IN THE SUPREME COURT OF IOWA No. 13 / 05-0135
Filed December 7, 2007
IN THE MATTER OF THE ESTATE OF GLENN W. WOODROFFE, Deceased
RANDOLPH W. WOODROFFE and JANICE M. WOODROFFE,
Appellants,
vs.
THE ESTATE OF GLENN W. WOODROFFE, ELDA H. WOODROFFE, JEANNE A. WOODROFFE, REGINALD WOODROFFE, KERWIN WOODROFFE, and ANITA L. ERICKSON,
Appellees.
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THE ESTATE OF GLENN W. WOODROFFE and RANDOLPH WOODROFFE, a/k/a RANDY WOODROFFE,
KERWIN WOODROFFE, ANITA ERICKSON, and THE UNBORN OR ADOPTED CHILDREN OF GLENN W. WOODROFFE,
Appeal from the Iowa District Court for Lee County, James Q.
Blomgren, Judge. 2 April 15, 2008 (3:10PM)
Plaintiffs appeal, and defendants cross-appeal, from the district
court’s adjudication resolving the parties’ competing claims to real and
personal property. AFFIRMED.
Robert S. Hatala of Crawford, Sullivan, Read & Roemerman, P.C.,
Cedar Rapids, for appellants.
William H. Napier of Napier, Wolf & Napier, Fort Madison, for appellee
Elda H. Woodroffe.
John H. Smith of Smith, Kultala & Boddicker, LLP, Keokuk, for
appellee Kerwin Woodroffe.
M. Carl McMurray, Keokuk, for appellee Estate of Glenn W.
Woodroffe. 3
HECHT, Justice.
This case presents a saga covering three generations of the Woodroffe
family. The family created a profitable sawmill business due in large part to
the industry and hard work of Glenn Woodroffe. After about thirty years in
the business, Glenn attempted during his lifetime to ensure the continuation of the family enterprise beyond his lifetime. By the time of his
death in 2002, however, Glenn had failed to establish business and
testamentary arrangements necessary to avoid family conflicts over the
future ownership of the mill and related assets. Those conflicts survived
Glenn and fostered this litigation.
I. Background Facts and Proceedings.
We find the following facts from the record. Glenn started the family
business with a portable sawmill. He incorporated the company, Glenn
Woodroffe Sawmill, Inc. (GWSM), in 1957.1 Although he started the
company with a portable mill, Glenn eventually had the opportunity to
locate the business on real estate located in rural Lee County. In 1959,
Charles Woodroffe, Glenn’s father, conveyed that real estate to Glenn, for
life, with the remainder interest in equal shares to Glenn’s children living at
the time of Glenn’s death. Glenn and his wife, Elda, raised five children: Randolph, Jeanne,
Reginald, Kerwin, and Anita. Randolph, the eldest child, was active in the
family business from an early age. After achieving a college degree in
industrial engineering, he returned to work full-time at the mill in 1974. In
addition to his long hours of work in the day-to-day operations of the mill,
Randolph drove the truck that delivered to customers loads of pallets
manufactured by GWSM.
1 The articles of incorporation identified Glenn as the sole officer and director of the
company. 4
The other Woodroffe family members were involved to a lesser degree
in the day-to-day operations of the company. Elda was at times identified
in GWSM records as the company’s corporate secretary, but she was unable
at trial to recall the duration of her service as an officer. Her role in the
company’s operations was clearly insubstantial compared to Glenn’s and Randolph’s. Although Jeanne, Reginald, Kerwin, and Anita performed tasks
around the mill during their youth, the record does not provide much detail
as to their involvement in the operation.
Although Glenn worked incredibly long hours at the mill and devoted
great energy to the business, he was less than fastidious about compliance
with corporate formalities. Although corporate tax returns consistently
identified Glenn as the sole owner of the company, no stock certificates were
ever issued by the company. No records of an initial organizational meeting
or subsequent annual corporate meetings were maintained. No assets were
transferred to GWSM to capitalize the company when it was organized.
Little, if any, effort was made to segregate the company’s assets from the
Woodroffe family’s assets. Although almost all of the income-producing
machinery, equipment, and building improvements were purchased with
funds from GWSM’s bank account, tax deductions for the depreciation of
those assets were taken on the personal tax returns of Glenn and Elda, and
Randolph and his wife, Janice.2 Although GWSM paid rent to those
individuals for the use of such assets, no corporate records evidence the
company ever transferred ownership of the assets to the family members.3
2This was consistently true until 1994 when the company’s tax return claimed some
depreciation expense.
