Opinion
No. 108,117.
2013-08-23
Norene HARNESS, Russell Harness, Shala Unruh, Connie Edmonston, and Diane Willems, Appellees, v. Josephine M. THOMPSON, Steven V. Thompson, Anne Marie Thompson, Vincent Jay Thompson, Gregory Thompson, and Jeffrey B. Thompson, Appellants.
Appeal from Comanche District Court; E. Leigh Hood, Judge. Ronald D. Smith, of Smith, Burnett, Larson & Butler, LLC, of Larned, for appellants. Alan C. Goering, of Goering and Slinkard, of Medicine Lodge, for appellees.
Appeal from Comanche District Court; E. Leigh Hood, Judge.
Ronald D. Smith, of Smith, Burnett, Larson & Butler, LLC, of Larned, for appellants. Alan C. Goering, of Goering and Slinkard, of Medicine Lodge, for appellees.
Before BUSER, P.J., McANANY and POWELL, JJ.
MEMORANDUM OPINION
PER CURIAM.
The defendants in this case, Josephine M. Thompson, Steven V. Thompson, Anne Marie Thompson, Vincent Jay Thompson, Gregory Thompson, and Jeffrey B. Thompson (Thompsons) appeal from the district court's dismissal of all claims pursuant to its interpretation of a settlement agreement. Two sides of a family, the plaintiffs, Norene Harness, Russell Harness, Shala Unruh, Connie Edmonston, and Diane Willems (Harnesses) and the Thompsons each own 50% of the shares in Calvary Creek Farms, Inc. (CCF), which owns and leases a section of ranch land. Due to multiple disputes between the directors and officers of CCF, the families agreed to sell the land and dissolve the corporation. This litigation ensued because the parties were unable to cooperate to meet those goals.
The parties entered into a settlement agreement to govern the sale of the property and the dissolution of the corporation. The district court appointed a custodian to manage the corporation and enforce the terms of the settlement agreement. Eventually, the land sold, the custodian dissolved the corporation, and, pursuant to a provision in the settlement agreement, the district court dismissed all claims between the parties.
The Thompsons appeal, asserting several grounds of error: (1) the district court failed to rule on the Thompsons' motion for summary judgment; (2) the district court improperly dismissed all claims with prejudice without an evidentiary hearing; (3) the district court erred in appointing a custodian without an evidentiary hearing; and (4) the district court erred in granting the Harnesses' motion to dismiss and for granting the motion without viewing the facts in a light most favorable to the Thompsons.
We dismiss the Thompsons' appeal because we find they acquiesced in the judgment by accepting the proceeds from the sale of the land. Alternatively, we find there was no error below and affirm the district court.
Factual and Procedural History
CCF was a C corporation formed in 1975. The shareholders consisted of 11 people from two sides of a family: five from the Harness family and six from the Thompson family. Each family group owned exactly half of the shares. Originally, the board of directors and officers consisted of Norene Harness as President, Norene's brother Victor Thompson as Vice President, and Russell Harness. Victor Thompson died in 2007; at the time of this law suit, the directors and officers included Norene Harness as President/Treasurer, Russell Harness as Secretary, Gregory Thompson as Vice–President, Connie Edmonston (part of the Harness family), and Jeffrey Thompson.
CCF's only asset, other than bank accounts, was a large section of ranch real estate located in Comanche County, Kansas. The corporation had entered into hunting leases over the years with Russell Harness and third parties. The property also had a house on it in which Russell and Norene Harness' daughter, Shala Unruh, lived. Russell and Norene Harness individually owned property adjacent to CCF's property which had been run in conjunction with CCF's property for many years. At the commencement of this lawsuit, there was no fence separating the properties. During this entire lawsuit, CCF was a solvent corporation without any tax-related issues.
After the death of Victor Thompson, all parties agreed there were many differences of opinion between the two sides of directors and shareholders. According to the Harnesses' petition, someone expressed interest in purchasing CCF's real estate in early 2008. The Harnesses claimed that the Thompsons “placed unreasonable demands and condition on the terms of the offer.” Ultimately, no contract was finalized.
A year later, the same buyer approached CCF again about the purchase of the real estate. CCF held a directors and shareholders meeting on May 12, 2009, to discuss the possible sale. The parties differ on what happened and which side was being unreasonable, but each side had prepared a shareholder agreement, both of which were rejected because half of the shareholders always voted against whichever agreement their side did not draft. The Harnesses' petition reported that a vote was taken to dissolve the corporation, but it failed because the Thompson half of the shareholders voted against it.
Claiming that the officers and directors of CCF could no longer conduct the affairs of the corporation because of the equal distribution of stock, the Harness family filed this lawsuit on May 18, 2009. The petition requested the district court appoint a receiver to manage and dissolve the corporation and that CCF's real estate be sold or partitioned. The Thompsons filed a counterclaim against the Harnesses alleging mismanagement of the corporation's hunting and residential leases. The Thompsons requested the Harnesses repay the corporation for the use of the property via reduced lease prices and for permitting such transactions to occur.
Trial was originally set for March 2010, but on February 17, 2010, all parties entered into a settlement agreement, referred to by the parties and throughout the record as the “Shareholder Agreement.”
