County District Court File No. 73-CV-14-1829
F. Mathews, Kelly A. Larson, Hughes Mathews Greer, P.A., St.
Cloud, Minnesota (for appellants Kathryn Ward Blum and
V. Steffenson, Henningson & Snoxell, Ltd., Maple Grove,
Minnesota (for co-appellant Thomas Ward).
A. Rajkowski, Matthew W. Moehrle, Christopher A. Wills,
Rajkowski Hansmeier Ltd., St. Cloud, Minnesota (for
respondents Molly Thompson and Ann Sullivan).
H. Wenner, Reichert Wenner, P.A., St. Cloud, Minnesota (for
respondent Richard Ward).
Piras, Willenbring, Dahl, Wocken & Zimmerman, PLLC, Cold
Spring, Minnesota (for respondent Kevin Ward).
A. Janson, Janson Law Office, Waite Park, Minnesota (for
respondent Ward Family Inc.).
Considered and decided by Larkin, Presiding Judge; Johnson,
Judge; and Reilly, Judge.
plaintiff who establishes liability on a claim of breach of
fiduciary duty may, in appropriate circumstances, obtain
relief in the form of monetary damages.
document that is not an agreement between or among
shareholders may be relevant to the reasonable expectations
of shareholders in a closely held corporation for purposes of
Minnesota Statutes section 302A.751, subdivision 3a.
minority shareholders of a family-owned corporation, Ward
Family Inc., brought this lawsuit after the corporation
leased its sole asset, 1, 200 acres of real property, to a
corporation owned by another family member, on terms that the
plaintiff shareholders believe are unfavorable to them and to
Ward Family Inc. The district court entered summary judgment
in favor of the defendants on the plaintiffs' claims of
breach of fiduciary duty and oppression of minority
shareholders' rights. We conclude that the district court
erred in those rulings. But we also conclude that the
district court did not err by entering summary judgment in
favor of the defendants on the plaintiffs' derivative
claims. Therefore, we affirm in part, reverse in part, and
remand for further proceedings.
Ward and Rosemary Koop Ward were married in 1958. During
their marriage, they had seven children: Kathryn Ward Blum,
Charles Ward, Kevin Ward, Thomas Ward, Molly Thompson, Ann
Sullivan, and Maggie Motyl.
of Corporate Asset
1960s, Richard and Rosemary acquired 1, 200 acres of rural
property in Stearns County from Rosemary's parents. In
the 1960s or 1970s, Richard and Rosemary also purchased El
Rancho Manana Inc. (ERMI) from Rosemary's parents.
Through ERMI, Richard and Rosemary operated a commercial
campground and a horse stable on approximately 200 acres of
the 1, 200-acre property for approximately two decades.
Richard and Rosemary's children worked for the campground
during their childhood years, and some children continued to
do so in adulthood. Family members generally refer to both
the property and the associated business as "the
ranch." Family members also have used the property for
both recreational and revenue-producing activities, including
farming, cross-country skiing, snowmobiling, deer hunting,
footraces, concerts, rodeos, cattle grazing, logging, and
and Rosemary were divorced in 1985. They stipulated to a
dissolution decree that awarded all of the 1, 200-acre
property and all shares of ERMI to Richard. But the
dissolution decree contained numerous restrictions on
Richard's interests in the real property and ERMI. The
relevant provisions of the dissolution decree are as follows:
3. That [Richard] shall assume ownership and title to certain
real estate, commonly referred to as El Rancho Manana
Campgrounds and Riding Stable which is legally described as
b. Should [Richard] remarry, he shall execute a valid
premarital agreement pursuant to Minnesota Statutes to be
signed by both himself and his new spouse. Said premarital
agreement will confirm that the above-described real estate
will always be a part of [Richard]'s Estate, singly and
separately, and [Richard]'s new spouse and/or issue of
that marriage will not acquire any right, title or interest
in the [land] by virtue of the marriage or in any other way.
c. [Richard] within ninety (90) days of the entry of the
judgment and decree in this matter [shall] execute a will
which shall devise the above referenced real estate in the
(1) An undivided 3/10 interest to Rosemary Ward, if living
and an undivided 7/10 interest or all thereof if Rosemary
Ward is not then living, to the then living children of this
marriage or the living issue of any predeceased child by
right of representation.