3Glenn and Randolph received rent payments in lieu of W-2 earnings from GWSM to avoid tax withholding. Randolph also received income from GWSM for the trucking services he provided for the enterprise. 5
Organized under Iowa Code chapter 491 (1954), the corporate
existence of GWSM was to terminate after twenty years unless renewed. In
1976, the Secretary of State notified Glenn and his attorneys that the
corporation’s existence would expire on January 14, 1977, if a certificate of
renewal and renewed articles of incorporation were not filed. Although Glenn delivered the notice of impending expiration to his attorney who
prepared a draft of the necessary renewal documents, there is no evidence
that the documents were ever signed by Glenn and forwarded to the
Secretary of State. Consequently, the corporate existence of GWSM expired
on January 14, 1977. No annual corporate reports were filed by GWSM
after 1976.
Although the de jure existence of GWSM expired in January of 1977,
the sawmill business’s operations continued as before. Corporate income
tax returns were filed under the name and tax identification number of
GWSM; machinery and equipment were purchased and building
improvements were constructed with funds from the GWSM bank account;
and workers’ compensation and unemployment claims lodged against
GWSM were defended as though the corporation still existed.
By the late 1980s, Glenn had begun thinking about how ownership of
the business could be transferred, upon his death, to Randolph. He
realized he only held a life estate, and that Randolph’s siblings owned a
four-fifths remainder interest, in the Lee County real estate upon which the
machinery, equipment, and extensive building improvements used by the
business, and a home built for Randolph and his wife, Janice, were
situated.4 Because Glenn and Randolph believed it was economically
infeasible to move the mill improvements and the home to another location,
4 The funds used to pay for the home were derived from mill revenues, and much of
the labor was performed by mill employees, including Randolph. 6
Randolph sought to acquire his siblings’ remainder interests. In
furtherance of this objective, an appraisal of the real estate was undertaken
in 1988.
The appraiser was specifically instructed to value the real estate
assuming the existence of no mill or residential improvements. The resulting valuation of $42,500 was used by Randolph as the basis for his
offers to purchase the remainder interests of his siblings. Although
Reginald and Jeanne each conveyed their remainder interests to Randolph
for $10,000, Kerwin and Anita did not. Unable to amicably complete the
consolidation of the ownership of all of the remainder interests in Randolph,
Glenn and Randolph filed a partition action in July of 1991 naming Kerwin
and Anita as respondents. In their petition, Glenn and Randolph alleged
they had made substantial improvements to the property in good faith; and
they requested the court to order the sale of the property, and to award to
them the value of the improvements from the sale proceeds.
On August 5, 1992, a consent decree was entered by the district
court. It noted the parties had reached an agreement to (1) sell the Lee
County real estate at public auction, (2) allocate to Glenn and Randolph
from the sale proceeds “the enhanced value due to improvements made to
the land by [them] in good faith,” and (3) deposit the balance of the net
proceeds in trust for the benefit of Glenn and the remaindermen. To
ascertain the “enhanced value” occasioned by the improvements, the parties
agreed and the court decreed that two appraisals of the property be
undertaken by a specified appraiser: one including the value of the
improvements made by Glenn and Randolph; and another disregarding the
value of those improvements.
The appraisals contemplated in the August 5 order were not
undertaken, however, and the public auction was not held. The petitioners 7
filed an application on August 28, 1992, alleging the appraiser identified in
the August 5 order believed he was unqualified to conduct the appraisals,
and asserting there was “an affordable and alternate procedure” that was
likely “to produce greater partition proceeds.”
On October 22, 1992, a new order was entered by the court confirming yet another agreement to resolve the parties’ controversy. This
order contemplated that the property would be divided by the parties into
five parcels. One of these parcels identified as “Tract A” was “to include the
sawmill, the house in which Randolph Woodroffe resides, and all other
physical improvements to the land in question.” The other four parcels,
denominated “tracts 1, 2, 3, and 4,” and consisting of essentially
unimproved land, were to be sold at a private auction at which only the
parties could bid. The average price per acre obtained at the auction for
tracts 1, 2, 3, and 4 would be the price that Randolph would pay for Tract
A. Glenn’s life estate was “not to be affected” by the partition agreement
and sale.
The auction was never held, and Glenn and Randolph continued to
operate GWSM just as they had before. Kerwin, who had no interest in
operating the sawmill, farmed rent-free the unimproved portions of the Lee
County real estate. Glenn generally disapproved of Kerwin’s farming
practices, and the relationship between Glenn and Kerwin was strained at
best.
GWSM owned a wooded tract of real estate in Des Moines County.
On September 25, 2000, purporting to act as the president of GWSM, Glenn
executed a warranty deed conveying this property to Randolph and Janice.
In 2001, a bank requested documentary evidence of the corporate existence
of GWSM. Glenn’s counsel contacted the Secretary of State and discovered
the company’s corporate charter had expired in 1977. Having learned that 8
the name “Glenn Woodroffe Sawmill, Inc.” was still available, Randolph
caused new articles of incorporation for a corporation with that name to be
filed in July of 2001. The new articles designated Randolph as the
incorporator, registered agent, and sole director of GWSM.5 During his last illness, Glenn contacted his attorney and discussed
the preparation of a will. Elda subsequently typed and Glenn signed a last
will and testament on January 18, 2002. The will, in relevant part, named
Elda as executor and bequeathed property to Elda and Randolph: I give all of my household furnishings, articles of personal use, Certificates of Deposit and automobiles for non-business use to my wife Elda. Also, all machinery, equipment and inventory owned by me at the time of my death, I leave to my wife Elda.
