This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
IN COURT OF APPEALS
R. Jack Walser, et al.,
Ramsey County District Court
File No. C099508
Paul W. Chamberlain, Chamberlain Law Firm, Suite 333, 445 Lake Street, Wayzata, MN 55391 (for appellant)
William M. Hart, Mary M. L. O’Brien, Erica Gutmann Strohl, Meagher & Geer, P.L.L.P., 4200 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for respondents)
Considered and decided by Schumacher, Presiding Judge, Kalitowski, Judge, and Stoneburner, Judge.
On appeal from the district court’s grant of summary judgment in favor of respondents, (a corporation and other shareholders) appellant John S. Drewitz alleges the district court erred in concluding that majority shareholders neither breached their fiduciary duty to Drewitz nor engaged in conduct unfairly prejudicial to Drewitz under Minn. Stat. § 302A.751 (2000) and that expiration of Drewitz’s employment contract triggered the buy-back provision of the parties’ shareholder agreement. Because appellant received what he had bargained for in his contracts with respondents, we affirm.
Appellant John Drewitz was hired by respondent Motorwerks BMW, Inc., as a salesman in 1990. Drewitz was promoted to general manager of Motorwerks in July 1993 for a six-month trial period, and in January 1994 Drewitz and respondent Jack Walser, the sole shareholder of the corporation, began negotiating an employment contract and a stock purchase plan. Negotiations continued for almost two years. Drewitz was represented by counsel throughout the process.
On September 15, 1995, Drewitz and Motorwerks entered into an employment agreement and Drewitz, Motorwerks, and Jack Walser entered into a Shareholder Sale/Purchase/Redemption/Voting/Control Agreement (shareholder agreement). Both agreements were effective retroactive to January 1, 1995. The employment agreement provided for Drewitz’s employment as Vice President and General Manager of Motorwerks for the period January 1, 1995 through March 31, 1999. Article Three of the employment agreement provided that Motorwerks “may terminate Drewitz’s employment without advance notice only for cause * * * .” The causes for which Drewitz could be terminated were listed specifically The employment agreement also contained the following integration clause:
This Agreement, the Shareholder Agreement, the Lease, as amended, and the Consulting Agreement as defined in the Shareholder Agreement embody the entire agreement and understanding among the parties relative to the subject matter hereof and supersede all prior oral or written agreements and understandings and shall be amended or modified only by written instruments signed by all parties hereto.
The shareholder agreement provided that Drewitz would purchase 330 shares (20% of the total outstanding shares) immediately and granted Drewitz three successive annual options to purchase 165 shares (10% of the outstanding shares). The options were to be exercised in writing by January 31 of each year and Drewitz was to pay in full by March 1 or within 30 days of the date of the price determination, whichever was later. Failure to exercise the option in any year terminated the right to all further options and Drewitz’s ability to acquire additional shares in any other manner. The shareholder agreement prohibited transfer and encumbrance of the shares by Drewitz. The recitals, incorporated by reference into the agreement, stated the purpose for the transfer of shares to Drewitz as part of the manager’s equity program:
[T]o promote loyal, dutiful and successful on-site management of [Motorwerks], preserving the benefits and rights due Walser in light of his personal and his companies’ reputation in the automotive industry, Walser and his companies’ contribution to the potential success of the Company and the financial risk and commitment made by Walser permitting the continuation of this venture, and to provide for the terms and conditions of sales and redemptions of Shares among themselves and the Company.
The shareholder agreement also provided for Drewitz’s discharge:
If Drewitz[’s] employment by the Company is terminated for any reason, whether voluntarily or involuntarily, the Company shall purchase, and the terminated Shareholder shall sell to the Company, all of the Shares of the Company issued to and outstanding in the name of the terminated Shareholder.
The shareholder agreement contained an integration clause, similar to the integration clause in the employment agreement.
Although the shareholder agreement required Drewitz to pay for shares in full by certified or bank cashier’s check at closing, Jack Walser permitted Drewitz to purchase the initial 330 shares and the first option of 165 shares with promissory notes to Motorwerks.
