Estate of James v. Hunt ( 2002 )

No. 01-699
IN THE SUPREME COURT OF THE STATE OF MONTANA
2002 MT 218N
IN THE MATTER OF THE ESTATE OF
ALVARETTA M. JAMES, Deceased,
DARLENE M. ROSE, Personal Representative,
Petitioner and Respondent,
v.
DELBERT HUNT AND MONTE CRISTO
MINING CO.,
Respondent and Appellant.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Beaverhead,
The Honorable Loren Tucker, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Thomas S. Winsor, Winsor Law Firm, Helena, Montana
For Respondent:
Catherine S. Sands, J. Blaine Anderson, Jr. Law Offices, Dillon, Montana
Submitted on Briefs: May 2, 2002
Decided: September 24, 2002
Filed:
__________________________________________
Clerk
Chief Justice Karla M. Gray delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal
Operating Rules, the following decision shall not be cited as precedent. It shall be filed as a
public document with the Clerk of the Supreme Court and shall be reported by case title,
Supreme Court cause number and result to the State Reporter Publishing Company and to
West Group in the quarterly table of noncitable cases issued by this Court.
¶2 The Fifth Judicial District Court, Beaverhead County, directed
the personal representative of the Estate of Alvaretta M. James
(Estate) to distribute to the Estate's heirs and beneficiaries
their share of property in Monte Christo Mining Company, Inc.
(Monte Christo), a Montana corporation which was involuntarily
dissolved in 1997. Delbert Hunt (Hunt) and his corporation, which
is also named Monte Christo Mining Company, Inc. (MCMC), appeal.
We affirm and remand for clarification.
¶3 The issues are:
¶4 1. Did the District Court err when it "disallowed" the
corporate reinstatement?
¶5 2. Did the District Court err when it confirmed that Monte
Christo was dissolved and ordered distribution of the Estate's
property?
¶6 3. Does the District Court's order deprive Hunt of his
property rights?
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BACKGROUND
¶7 Darlene Rose (Rose) is the personal representative of the
estate of her mother, Alvaretta James (James), who died in May of
1999. The Estate asserts that one of its assets is a one-ninth
interest in mining claims near Argenta, Montana.
¶8 The record reflects that James and four other co-owners of the
mining claims conveyed their interests in the claims to Monte
Christo in 1993 in exchange for stock in the corporation. In 1997,
the Montana Secretary of State involuntarily dissolved the
corporation pursuant to § 35-6-102, MCA. Both the corporation and
the mining claims were largely inactive at the time, and the
directors and officers did not take any action to wind up the
corporation or liquidate the corporate assets.
¶9 In March of 2001, Hunt, the son of one of Monte Christo's
shareholders, sent a letter to the Montana Secretary of State in
which he stated:
I, Delbert Hunt, incorporated Monte Christo Mining
Corporation on November 11, 1999. I am reinstating Monte
Christo Mining Company which was incorporated January 14,
1981.
Hunt included with his letter a completed and signed "Application
of Reinstatement or Revivor" form provided by the Secretary of
State's office. In return, the Secretary of State sent Hunt a
letter stating he had approved the filing of Hunt's documents for
the reinstatement.
¶10 At about the same time, Hunt extended offers to each of the
Monte Christo shareholders to purchase their corporate stock. All
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shareholders except the Estate sold Hunt their stock in Monte
Christo. This resulted in the present dispute between Rose and
Hunt over whether the Estate is entitled to a fractional interest
in the mining claims or only to ownership of stock in MCMC, Hunt's
corporation.
¶11 At Rose's request in the probate proceeding, the District
Court ordered the directors and officers of Monte Christo to appear
and show cause why they should not deliver the Estate's interest in
the mining claims to Rose. At the hearing, the court received
documentary evidence and heard testimony from Rose and three other
witnesses, including the president and secretary-treasurer of Monte
Christo.
¶12 Based on the evidence received at the hearing, the District
Court determined Hunt's "reinstatement" of the corporation was not
effective and that "[t]he then existing shareholders are entitled
to the real estate owned by the then existing corporation." The
court directed Rose to "take such steps as are required by law to
distribute the property of the estate to the heirs and
beneficiaries of the estate" and further ordered that "[Hunt] shall
have and take nothing of the property or assets of the previously
existing Monte Christo Mining Company, Inc." Hunt and MCMC appeal.
STANDARD OF REVIEW
¶13 We review findings of fact to determine whether they are
clearly erroneous and conclusions of law to determine whether they
are correct. Dome Mountain Ranch, LLC v. Park County, 2001 MT 289,
¶ 12, 307 Mont. 420, ¶ 12, 37 P.3d 710, ¶ 12 (citations omitted).
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The District Court did not expressly divide its order into findings
and conclusions, but the issues raised by Hunt implicate both
findings of fact and conclusions of law.
DISCUSSION
¶14 1. Did the District Court err when it "disallowed" the
corporate reinstatement?