As sole owner of the Glenn Woodroffe Sawmill, Inc. I give all my stock in that business or corporation to my son Randolph W. Woodroffe, who may continue the business after my death.
The will did not include a residuary clause.
Glenn died on April 22, 2002. On July 24, 2002, the district court
admitted Glenn’s last will and testament to probate. On January 27, 2003,
Elda filed a probate report and inventory listing the Des Moines County real
estate, the home in which Randolph and Janice lived, the buildings,
machinery, and equipment used in the sawmill operation, and the sawmill
inventory among the assets of Glenn’s estate.
On May 8, 2003, Randolph filed an application requesting the
appointment of a referee to assist with enforcement of the October 1992
order. Elda resisted the application, contending she had an interest in the
improvements on the property and was not bound by the 1992 order as she
was not a party to the partition action in which it was entered. Kerwin also
resisted the appointment of a referee and asserted the boundaries to tracts
5 Randolph handled the incorporation of GWSM in July of 2001 because Glenn was then in poor health. It is undisputed that Glenn was the sole owner of the newly- incorporated GWSM. 9
A, 1, 2, 3, and 4 had never been agreed to. Kerwin further contended the
sawmill improvements were assets of Glenn’s estate because they were not
part of the property subject to the private auction contemplated in the
October 1992 order. The district court denied Randolph’s application for
the appointment of a receiver because the matter involved “too many disputes and questions [that] must be resolved” before an auction could be
held.
Randolph and Janice filed a petition for declaratory judgment on
October 20, 2003, requesting the court to declare: (1) the Des Moines
County property6 is not an asset of Glenn’s estate because Glenn executed a
deed conveying the land from Glenn Woodroffe Sawmill, Inc. to Randolph
and Janice on September 25, 2000; (2) the dwelling in which Randolph and
Janice reside and the improvements used in the sawmill operation and
located on the Lee County property are not assets of Glenn’s estate because
they are permanently affixed to “Tract A” which Randolph is entitled to
acquire by private auction under the October 1992 order; and (3) the
sawmill machinery, equipment, and inventory are not assets of Glenn’s
estate because they were owned by GWSM at the time of Glenn’s death, and
were bequeathed to Randolph as a consequence of Glenn’s bequest of the GWSM stock. Elda and Kerwin filed separate answers substantially denying
the allegations and claiming the October 1992 order is unenforceable.7
6The parties agree Janice’s only interest in this litigation is her alleged entitlement
to the Des Moines County property.
7Elda contended the order is unenforceable as to her because she was not a party to the partition action. Kerwin challenged the enforceability of the order because it contemplated the private auction and partition would occur only if the parties reached an agreement as to the boundaries of the several tracts identified in the order; and because the parties were unable to reach such an agreement, the contemplated partition was aborted and cannot be completed. Anita, Reginald, and Jeanne defaulted and are not parties to this appeal. 10
Because of the close connection between the legal consequences of
the October 1992 order filed in the partition action and the appropriate
disposition in the declaratory judgment action filed within Glenn’s probate,
the matters were consolidated for trial. During the trial, Randolph and
Janice offered in evidence exhibits 23, 24, 25, 26, and 26A, consisting of typewritten documents allegedly authored by Glenn.8 Randolph and Janice
claimed the documents evidenced Glenn’s testamentary intent to ensure
that Randolph would receive Tract A and the GWSM machinery, equipment,
and inventory. The district court sustained Elda’s hearsay objections and
the exhibits were not received in evidence.
On November 15, 2004, the district court filed its ruling holding the
Des Moines County real estate is an asset of Glenn’s Estate. The court
reasoned that the attempted conveyance of that property from GWSM to
Randolph and Janice failed because GWSM’s corporate existence expired in
January 1977, before the deed was drawn and delivered. The court further
concluded the sawmill machinery, equipment, and inventory listed on the
probate inventory are also assets of the estate because they were owned by
Glenn at the time of his death. The court concluded, however, that the
improvements (buildings used in the sawmill operation and the residence in
which Randolph and Janice reside) that are permanently affixed to the Lee
County real estate are not assets of the estate because their disposition is
controlled by the October 1992 order in the partition action.