In April 1996, respondent Paul M. Walser (Jack Walser’s son) reentered the business (he had at one time been the 100% owner of the corporation’s shares) by purchasing 15% of his father’s shares. At this time, Paul Walser was managing all of Jack Walser’s holdings in automotive dealerships and all of Jack Walser’s stock. Paul Walser directed that the company would no longer finance Drewitz’s stock options. Drewitz was not able to exercise the option to purchase stock in 1997 and therefore lost the opportunity to acquire additional stock pursuant to the terms of the shareholder agreement.
On December 10, 1998, Paul Walser informed Drewitz that Walser and Barbara Jerich of Walser Auto’s Human Resources Department would be conducting an investigation into employee dissatisfaction with Drewitz. Paul Walser told Drewitz to leave the premises and to have no contact with employees during the investigation. On December 18, 1998, Paul Walser told Drewitz his services were no longer needed. On December 24, 1998, Paul Walser sent a letter by messenger to Drewitz’s home setting out the terms of a non-negotiable “severance of our partnership and separation from employment.” The letter proposed paying Drewitz his salary and incentive through March 31, 1999, by December 31, 1998; continuing insurance benefits through June 30, 1999; repurchasing Drewitz’s shares at the price established by the formula in the shareholder agreement by December 31, 1998; continuing Drewitz’s use of two demo vehicles through March 31, 1999; and offering the sum of $75,000 “[i]n order to separate efficiently and amicably.” Drewitz rejected this offer and sued respondents, requesting equitable relief and buyout of his shares at a “fair” value plus the fair value of the additional 20% of shares he was precluded from buying when could not exercise his 1997 option to purchase.
Drewitz’s complaint alleged four counts: violation of Minn. Stat. § 302A.751 (2000) by failing to act in a fair, honest and reasonable manner; breach of fiduciary duty; breach of employment contract; and breach of an implied covenant of good faith and fair dealing. Respondents moved for summary judgment on all counts and counterclaimed, requesting that Drewitz be ordered to sell back his shares pursuant to the formula in the shareholder agreement. The district court granted the motion on the § 302A.751 claim, the breach of fiduciary duty claim, the breach of implied covenant claim, and on respondents’ counterclaim, but it denied summary judgment on Drewitz’s breach of employment contract claim. The parties then settled the breach of employment contract claim under terms that are not in the record and, by stipulation, that count was dismissed with prejudice. Drewitz appeals the district court’s grant of summary judgment on the § 302A.751 claim and the breach of fiduciary duty claim.
On appeal from summary judgment, this court asks (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990) (citation omitted). A material fact is one that will “affect the result or outcome of the case depending on its resolution.” Zappa v. Fahey, 310 Minn. 555, 556, 245 N.W.2d 258, 259-60 (1976). When the facts are not disputed, the only questions before this court are questions of law, which we review de novo. Reads Landing Campers Ass’n, Inc. v. Township of Pepin, 546 N.W.2d 10, 13 (Minn. 1996). The reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
Drewitz does not allege in his brief that there are material fact issues that preclude summary judgment. He asks this court to reverse the district court and to hold, as a matter of law, that his employment was terminated on December 18, 1999; that the parties reasonably expected Drewitz to continue employment after his employment agreement expired; that unfairly prejudicial conduct terminates any right respondents may otherwise have to acquire his stock pursuant to the formula in the shareholder agreement. He also asks us to remand for a determination of the fair value of his shares.
1. Minn. Stat. § 302A.751 claim
Minn. Stat. § 302A.751 (2000) provides for judicial intervention and equitable remedies or dissolution of a corporation under enumerated circumstances, including when “the directors or those in control of the corporation have acted in a manner unfairly prejudicial toward one or more shareholders in their capacities * * * as officers or employees of a closely held corporation.” Id., subd. 1(b)(3). If a circumstance warranting intervention is established, the court may “order the sale * * * of all shares of the corporation held by the plaintiff or defendant to either the corporation or the moving shareholders,” at the price as set forth in any existing agreements, unless the court determines that the price or terms are unreasonable under all of the circumstances of the case. Id., subd. 2. In determining whether to order equitable relief after a finding that judicial intervention is warranted, the court must take into consideration the duty of all shareholders in a closely held corporation “to act in an honest, fair, and reasonable manner in the operation of the corporation and the reasonable expectations of all shareholders as they exist at the inception and develop during the course of the shareholders’ relationship with the corporation and with each other.” Id., subd. 3a.
