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No. 82-190 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982

SCHULZ, DAVIS

&

WARREN, a partnership, et al.,, Plaintiffs and Respondents,

-vsGEORGE P. MARINKOVICH, et al., Third-Party Plaintiff,

GEORGE P. MARINKOVICH, et al., Third Party Plaintiff, -vsM
&

M ENTERPRISES, a Mont. Corp., Third Party Defendant.

DOMINIC C. ORI, and individual and PATRICIA M. ORI, individually and as . I a shareholder and liquidating director of M & ?ENTERPRISES, Third Party Plaintiffs and Cross-Complainant, -vsM

M ENTERPRISES, a Mont. Corp., Third Party Defendant, and GEORGE P. MARINKOVICH, et al., Cross-Defendants.
&

Appeal from:

District Court of the Fifth Judicial District, In and for the County of Beaverhead, The Honorable Frank Blair, Judge presiding.

Counsel of Record: For Appellant:

W. G. Gilbert, 111, Dillon, Montana Berg, Coil, Stokes & Tollefsen, Bozeman, Montana
For Respondents Max Hansen, Dillon, Montana

Submitted on Briefs: Decided: Filed:

September 2, 1982 February 24, 1983

f E B 2 q 1983
---------

Clerk

F4r.

Justice John C.

Sheehy delivered the Opinion of the Court.
& M

Appeal by George T. Marinko~rich, Ann C. Marinkovich, and P4

Enterprises, from a judqment entered by the District Court, Fifth Judicial District, kaverhead County, s i t t i n q without a jury,

awarding wage claims, m r t i e s in the action,

penalties
and

and attomevs

fees t o various

from a judgment of qeneral damages
Ann C. Phrinkovich, in favor of

against reorge T. Marinkovich Patricia M. O r i .

M & M Enterprises was incorporated in 1969.

I t had four

stmkholders,

each with 125 shares of

stock,

n m l y George T.

Marinkovich, Ann C. Marinkovich, Allj-e McFadden, and her daughter, Patricia O r i . Upon the subsequent death of Allie McFadden, Patricia

O r i succeeded t o A l l i e ' s 1-25 shares.

The a r t i c l e s of incorporation of M four directors.

&

M Enterprises provided for

a Each of the st0c:kholders w s elected a director.

The bylaws provided for officers, a president, two vice presidents,
and a secretan-y-treasurer .

In the beqinning, Ceorge T. Marinkovich

was president,

Ann

C.

Marinkrl~~ich and Al-lie McFadden were vice

presidents, and Patricia M. O r i acted a s secretary. After the death of Allie McFadden and the devolution of her corporate stock t o Patricia O r i , George T. Marinkovich and Ann C. Marinkovich, h i s wife, each had 125 shares, and Patricia O r i had 250 shares. after The vacancy in the office of the director was not f i l l e d Al-lie &Fadden's death nor the vacant office of vice

president.

which give r i s e t o t h i s Thus a t the time of the ev~mts of the

la~vsuit, although Patricia O r i held i n her name one-half outstanding shares of M
& M

Enterprises, she was outvoted on the

board of directors two-to-one. The principal asset and business of M & M Enterprises was the purchase and operation of the Andrus Hotel i n Dillon. Until the

hotel w s sold by the corporation in 1979, the directors of M & M a

Enterprises, and as well Dominic C Ori, Patricia's husband, acted .
i various ways to look after the property, to maintain it, to enter n

into leases, and even to operate it as a business in between lessees. Nothinq in the corporate records, or the court file,

indicates that any corporate action was taken to provide for pamt
to any of the directors for such services to the corporation.

With the sale of the hotel on June 22, 1979 to one Douqlas Harvey, the stocfiolders met and adopted a plan of corplete liquidations and dissolution, to accord with section 337 of the Fed.eral Internal Revp-nue Cx.e c3d. liquidation adopted provided that (26 U.S.C. 337.) The plan of

". from and after the date of sale anc3 transfer of the assets of the corporation, the corporation shall not engage in any business acti1ritie.s. The directors them in office, and at their pleasure, the officers shall continue in office solely for the purpose of winding up the business and affairs of the corporation, and after such date shsll not take such action whatsoever which is or shall he constnled to be inconsistent with the status of liquidation, and such status shall be conthued until the date of the dissolution of the corporation."
In connection with the sale of the hotel and the plan of li-quidation,the Dillon law firm of Schulz, Davis and Warren was desicpated. as the corporate trustee to hold the prmeeds from the sale for the payment of the corporation debts and final disbursement among the stockholders in proportion to their ownerships. On April 2, 1980, the liquidatinq directors of the corporation
. approved paymemt of a vmge claim presented by George T Marinko~rich

..

for $2,142.75, against the corporation. The directors, by a two to one vote, rejected the claim of Dominic C. Ori for $500 for services to the corporation and the claim of Patricia M. Ori for services performed by her mther Allie McFadden for $1,600. Thereafter the

law firm as corporate trustee, was given conflicting directions from the liquidating directors for disbursal of the remain.ing corporate funds.
As a result, the law firm as a stakeholder filed this

interpleader action on April 15, 1980, naming a s defendants the individual directors of M
& M

Enterprises.