Randolph, Janice, and Kerwin filed motions to enlarge or amend the
district court’s findings, conclusions, and ruling. Randolph and Janice
urged the court to (1) rule on their claim that the deed to the Des Moines
County real estate should be reformed; (2) conclude the business inventory
8 Although the documents were not signed by Glenn, the proponents of the exhibits did offer evidence tending to prove the exhibits, which were found after Glenn’s death in the GWSM business office, were typed on the typewriter commonly used by Glenn. 11
is an asset of GWSM, and not an asset of the estate; and (3) address the
question whether certain grain bins are located on Tract A, and whether
their disposition is controlled by the October 1992 order. Kerwin urged the
district court to amend its conclusion that the disposition of the
improvements located on Tract A must be controlled by the October 1992 order, and joined in the post-trial request of Randolph and Janice that the
court should decide the dispute as to the ownership of the grain bins. In its
ruling on the respective motions to enlarge or amend the November 15,
2004 findings, conclusions, and ruling, the district court held the deed from
Woodroffe Sawmill, Inc. to Randolph and Janice cannot be reformed
because any mistake of the parties to the deed was a mistake in the
formation of the transaction, not in its expression. The district court also
denied relief on the other aspects of the post-trial motions, reasoning that
(1) the October 1992 order should be enforced because it accurately
memorialized the understanding and intent of the parties to permit
Randolph to purchase Tract A which included the improvements
permanently affixed to it; (2) the inventory was owned by Glenn at the time
of his death because GWSM’s corporate existence expired in 1977, and the
inventory was never transferred from Glenn to the new corporation formed
in 2001; and (3) the evidence supports the court’s finding that the grain
bins were purchased by Glenn, not by Kerwin, and placed on Tract A, the
disposition of which was adjudicated in the October 1992 order.
Randolph and Janice appeal from the district court’s determination
that the Des Moines County property and the sawmill machinery,
equipment, and inventory listed in the probate inventory are assets of the
estate.9 Kerwin and Elda cross-appeal from the court’s conclusion that the
9The parties agree Janice’s only interest in this litigation is her alleged entitlement
to the Des Moines County property. 12
disposition of the improvements located on Tract A is controlled by the
October 1992 order.
II. Scope of Review.
Partition actions are equitable actions which we review de novo. See
Iowa R. Civ. P. 1.1201(1). The declaratory judgment action brought in Glenn’s estate is a matter “tried by the probate court as a proceeding in
equity,” Iowa Code § 633.33 (2007), and our review in such cases is de
novo. Iowa R. App. P. 6.4. Although the district court made several rulings
on evidentiary objections, a procedure typically followed in actions at law,
“the pleadings, relief sought, and nature of the case” lead us to conclude the
proceedings in the district court were equitable proceedings. Passehl Estate
v. Passehl, 712 N.W.2d 408, 414 (Iowa 2006) (noting that while a court’s
rulings on evidentiary objections is an important test of whether an action
was tried in law or equity, it is not dispositive). All of the parties agree our
standard of review is de novo.
III. Analysis.
A. Machinery, Equipment, and Inventory. Randolph contends
the district court erred in holding the sawmill machinery, equipment, and
inventory listed on the estate’s probate inventory were owned by Glenn at
the time of his death. Randolph alleges those assets were, at the time of
Glenn’s death, assets of GWSM, and that they follow the GWSM stock
bequeathed to Randolph. Notwithstanding the expiration of the
corporation’s de jure existence in 1977, Randolph contends GWSM lived on
for purposes relevant to the case as a de facto corporation. In the
alternative, he contends GWSM’s corporate existence should be deemed to
extend beyond the expiration of its de jure existence under the doctrine of
corporation by estoppel. Elda and Kerwin contend the machinery,
equipment and inventory were properly listed in the probate inventory as 13
assets of the estate because, upon the termination of the corporation’s
existence in 1977, their ownership passed to Glenn who owned them at the
time of his death.
For reasons discussed below, we conclude the only type of
corporation Iowa law recognizes is one created pursuant to law—a de jure corporation. Consequently, GWSM’s existence as a corporate entity ended
in 1977 when the company failed to file a certificate of renewal and renewal
of the articles of incorporation. The inventory, machinery and equipment
listed on the estate’s probate inventory were therefore owned by Glenn at
the time of his death, and they pass to Elda under Glenn’s will.
