Estate of James v. Hunt

2002 MT 218N

• Court: Montana Supreme Court
• Decided: September 24, 2002
• Docket: 01-699
• Status: Published

Opinion

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?

2 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

3 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).

4 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

¶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.

5 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

6 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

7 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

¶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

8 We concur:

/S/ PATRICIA COTTER /S/ JIM REGNIER /S/ W. WILLIAM LEAPHART /S/ JIM RICE