George T. Mrinkovich and Ann C. Marinkovich f i l e d their answer
t_o

the complaint md interpleader, asserting the wage claim for

George T. Marinkovich, and denying any wage claims should be paid t~ Dominic C. O r i o r Patricia O r i as successor t o Allie McFadden.

In

addition, George Marinkovich f i l e d a third party complaint against third party defendant M & M Enterprises f o r h i s wage claim of
$2,142.75, plus penalties and attorneys fees.

Dominic O r i and Patxicia M. O r i f i l e d a t h i r d part:7 and cross-complaint against M wage claims,
& M

complaint

for +heir resFctive and
Ann

and

aqainst

Ceorqe

Marinkovich

for

relinquishing the c o r p r a t e ownership t o stained glass windows which
had been removed from the hotel build-ing and delivered t o Douglas

Harvey. The Marinkovichs f i l e d an answer a s t h i r d party defendants i n effect denying generally the claims of the O r i l s for wages, and denying any responsibility in damages for the relinquishment of the stained glass windows. In this pleading, the Marinkovichs did not

raise the issue of whether Dominic C. O r i was p r o p r l y a party t o the action.
M & M Enterprises f i l e d an answer t o the O r i cross-complaint,

in e f f e c t a general d m i a l of the claims of the O r i l s and a claim

for attorneys fees.

When +he cause came on for t r i a l , counsel for the Marinkovichs
raised for the f i r s t time whether Dominic C. O r i was a proper party in the action, since he had not obtained permission for leave t o intervene before joining i n h i s third party compl-aint. The D i s t r i c t Court denied the motion t o dismiss Dominic C. O r i as a party.

After t r i a l Sefore +he court, s i t t i n g without a iury, the court mde findings of f a c t , conclusj.ons of law, and entered judgment as follms: For George T. Marinkovich i n the swn of $2,142.75 wages,

attorneys fees of $2,337.63, and a penalty i n the s m of $2,142.75; u For the e s t a t e of =lie
K.

McFadden,

the s m of u

$1,600,

attorneys fees of $1,291.70, and a penalty of $1,600; For Dominic C. O r i , the s m of $500 for wages, $1,291.70 for u attorneys fees, and a penalty7 of $500;
A further judgment i n favor of Dominic C.

O r i i n the s m of u

$5,000; and a judgment in favor of Patricia M. O r i , against George
T. Marinkovich m.d Ann C. Marinkovich for $3,000.

Thereafter the

D i s t r i c t Court denied post-trial motions made by the Marinkovichs and this a p p a l followed.. The issues raised by the appellants Marinkovich are these: 1.
?.

Whether Dominic C. O r i is a proper party t o the action? Whether the claim of Allie
R. McFadden was barred by the

statute of limitations? 3. Whether the D i s t r i c t Court had the power t o overrule the the liquidatinq directors w i t h respect t o the wage

decision of

claims of Dominic and Patricia Ori? The objection against Daminic O r i being regarded as a mop-r party is grounded upon h i s failure t o procure an order qranting him 1-eave t o intervene in the action a s a co-plaintiff with Patricia
O r i , b~howas already a party t o the action.

Rule 24 (c) , M. R.Civ. P

., requires

a person desiring t o intervene

to f i l e anrl serve a motion for leave t o intervene upon t h parties,
stating the grounds t h r e f o r , accompanied by a pleadins setting forth the claim o r defense for which the intervention i s sought. Dominic O r i made no such motion, but f i l e d in the action a t h i r d party c m l a i n t a s a co-plaintiff

w i t h Patricia O r i .

Idhen M & M

Enterprises responded to the Ori joint third party complaint, it moved to dismiss the complaint and cross-complaint merely upon general grounds. The P.larinkovichsresponse to the joint third party cross-complaint was "Answer to Cross-Complaint of Patricia M. Ori." No mntion was made i the pl-eadings by the Marinkovichs then or n later that made objection to the presence in the case of Dominic Ori as a party. When M
&