At common law, once a de jure corporation’s term of existence ended
pursuant to its charter, it could not continue to exist as a de facto
corporation or corporation by estoppel. See M. H. McCarthy Co. v. Dubuque
Dist. Ct., 201 Iowa 912, 916, 208 N.W. 505, 507–08 (1926) (holding a
corporation with an expired charter could only continue to act for purposes
of winding up business); accord In re Booth’s Drug Store, 19 F. Supp. 95, 96
(W. D. Va. 1937) (“The doctrine of the common law was that upon expiration
of its charter, a corporation at once lost its identity and its powers; its life
was instantly terminated.”); Merges v. Altenbrand, 123 P. 21, 22 (Mont. 1912) (holding a corporation failing to follow statutory steps for continued
existence was dissolved); 19 Am. Jur. 2d Corporations § 2352, at 457 (2007)
(“The general rule is that after the expiration of the period of existence
specified in its charter, a corporation is ipso facto dissolved and no longer
has any existence at all, either de jure or de facto.” (citing Eagle Pass Realty
Co. v. Esparza, 474 S.W.2d 624, 625 (Tex. Civ. App. 1971))). The legislature
did not repeal this common law rule through its enactment in 1989 of the
Iowa Business Corporation Act (IBCA). See Atwood v. Vilsack, 725 N.W.2d
641, 644–45 (Iowa 2006) (“The common law may be repealed by implication 14
in a statute that plainly expresses the legislature’s intent to do so.” (citing
Iowa Civil Liberties Union v. Critelli, 244 N.W.2d 564, 568 (Iowa 1976); Wilson v. Iowa City, 165 N.W.2d 813, 822 (Iowa 1969))). Rather, the IBCA
plainly evidences a legislative judgment that the only type of corporation
that may exist in Iowa is a de jure corporation.
First, the IBCA states, “Unless a delayed or effective date or time is
specified, the corporate existence begins when the articles of incorporation
are filed.” Iowa Code § 490.203(1); see also 5 Matthew G. Doré, Iowa
Practice Series, Business Corporations § 16:9 (2007) (stating IBCA section
490.203 supersedes the de facto corporation and corporation by estoppel
concepts). We acknowledge this provision does not speak directly to
whether a de facto corporation or corporation by estoppel may exist after a
de jure corporation has expired. It does, however, indicate de facto
corporations and corporations by estoppel may not exist prior to the
formation of a de jure corporation. The parties do not suggest any reason
why, under the IBCA, the period prior to de jure incorporation should be
treated differently than the period after the expiration of de jure
incorporation.
Second, the IBCA provides for personal liability for transactions that occur in the absence of de jure incorporation: “All persons purporting to act
as or on behalf of a corporation, knowing there was no incorporation under
this Act, are jointly and severally liable for all liabilities created while so
acting.” Iowa Code § 490.204 (emphasis added); see 5 Doré, Iowa Practice
Series, Business Corporations § 16:9 (stating IBCA section 490.204
supersedes the de facto corporation and corporation by estoppel concepts).
Personal liability in the absence of the existence of a de jure corporation
plainly implies neither a de facto corporation nor a corporation by estoppel
is recognized in Iowa. 15
Our decision is influenced by the historical background of the 1984
Model Business Corporation Act (MBCA), upon which the IBCA is patterned.
The MBCA drafters observe the de facto corporation and corporation by
estoppel doctrines have been “ ‘widely criticized as being confusing, result-
oriented, overlapping, and involving legal conceptualism that tended to hide the true basis for the decision.’ ” 5 Doré, Iowa Practice Series, Business
Corporations § 16:9 (citing Model Bus. Corp. Act Ann. § 2.04, Historical
Background (3d ed. 1985 & Supp.)). The drafters expressly state they
intended to do away with the de facto corporation concept through
provisions mirroring the IBCA provisions cited above. Id. (citing Model Bus.
Corp. Act Ann. § 2.04, Historical Background (3d ed. 1985 & Supp.)).
Our decision that the IBCA reflects disfavor toward the doctrines of de
facto corporation and corporation by estoppel is consistent with the
approach of most other jurisdictions with statutes patterned after the
MBCA. See, e.g., Swindel v. Kelly, 499 P.2d 291, 299 n.28 (Alaska 1972)
(“The concept of de facto corporations has been increasingly disfavored, and
Alaska is among the states whose corporation statutes are designed to
eliminate the concept.”); Booker Custom Packing Co. v. Sallomi, 716 P.2d
1061, 1063 (Ariz. Ct. App. 1986) (finding the Arizona Business Corporation Act was “inconsistent” with the defendant’s claim that he should not be
individually liable because the plaintiffs thought they were dealing with a
corporation); Robertson v. Levy, 197 A.2d 443, 447 (D.C. 1964) (holding the
Business Corporation Act of the District of Columbia “eliminate[s] the
concepts of estoppel and de facto corporateness”); Warthan v. Midwest
Consol. Ins. Agencies, Inc., 450 N.W.2d 145, 148 (Minn. Ct. App. 1990)
(“[T]he doctrine of de facto corporations is inapplicable in this state after
enactment of [the Minnesota Business Corporation Act].”); Smith v.
