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BAGGETT v. CYCLOPSS MEDICAL SYSTEMS INC.3/27/1997
Cyclopss Medical Systems (Cyclopss) appeals a grant of summary judgment in favor of Richard Baggett, Jeanette Baggett, and Roger Eulberg (collectively, the Baggetts), ordering Cyclopss to deliver shares of stock replacing those canceled by Cyclopss's corporate predecessor. We affirm.
BACKGROUND
During their tenure as officers and directors of Inter-Med International, Inc. (Inter-Med) and its predecessor corporations, the Baggetts were issued shares of stock in consideration for their services. As of November 30, 1988, the Baggetts owned 1,778,030 shares of Inter-Med stock. After a potential purchase of Inter-Med by another corporation failed in late 1989, Inter-Med remained dormant and conducted no business for a period of time.
In April 1990, Mark Sansom, a shareholder controlling approximately 1,750,000 shares of Inter-Med, initiated efforts to revive the corporation. Mr. Sansom held a special shareholder meeting on April 16, 1990, attended by himself only, at which Mr. Sansom appointed himself sole director and president of Inter-Med. During this same meeting, Mr. Sansom caused Inter-Med to cancel the Baggetts' shares, which were still in the possession of a transfer agent engaged for the failed 1989 Inter-Med merger. The Baggetts and Mr. Sansom dispute whether the Baggetts had notice of the cancellation of their shares at that time.
Shortly thereafter, Inter-Med changed its name to Cyclopss and named new corporate directors. Mr. Sansom was not one of the newly-named directors, who ratified the corporate actions that had taken place through Mr. Sansom on April 16, 1990.
The Baggetts filed suit three years and 363 days after the cancellation of their shares, claiming the cancellation constituted a breach of contract and seeking specific performance of their contract with the corporation through restoration of their shares. The trial court granted the Baggetts' motion for summary judgment and ordered Cyclopss to deliver to the Baggetts their rightful number of Cyclopss shares.
Cyclopss appeals, claiming that (1) cancellation of the Baggetts' shares constituted conversion, at best, and not breach of contract, and therefore the Baggetts' complaint should be dismissed because it was filed beyond the three-year statute of limitations for conversion claims; (2) cancellation of the Baggetts' shares was not wrongful because Mr. Sansom was a de facto director of Inter-Med and there were questions of material fact as to whether the Baggetts acquiesced in the cancellation of their shares so as to preclude summary judgment; and (3) cancellation of the Baggetts' shares involved issues of material fact regarding whether the appropriate remedy was damages rather than specific performance as awarded by the trial court, and therefore, summary judgment was not appropriate.
On appeal, we note that summary judgment may be granted only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See K & T, Inc. v. Koroulis, 888 P.2d 623, 626-27 (Utah 1994). "Because entitlement to summary judgment is a question of law, we accord no deference to the trial
court's resolution of the legal issues presented." Id. at 627.
ANALYSIS
I. Action for Breach of Contract
Cyclopss argues that Inter-Med's cancellation of the Baggetts' shares gives rise to a cause of action for conversion, but not for breach of contract. Because the Baggetts did not file their action within the three-year limitation period for conversion, Cyclopss asserts the Baggetts' complaint should have been dismissed. See Utah Code Ann. ยง 78-12-26(2) (1996). The Bagg
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