For purposes of this section, any written agreements, including employment agreements and buy-sell agreements, between or among shareholders or between or among one or more shareholders and the corporation are presumed to reflect the parties’ reasonable expectations concerning matters dealt with in the agreements.
Drewitz argues that the district court erred in treating the issue of prejudicial conduct as a question of law and erred in defining “unfairly prejudicial” actions as actions that were dishonest, unfair and unreasonable. Drewitz, however, also argues that, under the facts he asserted, the issue of whether respondents acted in an unfairly prejudicial manner towards him should be resolved as a matter of law in his favor and asks this court to hold that respondents’ actions established a statutory basis for judicial intervention and equitable relief by disregarding the buy-out formula contained in the shareholder agreement.
“The term ‘unfairly prejudicial’ should be liberally construed.” Berreman v. West Pub. Co., 615 N.W.2d 362, 373 (Minn. App. 2000) (citation omitted), review denied (Minn. Sept. 26, 2000). After an examination of how the term is treated in other states, this court concluded that the definition most consistent with the Minnesota legislature’s intent in adopting the unfairly prejudicial language is:
[C]onduct that frustrates the reasonable expectations of shareholders in their capacity as shareholders or directors of a corporation that is not publicly held or as officers or employees of a closely held corporation.
Id. at 374.
Drewitz argues that respondents’ conduct frustrated his reasonable expectation that: (1) he would be able to continue to use promissory notes to exercise his options to buy shares; (2) his employment would continue beyond the expiration of his employment contract; and (3) expiration of the contract would not trigger the buy-back provision in the shareholder agreement.
The district court did not specifically address the issue of Drewitz’s expectation that he could continue to use promissory notes to finance share purchases. Since it was briefed, however, we need not remand to the district court for a specific determination on this issue. Id. at 373 (citing Holen v. Minneapolis-St. Paul Metro. Airports Comm’n, 250 Minn. 130, 135, 84 N.W.2d 282, 286 (1957) (stating that appellate court may address issue when fully briefed and no possible advantage or disadvantage to either party in not having prior ruling)).
The shareholder agreement (1) specifically provided for payment in full by certified or bank cashier’s check; (2) prohibited use of shares as collateral; and (3) provided that the agreement expressed the entire agreement and understanding among the parties. Drewitz has not provided any authority for his assertion that because he was permitted to make the initial and first option share purchases by promissory note, he had a reasonable, actionable expectation that the remaining purchases could be made by promissory note, contrary to the unambiguous contract language. Drewitz asserts Jack Walser’s permitting his son to purchase stock with a promissory note when that privilege was denied to Drewitz is unfairly prejudicial. Drewitz fails to consider that Paul Walser was merely given the same benefit already given to Drewitz, to make his initial purchase by promissory note, and ignores the contract provision that specifically permits Jack Walser to transfer shares to his children under terms different from those extended to Drewitz. Under these facts, we conclude as a matter of law that Drewitz did not have a reasonable expectation that the corporation would continue to finance his share purchases. Drewitz was required to abide by the terms of a contract that he negotiated, and no reasonable factfinder could conclude that requiring Drewitz to do so was unfairly prejudicial to Drewitz. Failure to allow Drewitz to exercise his option by promissory note in 1997 was not, therefore, conduct that was unduly prejudicial to Drewitz.
The district court relied on the plain language of the employment agreement to conclude that Drewitz, as a matter of law, could not assert a reasonable expectation that his employment would continue indefinitely beyond the expiration date of the contract. We agree. The employment agreement contained an integration clause. The contract expired on a date certain negotiated by Drewitz with Jack Walser. Minnesota law provides that written agreements, including employment agreements and buy-sell agreements are presumed to reflect the parties’ reasonable expectations. Minn. Stat. § 302A.751, subd. 3a. Drewitz has not overcome this presumption. The district court correctly concluded that expiration of the employment contract on the date provided did not constitute conduct by respondents that was unfairly prejudicial to Drewitz.