Halliburton Co., 879 P.2d 1198, 1207 (N.M. Ct. App. 1994) (finding the New 16
Mexico Business Corporation Act was “intended to abolish the doctrine of de
facto corporations”); Timberline Equip. Co. v. Davenport, 514 P.2d 1109,
1110–12 (Or. 1973) (finding, as a result of the Oregon Business Corporation
Act, the doctrine of de facto corporations no longer exists in Oregon);
Mobridge Cmty. Indus. v. Toure, Ltd., 273 N.W.2d 128, 131 (S.D. 1978) (finding a South Dakota law “has the effect of negating the possibility of a de
facto corporation”); Thompson & Green Mach. Co. v. Music City Lumber Co.,
683 S.W.2d 340, 344 (Tenn. Ct. App. 1984) (“We hold that the Tennessee
General Assembly, by passage of the Tennessee General Corporations Act of
1968, abolished the concept of de facto incorporation in Tennessee.”); Miller
v. Celebration Mining Co., 29 P.3d 1231, 1237 (Utah 2001) (“[T]he common
law doctrine of de facto corporations was specifically preempted by [two
Utah Business Corporation Act provisions] because of its inconsistent
application.”); Equipto Div. Aurora Equip. Co. v. Yarmouth, 950 P.2d 451, 456
(Wash. 1998) (concluding that the Washington Business and Corporation
Act “abolish[ed]” the doctrines of de facto corporation and corporation by
estoppel).
GWSM’s articles of incorporation expressly contemplated that the
corporation would “terminate” on January 9, 1977, if the corporation’s existence was not renewed. The corporation did not continue to exist after
the expiration of its de jure existence as a de facto corporation or under the
doctrine of corporation by estoppel. The corporation’s existence continued
after the January 1977 expiration date only to the extent necessary to wind
up its business. We next turn to the question of who succeeded to the
ownership of GWSM’s machinery, equipment, and inventory, when the
corporation’s existence expired. 17
GWSM’s articles of incorporation filed in 1957 expressly provided for
the distribution of assets to shareholders upon dissolution of the
corporation: In the event of dissolution or winding up of the affairs of this corporation . . . the assets of the Corporation shall be first applied to the payment of the first preferred stock at par, with all unpaid accumulated dividends thereon and before any payment is made to the holders of the common stock. The remaining assets of the Corporation shall be paid to the holders of the common stock according to their respective shares.
Although GWSM never issued stock, the company’s tax returns consistently
identified Glenn as the company’s sole “shareholder.” In addition, it is
undisputed in this case that Glenn was the sole owner of the company.
Therefore, we conclude Glenn was the owner of the machinery, equipment,
and inventory listed on the probate inventory.
Randolph next contends the new corporation organized by him in
2001 under the same name succeeded to the ownership of the expired
corporation’s assets. This contention, too, must fail because Randolph
failed to establish that any of the assets owned by Glenn were transferred to
the new corporation. Therefore, the machinery, equipment, and inventory
listed on the estate’s probate inventory were owned by Glenn at the time of
his death.
Randolph contends that the district court’s decision that the
machinery, equipment, and inventory are assets of Glenn’s estate is
inconsistent with Glenn’s clearly expressed intent. In support of this
contention, Randolph points to a typewritten note from Glenn to his
attorney expressing his testamentary intent that Randolph should receive
all of the sawmill machinery except any machinery owned by Reginald.
Randolph also points in this context to the language of an unsigned will
drafted by Glenn’s attorney after he received the typewritten note from 18
Glenn. Randolph’s reliance upon Glenn’s note and the unsigned will is
unavailing, however, because those documents antedated the will executed
by Glenn and admitted in probate. “It is well settled in this jurisdiction that
if the language of the will is plain, certain and unambiguous, the intention
of the testator must be ascertained from the will itself . . . .” In re Thompson’s Estate, 164 N.W.2d 141, 146 (Iowa 1969). Because the will
signed in 2002 is unambiguous, Glenn’s intent must be ascertained from
within its four corners. That will clearly bequeaths to Elda the machinery,
equipment and inventory listed in the probate inventory.
B. Des Moines County Property. The timber land located in Des
Moines County was conveyed to GWSM in 1957. Randolph and Janice
contend the September 25, 2000 deed executed by Glenn as president of
GWSM was a valid conveyance. Alternatively, they assert that if the deed
does not constitute a valid conveyance, it should be reformed because the
parties to the deed mistakenly believed GWSM existed when the deed was
drawn and delivered. Elda and Kerwin contend the real estate is an asset of
Glenn’s estate because GWSM did not exist at the time of the attempted
conveyance, and the deed is therefore void. Elda and Kerwin oppose
reformation of the deed on the ground that the deed, if void, may not be
reformed to relinquish Elda’s rights under Iowa Code section 633.211
(2001). Alternatively, they contend the deed, if valid, was nonetheless
subject to Elda’s rights under section 633.211.
