This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).


Krigbaum and Associates, Ltd.,


Vicki Ross-Rhoades,


Vicki Ross-Rhoades,


Krigbaum and Associates, Ltd., et al.,

Filed February 2, 1999
Foley, Judge*

Beltrami County District Court
File No. C3-98-948

Robert Woodke, 1106 Paul Bunyan Drive NE, P.O. Box 1273, Bemidji, MN 56619 (for respondents)

Thomas L. D'Albani, 205 Seventh St., P.O. Box 978, Bemidji, MN 56619 (for appellant)

Considered and decided by Toussaint, Chief Judge, Klaphake, Judge, and Foley, Judge.

U N P U B L I S H E D   O P I N I O N

FOLEY, Judge

Appellant, a former minority stockholder in respondent corporation, challenges the district court's findings as to (1) the amount due her under a stockholders' agreement and (2) her failure to prove her breach of fiduciary duty and related claims against the corporation's sole director. By notice of review, the corporation also challenges appellant's recovery under the stockholders' agreement on the grounds that her alleged violation of a non-compete provision in the agreement bars recovery or requires an offset. We affirm.


On July 1, 1986, appellant Vicki Ross-Rhoades signed a purchase agreement to buy 20 shares of common stock in respondent corporation from respondent Henry Krigbaum, the sole shareholder. The agreement and accompanying promissory note required Ross-Rhoades to make annual installments of the purchase price and accrued interest. The stock certificate was placed in escrow until full payment. Ross-Rhoades had the right to vote the shares (under proxy) and receive dividends while the stock was in escrow, but in the event of default, the stock certificate would return to the seller, Krigbaum. Krigbaum sold another 20 shares of stock to Mark Elliot under the same arrangement. After the sales, Krigbaum remained the majority stockholder with 60% of the corporation's stock.

On December 1, 1986, Krigbaum, Ross-Rhoades, and Elliot entered into a stockholders' agreement. The agreement provides for the repurchase of a stockholder's interest when the stockholder withdraws from the corporation. The agreement also contains a non-compete provision. All three stockholders were directors, officers, and employees of the corporation.

In 1987 and 1988, Ross-Rhoades paid Krigbaum the first two stock purchase installments out of her personal funds. In 1990, the corporation began paying the yearly installments to Krigbaum on Ross-Rhoades behalf.[1] These payments were accomplished by debiting a corporate note-receivable ledger account assigned to Ross-Rhoades and crediting the corresponding account assigned to Krigbaum. Each stockholder had a note receivable account in the corporate books that indicated the amount of money he or she "received" from the corporation. The balance in Ross-Rhoades's ledger account was largely attributable to her "receipt" of corporate money in the form of stock purchase installment payments to Krigbaum.

According to Ross-Rhoades, she initially consented to the disbursement of corporate funds to satisfy her personal obligation to Krigbaum, but at some later point objected to the arrangement at corporate meetings. No objections appear in the corporate minutes, which were prepared by Ross-Rhoades. Ross-Rhoades conceded that the amount in her note-receivable account was a valid debt owed to the corporation as of June 29, 1994. The corporation's June 30, 1994, financial statement indicated that Ross-Rhoades's note receivable indebtedness was $17,430.66.

In 1994, the stockholders' relationship deteriorated, largely due to Ross-Rhoades's and Elliot's disapproval of Krigbaum's management of the corporation. At a June 29, 1994, directors' meeting, Krigbaum suggested several options, including going "their separate ways" and dividing up the balance sheet and client list. Elliot agreed and began dividing up the client list. Ross-Rhoades testified that she "had no option but to go along with it" and that she began working on the balance sheet. When asked by Krigbaum what she intended to do, she replied, "look for a job." Later that day, after Ross-Rhoades and Elliot refused to surrender their keys, Krigbaum had the office locks changed. Ross-Rhoades then packed up her personal belongings and left the office. On July 1, Ross-Rhoades received a letter from corporate counsel requesting her written resignation. Her corporate board membership was officially terminated at a February 28, 1995 shareholders' meeting.