M Enterprises answered the Ori third party

complaint, it was in the nature of a general denial, raising the defense of the statute of limitations. Thus Dominic Ori is in a position of a person whose cause has been heard by the District Court, but who has never intervened. It
ha been held that the failure to file a f o m l moti-onto intervene

is not fatal where the trial court has eventuallv granted leave to intervene (U.S. v. 1,830.62 Acres of Land (Western District Va. 1943), 51 F.Supp. 158) and that lack of service of a motion to intervene can be cured by a supple-mentalmotion later served (Perry v Godbe (C.C.D. Nev. 18971, 82 F. 141). . It is true generally, and

was true i Montana &-fore the adoption of the Federal Rules of n Civil Procedure, that failure to m v e for intervention was fatal to ie the party's right to participate in the action. lbLtrich ~ r . Steam Dredge and Amalgamator (1894), 14 Mont. 261, 268, 3 P. 81. 6 See

Spnqler v. Pasadena Board of Education (9th Cir. 1977), 552 F.2d 1326. The purpse of the motion for leave to intervene is to give the District Court the opportunity to determine whether the parties seeking intervention may intervene as a matter of right or bv permission of the court. (Rule 24, M.R.Civ.P.) The rule that

failure to move for intervention is fatal to the right of a party to participate i the action is not iron-clad, however. In this case, n
M
&

M Enterprises did not raise an objection to the presence of
The

Dominic Ori in the case at the District Court level.

Marinkovichs answered the joint cross-complaint only as t o Patricia, and by no pleading then o r subsequently advised the court o r Dcsninic
O r i t h a t he was not properly a party i n the action.

The Marinkovich

objection t o the presence of Daminic O r i in the cause was f i r s t raised a t the mment of the opening of t r i a l . This was a cause

where Dnmjnic O r i could intervene as a matter of right, because h i s claim for wages, i f p r o p r l v supported, could only be paid out of the remaining assets of the corporation then being liquidated. D i s t r i c t Court's The

action i n overruling the objection raised by

!4arinkovich a t t r i a l time i s equivalent t o authorizing i n t e ~ ~ e n t i o n
by Dominic O r i .

The f a i l u r e t o raise objection t o O r i ' s presence

u n t i l the moment of t x i a l a u n t s t o a waiver of any objections t o h i s intervention. These factors hrinq t h i s case within the rules

announced i n Martindab v. International Tel.

a\

&

Tel. Corp. (2d C i r .

1979) , 594 F. 2d 291, and In Re Beef Industry Anti-trust Litigation

(5th C i r .

1979), 589 F.2d 786.

In those cases though no formal

m t i o n for intervention had been made by the parties invnlved, the appeals court ruled on the merits of the appeals on grounds of waiver, and -de facto o r equivalent authorization for intervention.
On those bases w sustain the District Co~lrt's order denving the e

objection of the Marinkovichs t o the presence of Dominic O r i i n the cause, but w warn, e Litigation, a s did the court i n In R e Beef Industrv

Anti-trust

supra, that "future l i t i g a n t s should not

attempt t o use t h i s opinion t o circumvent the clear r e q u i r ~ m t s of the rule." 589 F.2d a t 789.

The remaining issues with respect t o the wage claims, w t r e a t e

as one, though appellants obiect t o the qrant of the O r i wage claims

Qn the grounds of the statute of limitations and t h a t the D i s t r i c t Court had no power t o overrule the decisions of the liquidating directors.
I t is our view that. the wage claim issues can be decided

by looking a t the pavers of liquidating directors generallv w i t h

respect to their duties i winding up n corporation.

the affairs of the

Under the dissolution plan adopted by the corporation, a part
of which we have quoted above, +_he corporation was not to "engage in

any business activities," and "the directors then in office

...

shall continue i office solely for the purpose of winding up the n business and affairs of the corporation." The only business of The

liquidating directors was the liquidation of the corporation.

grant of additional salaries not provided before the dissolution is not the proper business of the corporation in winding up.
The sane situation existed in the facts shown in Duval v.

Cornnissioner of Internal Revenue (5th Cir. 1932), 57 ~ . 2 d496. There the corpration was dissolved on August 31, 1919. For income tax purposes, the corporation attempted to claim as a deduction salaries for officers based on entries m d e in the books of the business on December 31, 1919. The federal court ruled the attempt to claim such deduction was improper stating:

. the evidence negatived the conclusion that any corporate action with reference to additional salaries was taken before the dissolution of the corporation. After its dissolution in August, 1919, the corporation continued in existence as a bodv corporate for a prescribed time for the purpose of prosecuting or defmding suits, settling its business, disposing of its propertv, and dividing its capital stock, but not for the purpose of continuing its business (Citing a state statute). The creation of liability for additional salaries was a business transaction requirins corporate action which could not be taken after the corpration ceased to exist for the purpose of continuing its business. An alleged liability for additional salaries of officers of the corporation which was not attempted to be created by any corporate action nor until after the corporation had been dissolved, was not a business Pne -s incurred or paid by the corporation for which . . . .

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