For the reasons explained in our discussion of the disposition of the
sawmill machinery, equipment, and inventory, we conclude GWSM did not
exist on September 25, 2000. A deed executed on behalf of a corporation
that does not exist is void. See N.H. Fire Ins. Co. v. Virgil & Frank’s Locker Serv., Inc., 302 F.2d 780, 783 (8th Cir. 1962) (“A [corporate] deed, executed
while the corporation has no legal existence, is a worthless thing.”). 19
We now turn to Randolph and Janice’s assertion that the parties
made a mutual mistake regarding the existence of the corporation, and this mistake merits reformation of their deed. We decline to reform the deed
because we lack authority to reform void contracts. Casady v. Woodbury
County, 13 Iowa 113, 115 (1862) (refusing to “modify” a void contract, due
to lack of authority to do so); see also Springer v. Kuhns, 571 N.W.2d 323,
329 (Neb. Ct. App. 1997) (“When the parties are asserting rights founded in
an illegal and void contract, the court leaves the parties just where they
placed themselves . . . .”); 66 Am. Jur. 2d Reformation of Instruments § 29, at
253 (2007) (“Neither a void contract nor a parol contract can be reformed.”).
Because GWSM did not exist at the time of the conveyance of the Des
Moines County property, no two parties reached a mutual agreement with
regard to the conveyance. We cannot reform the deed to correspond with
the contracting parties’ intentions when one of those parties did not even
exist; to do so would constitute creation of a contract, not reformation of a
contract.
As previously stated, when GWSM dissolved in 1977, Glenn, as the
sole shareholder of that corporation, became the owner of the corporate
assets. The Des Moines County property was therefore owned by Glenn in
2000 when the ill-fated conveyance was attempted, and at the time of his
death. Accordingly, the real estate is an asset of Glenn’s estate, and it is
properly listed on the probate inventory.
C. Sawmill Improvements. Elda and Kerwin assert the district
court erred in holding the disposition of the numerous sawmill buildings
located on the Lee County property shall be controlled by the October 1992
consent ruling. They contend those improvements were not a subject of the
ruling, and they should therefore pass to Elda as intestate property
pursuant to Iowa Code section 633.211. 20
Resolution of this claim requires us to interpret the October 1992
consent ruling. Because a consent ruling is viewed as a contract, the rules
of contract interpretation apply. Fed. Land Bank of Omaha v. Bollin, 408 N.W.2d 56, 60 (Iowa 1987) (citing World Teacher Seminar, Inc. v. Iowa Dist.
Ct., 406 N.W.2d 173, 176 (Iowa 1987)). The intent of the parties is
controlling, and intent is to be determined from the language of the
contract, when possible. Id. (“The objective is to ascertain the meaning and
intention of the parties as expressed in the language used. It is the court’s
duty to give effect to the language of the contract in accordance with its
plain and ordinary meaning and not make a new contract for the parties by
arbitrary judicial construction.”). Only if we find the contract ambiguous
may we resort to extrinsic evidence to ascertain the contract’s meaning. See
Clinton Physical Therapy Servs., P.C. v. John Deere, 714 N.W.2d 603, 615–16
(Iowa 2006).
The language of the October 1992 consent decree plainly indicates the
parties intended for the improvements to pass as part of Tract A to
Randolph. The October 1992 decree states Tract A is to “include the
sawmill, the house in which Randolph Woodroffe resides, and all other
physical improvements to the land in question,” and it also states that Randolph is to receive Tract A at a price determined by the average of the
sale prices received for tracts 1, 2, 3, and 4. The district court found it
reasonable to believe, and we find it highly probable, Glenn was willing to
forgo any personal remuneration for the value of the improvements to
achieve what was clearly his goal for the last fifteen years of his life: to
assure that Randolph would succeed him as the owner of the sawmill
business and the improvements used to generate its income. The October
1992 consent ruling not only advanced that goal, but it avoided the public
auction of the property contemplated by the August 1992 ruling and 21
thereby assured Glenn’s right to use of the sawmill property for the
remainder of his lifetime.
Kerwin claims the October 1992 consent decree lacks the definiteness
essential for validity because: (1) it states the parties must agree on tract
boundaries, but the parties never agreed on these boundaries, and (2) it does not clearly state whether the August decree remains effective. “[A]
judgment must be certain and in intelligible form so the parties understand
the adjudication.” Wolf v. Murrane, 199 N.W.2d 90, 95 (Iowa 1972)
(citations omitted). A judgment may be so indefinite and uncertain that it is
void. See Lynch v. Uhlenhopp, 248 Iowa 68, 74–75, 78 N.W.2d 491, 495–96
(1956) (finding that a provision in a divorce decree was void and that an
alleged violation of the provision was not contempt).
Whether or not the parties agreed on the precise metes and bounds of
the tracts referred to in the October 1992 consent ruling, the decree clearly
brings the improvements in question within the boundaries of Tract A. The
decree states that Tract A is to include “the sawmill, the house in which
Randolph Woodroffe resides, and all other physical improvements to the
land in question” and provides Randolph will buy the tract at a price
determined by a specific formula. We conclude the language of the ruling is
sufficiently definite to constitute a valid, binding judgment with regard to
the allocation of ownership of the improvements.