2. Fiduciary Duty
Drewitz alleges that respondents breached their “statutory” fiduciary duty to act in an honest, fair, and reasonable manner by acting in a manner unfairly prejudicial to him. Minnesota recognizes the common law fiduciary duty of shareholders in a closely held corporation. Berreman, 615 N.W.2d at 367. Courts impose the fiduciary duty because they find that closely held corporations are really more like “partnerships in corporate guise.” Id. (quotation omitted).
Whether a fiduciary duty has been breached generally is a question of fact. Miller Waste Mills, Inc. v. Mackay, 520 N.W.2d 490, 496 (Minn. App. 1994), review denied (Minn. Oct. 14, 1994). Summary judgment on Drewitz’s fiduciary duty claim is only appropriate if no rational finder of fact could conclude that respondents breached a fiduciary duty to Drewitz. See Berreman, 615 N.W.2d at 367. Drewitz asserts that Minn. Stat. § 302A.751, as amended in 1983, effectively provides that a breach of the fiduciary duty shareholders owe to each other may constitute unfairly prejudicial action and that unfairly prejudicial conduct may be found if a shareholder’s reasonable expectations with respect to his relationship to the corporation are defeated. This court has recognized that breaches of fiduciary duty are probably unfairly prejudicial within the meaning of § 302A.751, subd.1(b)(3). Id. at 373. “Section 302A.751, subd. 3a, specifically directs that courts, in deciding whether to grant equitable relief, should consider the duty which all shareholders in a closely held corporation owe one another to act in an honest, fair, and reasonable manner.” Id. (quotation omitted). Even if the converse is true, that unfairly prejudicial conduct constitutes a breach of the fiduciary duties shareholders owe one another, no evidence demonstrates that respondent acted in a manner unfairly prejudicial to Drewitz. The district court did not err in granting summary judgment to respondents on the breach of fiduciary duty claim asserted by Drewitz.
3. Price of shares for buy-back
Because Drewitz did not establish a circumstance triggering judicial intervention under 302A.751, subd. 1, we do not reach the issue of equitable relief under that statute. Drewitz also argues, however, that expiration of his employment contract does not trigger the buy-back provision in the shareholder agreement. He does not argue that he should be allowed to retain his shares, but that the court should require the buy-back to be for the “fair” value of the shares, not the “book value” as provided in the agreement. Drewitz does not cite any authority for this position. The shareholder agreement clearly provides that termination of employment for any reason triggers the buy-back. As the district court noted, there is no doubt that once the contract expired, and employment ended, respondents had the obligation to purchase Drewitz’s shares and he had the obligation to sell his shares to the corporation. Under all of the circumstances of this case, the district court did not err in concluding that the buy-back provision was triggered when the employment contract expired and that the terms negotiated by Drewitz and Jack Walser for the price of shares at buy-back controlled. Drewitz has received everything that he bargained for under the terms of his agreements with respondents.
 The agreement provided a specific formula for determining the book value of shares that governed the purchase and the buy-back provisions.
 Paul Walser’s purchase was financed by a promissory note to his father. The shareholder agreement specifically reserved to Jack Walser the right to transfer shares (and all of his rights under the agreement) by sale, gift, devise or the laws of intestacy to any of his children or grandchildren, without Drewitz’s consent.
 The district court dismissed the breach of implied covenant claim on the ground that Minnesota does not recognize a covenant of good faith and fair dealing in employment contracts. On appeal, Drewitz has not addressed this claim as it may relate to the shareholder agreement.
 In his reply brief, Drewitz asserts that whether a fiduciary duty has been breached is a fact question precluding summary judgment.
 Drewitz also argues that Paul Walser’s manner of terminating him constituted unfairly prejudicial conduct, but he conceded at oral argument that settlement of the breach of employment contract claim precludes this court from making any determinations based on that conduct.