stock was owned by Harold at his death. Sylvia does not argue this would have presented a conflict of interest for Bradley.
[15] Harold executed a will dated September 16, 1999. He executed his final will, a joint and mutual will with Sylvia, dated October 14, 2000. It is the October 2000 will that was admitted to probate.
[16] In
reviewing the denial of a motion for summary judgment, we apply the same
methodology as the trial court and review de
novo the grant or denial of summary judgment. Green Spring Farms v. Kersten,
136
[17] The bylaws require the owner of shares to “surrender for cancellation” the certificate for those shares as a step to effect the transfer of the shares on the corporate books. Here, because the shares apparently never left the possession of the corporation, they may have been effectively surrendered to the corporation when the owner evidenced intent to transfer his shares. The corporation’s failure to “cancel” the certificate with a stamp or other writing would not appear to negate other evidence of the owner’s intent to transfer ownership.
[18]
Transactions with deceased or insane persons. No party or person in the party’s or person’s own behalf or interest, and no person from, through or under whom a party derives the party’s interest or title, shall be examined as a witness in respect to any transaction or communication by the party or person personally with a deceased or insane person in any civil action or proceeding, in which the opposite party derives his or her title or sustains his or her liability to the cause of action from, through or under such deceased or insane person, or in any action or proceeding in which such insane person is a party prosecuting or defending by guardian, unless such opposite party shall first, in his or her own behalf, introduce testimony of himself or herself or some other person concerning such transaction or communication, and then only in respect to such transaction or communication of which testimony is so given or in respect to matters to which such testimony relates. And no stockholder, officer or trustee of a corporation in its behalf or interest, and no stockholder, officer or trustee of a corporation from, through or under whom a party derives the party’s interest or title, shall be so examined, except as aforesaid.
[19] Just prior to the commencement of trial, the trial court stated:
The Dead Man Act has been waived by the Plaintiff on learning that the Court would not permit it or them to decide whether or not to waive it after opening statements.… [B]ased on that ruling, [Sylvia’s counsel] advised the Court that, preserving that objection, he is going to waive it….
Sylvia’s counsel responded: “Right, we believe we preserved our objection with the earlier motion we made and the Court granted in part and denied in part, so that’s my understanding.”