As of June 30, 1994, Ross-Rhoades still owed two installment payments to Krigbaum. In the spring of 1995, Ross-Rhoades received a notice of default on her installment note with Krigbaum and written notice of Krigbaum's intent to repossess the stock certificate. On June 1, 1995, the escrow agent returned the stock certificate to Krigbaum. Ross-Rhoades did not receive any monies relating to the repurchase of the stock from the corporation.

In February 1996, the corporation sued Ross-Rhoades to recover the debt still owed on the corporate books. Ross-Rhoades counterclaimed, seeking amounts due under the shareholders' agreement. Ross-Rhoades also brought claims against Henry Krigbaum individually, alleging bad faith actions in contravention of the corporation's articles and by-laws and his fiduciary duty as an officer. After a bench trial, the district court found that Ross-Rhoades failed to prove her claims against Krigbaum. It also found that Ross-Rhoades owed the corporation $17,431 plus interest, but was entitled to $49,969 from the corporation under the stockholders' agreement. Offsetting the amounts and deducting the balance remaining on the stock purchase, the district court entered judgment in favor of Ross-Rhoades in the amount of $12,756.37. On the parties' cross-motions for amended findings, the district court adjusted the accrued interest on Ross-Rhoades's debt to the corporation and amended the amount of the judgment to $17,696.


This court's review of a district court judgment is limited to a determination of whether the district court's findings are clearly erroneous, either without substantial evidentiary support or based on an erroneous conclusion of law. Reserve Mining Co. v. State, 310 N.W.2d 487, 490 (Minn. 1981). When the district court's factual findings "are reasonably supported by the evidence as a whole, or not manifestly contrary to the weight of the evidence," this court will only reverse if left with the definite and firm conviction that a mistake has been made. Foster v. Bergstrom, 515 N.W.2d 581, 585 (Minn. App. 1994).

1. Ross-Rhoades's Recovery under Stockholders' Agreement

Ross-Rhoades first contends that the district court erroneously found that her departure was voluntary, rather than involuntary, which adversely affected the amount of compensation she received under the stockholders' agreement. The stockholders' agreement contains two separate formulas for valuating a departing stockholder's interest. A voluntary departure or loss of CPA status triggers the valuation formula in section 15(D) of the stockholders' agreement. If a stockholder's interest is terminated for any other reason, the valuation formula in section 15(E), which provides greater compensation, applies.

Ross-Rhoades's statements and actions on June 29, 1994 establish that her withdrawal from the corporation, albeit reluctant, was voluntary. Ross-Rhoades testified that after Krigbaum suggested dividing up the client list and balance sheet, she began sorting through the balance sheet while Elliot worked on the client list. Ross-Rhoades also told Krigbaum that her intentions were to look for another job. She stated that, after the meeting, she and Elliot intended to come back together to continue the process of dividing up the balance sheet and client list. She then packed up her personal belongings without communicating to Krigbaum any desire to stay on. This evidence reasonably supports the district court's conclusion that Ross-Rhoades voluntarily withdrew from the corporation on June 29, 1994, two days before her receipt of the letter asking for her resignation. The district court's finding of voluntary departure is not clearly erroneous.

Ross-Rhoades next challenges the district court's determination of the amount of her recovery. The district court calculated the corporation's total financial obligation to Ross-Rhoades by deducting the amount in her corporate note-receivable account from the amount owed her under the stockholders' agreement as of June 30, 1994. Ross-Rhoades contends this deduction was error because the note-receivable account balance reflected installments on the stock purchase and Krigbaum had already repossessed the stock. This argument rests on the incorrect assumption that Krigbaum and the corporation are the same entity. The record clearly establishes that Ross-Rhoades was indebted to Krigbaum under an installment note, which was completely separate from the note-receivable account in the corporate books. By making yearly payments to Krigbaum on Ross-Rhoades's behalf, the corporation did not become a party to the transaction between Krigbaum and Ross-Rhoades; it did not gain an interest in the stock. Instead, the corporation received an increase in a note receivable account, constituting money owed. The stockholders' agreement provides that the corporation can offset the amount due under the agreement by any amounts owed to the corporation by the withdrawing stockholder. Accordingly, the district court's finding of indebtedness and the resulting deduction was not error.

