This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).






Melvin L. Masters,

individually and derivatively

on behalf of, Inc.,





Edward S. Adams, et al.,

Defendants,, Inc.,



Filed January 8, 2002


Gordon W. Shumaker, Judge


Hennepin County District Court

File No. MC0016889




Vincent D. Louwagie, Mark D. Wisser, Anthony Ostlund & Baer, P.A., 3600 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402 (for appellant)


Thomas J. Undlin, Randall M. Tietjen, Robins, Kaplan, Miller & Ciresi, 2800 LaSalle Plaza, 800 LaSalle Avenue, Minneapolis, MN 55402 (for respondent)




            Considered and decided by Halbrooks, Presiding Judge, Shumaker, Judge, and Stoneburner, Judge.


U N P U B L I S H E D   O P I N I O N


The district court granted partial summary judgment in favor of respondent company, determining that appellant is liable for the payment of loans referenced in promissory notes he executed.  Appellant contends on appeal that the district court improperly weighed evidence as to three of the notes and improperly characterized the fourth as a demand note.  Because we conclude that the district court did not err in its rulings and its grant of partial summary judgment, we affirm.


Appellant Melvin L. Masters, chief executive officer and member of the board of directors of respondent, Inc., borrowed money from the company and, on September 17, 1999, executed three promissory notes for repayment.

On October 20, 1999, Masters gave a letter that he drafted to each member of the board of VirtualFund.  In the letter he proposed that the company waive current and future interest on his loans and that, instead of paying annual bonuses to him, the principal balances of the notes be consolidated, divided into three equal amounts, and be treated as bonuses over the next three years.  The effect of the proposal would be the forgiveness of the loans.  In the letter, Masters requested that the board members “approve the principal contract terms listed herein.”  Each member did so.

Masters sent another letter to the board on May 18, 2000, in which he referred to the “proposed agreement” of October 20, 1999, and the board members’ affirmative responses to the proposal.  He then stated, “I would like to confirm with each of you that [the October 20, 1999,] letter was not intended as a binding agreement,” and that the current letter supersedes “all matters intended to be binding” in the October 20, 1999, letter.

A document purporting to be the minutes of a board of directors meeting on June 27, 2000, provided that the board “unanimously approved” the implementation of a compensation plan for Masters “as outlined in a letter summarizing * * * [the] revised compensation plan.”  The document further provided that approval was to be confirmed by each board member.  Masters and one other person who was not a board member signed the document.

On October 24, 2000, Masters executed another promissory note to the company.  This instrument was labeled “Demand Note.”

On December 1, 2000, Masters sued VirtualFund.  The company terminated him for cause on December 19, 2000, and eventually asserted a counterclaim against Masters for money allegedly owed on the loans evidenced by the four promissory notes.  After the district court granted partial summary judgment determining that Masters is liable for repayment of the loans, he appealed.


1.         Promissory Notes of September 17, 1999

On appeal from summary judgment, this court determines whether a genuine issue of material fact exists and whether the district court erred in applying the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  In deciding a summary-judgment motion, the district court may not weigh the evidence.  Brookfield Trade Ctr. v. County of Ramsey, 609 N.W.2d 868, 876 (Minn. 2000).

Masters argues that the intent of the October 20, 1999, letter was that the loans referenced by the September 17 notes were to be forgiven and that the board members approved the proposal.  He contends that the district court improperly weighed the evidence by determining that the loans were not forgiven.

In his letter of May 18, 2000, Masters admitted that his proposal of October 20, 1999, was not intended to be binding.  Nothing in the document purporting to be minutes of the June 27, 2000, board meeting negates that admission.  Thus, without competent evidence that the proposal of October 20 became part of a binding agreement, and there is no such evidence, there is no genuine fact issue regarding the forgiveness of the loans.  No genuine fact issue exists “where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.”  DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (quotation omitted).  Masters clearly and unequivocally admitted that he did not intend the forgiveness proposal to be binding.  A rational trier of fact could not find otherwise on this record.  The district court did not err in granting partial summary judgment on the September 17, 1999, notes.

2.         The October 24, 2000, Promissory Note

In granting partial summary judgment on the fourth note, the district court ruled that the instrument was a demand note.  Masters contends that this ruling was error because the note contained a due date.  In the alternative, he argues that the instrument is ambiguous.  The interpretation of a legal instrument raises a question of law, which we review de novo.  Stewart v. Stewart, 400 N.W.2d 157, 158 (Minn. App. 1987).  Additionally, the clarity or ambiguity of a writing is an issue of law, also subject to de novo review.  In re Estate of Rock, 612 N.W.2d 891, 894 (Minn. App. 2000).  A writing is ambiguous if, based on its language alone, it is reasonably susceptible to more than one interpretation.  Id.  If a writing is ambiguous, extrinsic evidence may be admitted to resolve the ambiguity.  Id.  “When extrinsic evidence is admitted, the meaning of ambiguous language is a question of fact.”  Id. (quotation omitted).

The October 24 instrument is entitled “demand note,” and the words “demand note” appear throughout the document.  However, Masters argues that the intent of the note is ambiguous because it also includes a payment date.

[Respondent] and [appellant] agree that this Demand Note shall be paid in full prior to the end of the calendar year 2001 (i.e., 31 December 2001) or as extended by writing by [respondent].


However, another part of the note refers to the circumstances under which “this Demand Note” would be converted to a “term note”:

In the event that [appellant] cannot provide said collateral sufficient in the view of [respondent], [appellant] agrees to cooperate with [respondent] to convert this Demand Note to a term note, obligating [appellant] to make periodic, scheduled payment of the then‑existing principal and interest of this Demand Note.


The district court concluded that the note was a demand note because the “note unambiguously refers to itself as a demand note and specifies no date for payment.”  Minn. Stat. § 336.3‑108(a) (2000) defines a demand note.

[a] promise or order is “payable on demand” if it (i) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (ii) does not state any time of payment.


Furthermore, Minn. Stat. § 336.3‑108(c) (2000) defines a demand note with a payment deadline: 

If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.


The October 24 instrument fits the definition of a demand note with a payment deadline as provided in Minn. Stat. § 336.3‑108(c).  The district court did not err in concluding that the note is unambiguously a demand note and in granting partial summary judgment to VirtualFund on this issue.