The October 1992 ruling was clearly intended to supersede the
August 1992 ruling. This is in part clear because the two rulings
contemplated vastly different solutions to the parties’ conflicts. For
example, the August ruling would have required appraisals of the property,
while the October decree does not; the August ruling contemplated a public
auction, but the October ruling mandates a private auction; and the August
ruling would have required Glenn to convey his life estate to a purchaser, 22
but the October ruling states Glenn’s life estate “will not be affected” by the
private auction. Because of these differences, it would obviously be
impossible for the parties to comply with and for the court to enforce both
the August and October 1992 decrees.
Other evidence also amply supports our conclusion the parties intended for the October consent ruling to supersede the earlier ruling. The
application that precipitated the October 1992 ruling states the parties
viewed the August decree as “unworkable,” due to their inability to locate a
qualified appraiser. The application further states the parties desired an
“alternate procedure [that] w[ould] likely produce greater partition sale
proceeds.” Greg Johnson, Randolph and Glenn’s attorney in the partition
action, testified the October decree was intended to supersede the earlier
decree.
Kerwin asserts the parties to the October consent ruling agreed the
improvements in question were not part of Tract A; instead, he claims the
improvements were intended to remain “severed” from the property and to
remain the personal property of Glenn. In support of this assertion, Kerwin
argues: (1) the Iowa law of “implied license” suggests the improvements
retained their character as personal property; (2) under Cornell College v.
Crain, 211 Iowa 1343, 235 N.W. 731 (1931), the improvements retained
their character as personal property; (3) all the parties to the partition
action agreed that the improvements were to remain Glenn’s separate
property; and (4) Glenn, individually or through his business, paid for all of
the improvements.
Kerwin’s implied license argument need not be addressed because it
was not made before or ruled upon by the district court. See State v. Jefferson, 574 N.W.2d 268, 278 (Iowa 1997) (observing that “ ‘issues must
be presented to and passed upon by the district court before they can be 23
raised and decided on appeal’ ” (citing State v. Eames, 565 N.W.2d 323, 326
(Iowa 1997))). The remaining arguments lack merit in light of our
interpretation of the October consent ruling. The consent ruling reflects the
parties’ intent for Tract A to include improvements. Regardless of whether
Glenn paid for the improvements or the improvements could be classified as
Glenn’s personal property under Crain, Glenn could, and did, forgo any
ownership interest he may have had in the improvements when he agreed to
the terms of the October consent ruling.
The Lee County real estate and the improvements permanently
attached to it pass to the remaindermen-children pursuant to the October
ruling, not to Elda. The ruling requires the sale of Tract A, including the
improvements located upon it, to Randolph. Elda, as Glenn’s surviving
spouse, has no interest in the life estate of Glenn under section 633.211, as
Glenn’s interest in the real estate was extinguished at the time of his death.
D. Hearsay Rulings. Randolph contends the district court erred
in excluding exhibits 23, 24, 25, 26, and 26A, which were offered to prove
Glenn’s intent as to the disposition of his assets. He asserts the typewritten
exhibits were admissible under Iowa Rules of Evidence 5.803(24) (residual
hearsay exception) and 5.803(3) (then existing mental, emotional, or
physical condition). The writings bear no signature, but Randolph claims
they were authored by Glenn because they “sound like” something he would
have written, and they appear to have been written on Glenn’s typewriter.
Some are dated, while others are not. One of the documents was found
shredded in a wastebasket in the company’s business office.
Even assuming these documents were admissible, the district court’s
ruling excluding them from evidence did not prejudice Randolph and Janice
and no reversible error resulted from their exclusion. See Crane v. Cedar
Rapids & Iowa City Ry., 160 N.W.2d 838, 846 (Iowa 1968) (concluding 24
exclusion of evidence did not prejudice plaintiff). The exhibits in question
would have no impact upon our reasoning or conclusions regarding the
disposition of Glenn’s assets. Because Glenn’s will is unambiguous as to
his intent regarding the disposition of the machinery, equipment, and
inventory, we need not look beyond its express terms to discern his testamentary intent. See In re Thompson’s Estate, 164 N.W.2d at 146 (“It is
well settled in this jurisdiction that if the language of the will is plain,
certain and unambiguous, the intention of the testator must be ascertained
from the will itself . . . .”).
IV. Conclusion.
We conclude the corporate existence of GWSM expired in 1977. As a
result, the machinery, equipment, and inventory of the sawmill business
were owned by Glenn at the time of his death and are therefore properly
included as assets of his estate. The deed of the Des Moines County
property is void and cannot be reformed. Accordingly, that real estate is
also an asset of Glenn’s estate. Tract A, which is to be sold to Randolph
pursuant to the October 1992 consent ruling, includes the improvements
located on that property. The district court’s exclusion of hearsay, if error,
was harmless.
AFFIRMED.