The corporation does not dispute the district court's calculations, but contends that it is either entitled to an offset for business taken by Ross-Rhoades or a finding that Ross-Rhoades's breach of the non-compete provision in the stockholders' agreement bars her recovery under the agreement. The district court rejected this argument. See Nelson v. Dorr, 239 Minn. 423, 432, 58 N.W.2d 876, 881 (1953) (denial of motion for amended findings equivalent to adverse finding on issue presented).

The corporation concedes that the stockholders' agreement does not provide for any offset or adjustments for business taken. Accordingly, the district court did not err in declining to make such an offset.

The district court also did not err with respect to the non-compete provision in the stockholders' agreement. The provision states that a withdrawing stockholder

agrees not to engage in the practice of public accounting in competition to the corporation either on his own account, in partnership or as an employee of another accountant within a radius of one hundred (100) miles of any of the corporate offices existing at the time of the withdrawal for a period of seven (7) years from the date of withdrawal, provided such agreement would not be in violation of any state law or professional ethics.

The corporation insists that Ross-Rhoades breached this agreement by doing public accounting work on her own and as an employee of Elliot's firm for former clients of the corporation. The record indicates, however, that Krigbaum suggested and consented to the division of the client list. Accounting work done on behalf of clients Krigbaum and the corporation voluntarily relinquished is not "in competition to the corporation." Moreover, Krigbaum admitted that, under the stockholders' agreement, the corporation owed Ross-Rhoades monies as of June 30, 1994, but did not pay her. Ross-Rhoades testified that had she received the monies owed under the stockholders' agreement, she would not have found it necessary to find work as a public accountant. We therefore concur with the district court's determination that Ross-Rhoades is entitled to recover under the stockholders' agreement.

2. Ross-Rhoades's Claims Against Krigbaum

Ross-Rhoades contends that the district court erroneously found that she failed to prove three of her claims against Krigbaum. She first argues that the district court should have ordered Krigbaum to provide a full accounting of the corporation's finances from June 29,1994 through June 1, 1995. Ross-Rhoades does not support this assertion nor does she specify which financial records she is still seeking. Assignment of error in a brief based on "mere assertion" and unsupported by argument or authority is waived unless prejudicial error is obvious on mere inspection. State v. Modern Recycling, Inc., 558 N.W.2d 770, 772 (Minn. App. 1997). Ross-Rhoades does not appear to have suffered any prejudice from the district court's denial of her requested accounting.

Ross-Rhoades also argues that the evidence presented at trial sufficiently established her claims that Krigbaum's actions were in contravention of the corporation's articles and by-laws and his fiduciary duty as an officer and director. We disagree. Ross-Rhoades complains of Krigbaum's unilateral decision at a February 28, 1998 board meeting to reduce the number of board members from three to one, over her objection. The corporation's attorney testified that the same motion was made at a shareholders' meeting held immediately after the board meeting. According to the attorney, the resolution was properly passed by a vote of 60-40. Voting by shares at a shareholders' meeting is authorized by the corporation's articles and by-laws.

In order to establish a breach of fiduciary duty claim, the plaintiff must show that

the action attacked is so far opposed to the true interests of the corporation as to lead to the clear inference that no officer thus acting could have been influenced by an honest desire to secure such interests.

Westgor v. Grimm, 318 N.W.2d 56, 59 (Minn. 1982) (quoting Warner v. E.C. Warner Co., 226 Minn. 565, 573, 33 N.W.2d 721, 726 (1948)). Ross-Rhoades did not adequately establish that Krigbaum's actions rose to this standard.


* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] The corporation's 1990 payment covered both the 1989 and 1990 installments.