(2) The above referenced provisions of [Richard]'s will
shall remain in effect at his death, and shall not be subject
to change by [Richard].
(3) In the event [Richard] fails to have a will with the
above referenced provision in full force and effect at the
time of his death, [Rosemary] and the children of this
marriage or the living issue of any predeceased child by
right of representation shall have a claim against
[Richard]'s estate in an amount equal to the value of
their respective interests as stated above.
d. [Richard] shall prior to selling said property give to
[Rosemary] and each of the children of this marriage the
option to purchase said real estate at or below the same
price and upon the same terms as offered by a bona fide
e. [Richard] may encumber [the land] to secure a loan or any
other indebtedness only if said loan or indebtedness is used
to improve [the land] or the business presently being
f. [Richard] and the parties' children shall have sole
discretion as to whether [the land] should be sold in the
future. Any sale shall be for not less than the [land]'s
fair market value. In the event said real estate is sold the
proceeds, after payment of all mortgages, liens, taxes, and
reimbursement to [Richard] for costs incurred by him for any
capital improvement made to the real estate from the date of
transfer to the time of sale, which has been paid for by him,
shall be divided as follows: Thirty-five percent (35%) of
said net proceeds paid to [Richard], Thirty percent (30%)
paid to [Rosemary], and Thirty-five percent (35%) to the
parties' seven natural children or the living issue of
any predeceased child by right of representation. In the
event that [Rosemary] is deceased at the time of sale, her
respective share of the net proceeds shall be divided equally
between [Richard] and the children of this marriage or the
living issue of any predeceased child by right of
4. [Rosemary] shall execute any and all documents necessary
to transfer her shares of stock in the Minnesota Corporation
El Rancho Manana, Incorporated to [Richard].
a. [Richard] shall draft an agreement relating to the
operation of [ERMI] and its business providing that [Richard]
and the seven natural children of the parties shall have
direct, decision making authority relating to the conduct of
the business, expansion and/or improvements.
the divorce, Richard continued to operate the campground on
the property that he was awarded in the dissolution decree.
December 7, 1998, Richard formed Ward Family Inc. (WFI). His
stated purpose in doing so was to allow him to give the 1,
200-acre property to his seven children incrementally, with
minimal gift taxes and estate taxes. Three days after forming
the corporation, Richard transferred his interest in the 1,
200-acre property to WFI by a quitclaim deed. At the same
time, WFI's counsel asked Rosemary to transfer any
interest she may have in the 1, 200-acre property to WFI by a
quit-claim deed. In a letter dated December 10, 1998,
corporate counsel explained to Rosemary the reasons for the
First, the purpose of all of this is to have the ranch real
estate transferred to the seven children. In your divorce
decree there are provisions requiring the property to be left
to the children in the event of Dick's death, or the
granting of a claim against his estate if it is sold. By
transferring the real estate to the corporation, Dick will be
able to gift the shares to the children over a period of a
few years and retain some or all of his credit against estate
and gift tax. . . .
Second, by transferring the real estate to the corporation,
the title should be cleared of the claims in the divorce
decree so the children will be able to eventually work with
the property without any title problems.
Third, the Stock Redemption and Alternate Purchase Agreement
goes a few steps beyond protecting the shares of stock. In
order to continue the desire you have to keep the title to
the real estate in the children I have specifically provided
that the real estate, once in the corporation, may not be
sold without the agreement of all of the shareholders until
sufficient shares have been transferred to the children to
give them, collectively, control of the corporation. After
that I stated that the real estate could only be sold upon
agreement of seventy-five percent of the outstanding shares.
I did this so if the children should decide that the land, or
part of it, is to be sold, the sale would not be prevented by
any one or two stockholders. . . . Also, I included
provisions that were requested in terms of keeping the real
estate in the blood line. . . .
of a quit-claim deed and a redemption-and-purchase agreement
were enclosed with the letter. On December 16, 1998, Rosemary
executed a quit-claim deed in favor of WFI.
December 17, 1998, Richard gave approximately two percent of
the outstanding shares of WFI to each of his seven children.
On December 25, 1998, WFI's counsel met with the seven
children. After some discussion, each of them executed a
quit-claim deed in favor of WFI. The proposed
redemption-and-purchase agreement never was ...