¶15 Because corporations are creatures of statute, statutory
requirements for their existence must be observed. See Barnett
Iron Works v. Harmon (1930), 87 Mont. 38, 41, 285 P. 191, 191.
Involuntary dissolution by the Montana Secretary of State is a
consequence of a corporation's failure to meet statutory
requirements for continued corporate existence, such as filing an
annual report. See § 35-6-102, MCA. As the District Court pointed
out, § 35-6-201(2), MCA, provides that after a corporation has been
involuntarily dissolved, the Montana Secretary of State may
consider reinstatement of that corporation on the application of "a
person who was an officer or director at the time of
dissolution[.]"
¶16 Based on the evidence presented, the District Court found that
Hunt, who signed the application for corporate reinstatement, was
not an officer or director of Monte Christo at the time of its
dissolution in 1997. Therefore, the court concluded, the attempted
reinstatement did not meet the statutory requirements and was not
effective.
¶17 The evidence that no director or officer of Monte Christo
filed the application for corporate reinstatement was undisputed.
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As a result, we hold that the District Court's finding to that
effect is supported by substantial evidence and is not otherwise
clearly erroneous. We further hold that the court did not err when
it concluded the statutory requirements for reinstatement of a
corporation had not been met and "disallowed" the corporate
reinstatement.
¶18 2. Did the District Court err when it confirmed that Monte
Christo was dissolved and ordered distribution of the Estate's
property?
¶19 Hunt contends the action taken by the Secretary of State in
1997 resulted only in an "administrative" dissolution of the
corporation, and not a "de facto" dissolution. He asserts that the
District Court improperly took things a step further by concluding
Monte Christo was dissolved "de facto" as well as "administratively." The
District Court did not make such a conclusion; nor do the involuntary dissolution statutes
distinguish between "administrative" and "de facto" dissolution. See §§ 35-6-101 through -
104, MCA.
¶20 Hunt also contends the District Court's order amounted to an
order of judicial dissolution, which is governed by § 35-1-938,
MCA. He asserts that the circumstances under which that statute
allows judicial dissolution were not present here.
¶21 Hunt is incorrect in his contention that the District Court's
order constituted a judicial dissolution. Section 35-1-938, MCA,
governs judicial dissolutions of existing corporations. Monte
Christo has not been an existing corporation since the Secretary of
State involuntarily dissolved it in 1997, pursuant to the
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provisions of § 35-6-102, MCA. Hunt was able to file on the name
"Monte Christo Mining Company, Inc." with the Secretary of State in
2001 because the corporate name was not in use after Monte
Christo's dissolution in 1997. However, as discussed above, his
acquisition of the previously-used corporate name was insufficient
to reinstate the corporation. The Secretary of State's approval of
the filing of the application for reinstatement and the Montana
Department of Revenue's acceptance of fees and taxes upon
reinstatement implicitly were based on an incorrect understanding
that the application was submitted by an officer or director of the
dissolved corporation as statutorily required.
¶22 The District Court correctly determined MCMC is not a
reinstatement of the dissolved Monte Christo, as discussed above.
Liquidation of the property and assets of an involuntarily-
dissolved corporation is governed by § 35-6-104(5), MCA, and the
statutes referenced therein. Thus, Hunt has not established that he
has any authority to require the Estate to take shares of stock in
MCMC in exchange for its shareholder interest in Monte Christo.
Because this proceeding does not concern all of Monte Christo's
corporate assets, but only the Estate's stock in that dissolved
corporation, the District Court appropriately limited the scope of
its order to instructing Rose to "take such steps as are required
by law to distribute the property of the estate to the heirs and
beneficiaries of the estate." We presume the District Court meant
in that portion of its order, and in its statement concerning "the
then existing shareholders" and "the real estate owned by the then
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existing corporation," that Rose should pursue liquidation of the
assets of Monte Christo as provided in § 35-6-104(5), MCA, and the
other statutes referenced therein.
¶23 We hold the District Court did not err when it confirmed that
Monte Christo had been dissolved and ordered distribution of the
Estate's property.
¶24 3. Does the District Court's order deprive Hunt of his
property rights?
¶25 The District Court determined that Hunt "and his corporation
have no right, title and interest in the real estate owned by the
now dissolved Monte Christo Mining Company" and ordered that Hunt
"shall have and take nothing of the property or assets of the
previously existing Monte Christo Mining Company, Inc." Hunt
objects to this determination and requests clarification of the
court's order, pointing out that the Monte Christo shareholders
accepted his offers and his money in exchange for their stock in
the dissolved corporation.
¶26 The Estate concedes the District Court appears to have erred
in this regard and that it is not entitled to strip Hunt and MCMC
of any property rights acquired when Hunt purchased stock from
Monte Christo's shareholders. The Estate does not object to
allowing the District Court's order to be clarified. Therefore, we
remand to allow the District Court to clarify its order.
¶27 Affirmed and remanded for clarification.
/S/ KARLA M. GRAY
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We concur:
/S/ PATRICIA COTTER
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
/S/ JIM RICE
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