The settlement agreement contained specific instructions regarding how the CCF property would be marketed, what information could be distributed, how long the parties would wait before hiring a broker, periodic progress reviews, and the minimum price per acre the parties were required to accept. Each family appointed its respective attorney as the “Designated Representative” who would communicate with one another and draft all necessary documents pertaining to the sale of the property. The agreement recognized and allowed for a discussion on the possibility that a potential buyer might be interested in purchasing Russell and Norene Harness' individually owned property along with the CCF property. The parties agreed that the property would not have a ranch lease for the 2010 year in order to allow for the growth of grass and to aid in the sale of the property. Shala Unruh's residential lease remained unaltered, though she agreed to give possession of the residence to a buyer if the buyer requested she vacate the property.
The settlement agreement also contained a specific provision for the dissolution of CCF. The two families agreed to cooperate with one another to dissolve CCF within 90 days of the closing date of the real estate sale. The provision also set out that dissolution would be accomplished within 1 calendar tax year. Additional provisions covered tax consequences of the sale and dissolution, where the proceeds from the sale of the real estate would be held, how the agreement could be modified, and rules related to the recreational use of the property. All parties agreed to maintain the corporation in the ordinary course of business through the officers and directors. Upon dissolution of the corporation, the parties agreed to arbitrate any dispute arising out of the settlement agreement. One of the most important provisions addressed the handling of the pending litigation. Provision 10 provided that the parties agreed to continue the trial date while selling the property and dissolving CCF. Then, “[u]pon the sale closing and liquidation of the company, the pending action in Comanche County Case No.2009 CV 8 and all claims that are or would have been asserted therein by and between the parties shall be dismissed with prejudice.”
After signing the settlement agreement, the parties struggled to work together towards the goal of selling CCF's property. On May 20, 2010, all shareholders attended a shareholder meeting, which was presided over by CCF's attorney in an attempt to maintain order and reduce conflict between the parties. Despite the presence of CCF's attorney, some conflict occurred during the May 20, 2010, meeting and, on May 25, 2010, the Harnesses motioned the district court to schedule pretrial and trial dates in the district court case.
On June 25, 2010, claiming the Harnesses' request breached the settlement agreement's provision continuing the district court case, the Thompsons requested leave to amend their counterclaim. The court granted them leave on August 30, 2010. The Thompsons' amended counterclaims were filed September 8, 2010, and added two new categories of claims: breach of fiduciary duties and breach of contract. First, they accused Norene Harness, Russell Harness, and Connie Edmonston of breaching their fiduciary duties to the corporation by causing and allowing self-dealing and by inappropriate use of the corporation for their own personal purposes. Second, the Thompsons claimed the Harnesses breached the settlement agreement by reinstating the lawsuit and asking the court to set trial dates, as well as many other instances throughout 2010. The Thompsons asked for money damages and for specific performance of the settlement agreement.
On July 27, 2010—before the Thompsons filed their amended counterclaim-the Harnesses requested the district court appoint a custodian with the powers of a receiver under K.S.A. 17–6901. The Harnesses argued that the two families were unable to work together to sell the property; CCF was losing income due to the lack of leases on the property; and a custodian was needed to conduct the day-to-day business of the corporation, complete a sale of the property, and eventually dissolve the corporation.
Discovery contentiously continued throughout 2010. On January 18, 2011, the district court held an evidentiary hearing and granted the Harnesses' request for appointment of a custodian. The district court found the corporation had suffered some irreparable harm, there was the real possibility for future harm, and the board of directors could not run the corporation because it was split down family lines. Pursuant to both K.S.A. 17–6516(a)(1) and (a)(2), the district court appointed Glenn Kerbs as custodian with all powers of a receiver as set out in K.S.A. 17–6901 and ordered the settlement agreement enforced.
The Harnesses amended their petition on March 22, 2011, also alleging breach of fiduciary duties and breach of contract The Harnesses asked for reasonable attorney fees, an order for the sale of the CCF property, the rescission of the settlement agreement due to the Thompsons' breaches, and an order to liquidate CCF. Similar to the Thompsons' amended counterclaims, the Harnesses listed many breaches by various Thompsons to details in the settlement agreement.
On August 1, 2011, the Thompsons filed a motion for partial summary judgment, asking the court to find that the Harnesses breached the settlement agreement by reinstating the lawsuit in May 2010. The Thompsons only requested monetary damages for the alleged breach.
Subsequently, a buyer for CCF's property came forward. The parties entered into a sales contract on August 26, 2011, and the sale closed on November 3, 2011. Kerbs reported that the designated representatives were working to dissolve the corporation by December 31, 2011, but he had not needed to become involved in the dissolution process as of November 2, 2011. CCF was not dissolved by the end of 2011 despite Kerbs' two orders to do so.
On January 31, 2012, the Harnesses moved to continue the pretrial and trial dates, expand the authority of the custodian in order to dissolve the corporation, and then dismiss all claims with prejudice. On February 13, 2012, the district court found after a hearing that the Thompsons had been “stonewalling, providing roadblocks or speedbumps to prevent the orderly dissolution of the corporation.” The court continued the trial dates indefinitely and granted Kerbs broad powers to execute tax returns and annual reports, transfer money to and from corporation bank accounts, pay CCF bills and taxes, set a final dissolution date, and distribute corporation funds to the shareholders. The court observed that, under the settlement agreement, dismissal of the case would not occur until after dissolution of the corporation; therefore, the district court ordered the Harnesses to submit a dismissal order after dissolution for the court to approve.
On February 14, 2012, the Thompsons filed a motion for stay of judgment and application of terms for supersedeas bond, requesting Kerbs be required to pay a bond, that an appeal bond be set, and that the court's order of February 13, 2012, be stayed. Also on the same date, the Thompsons filed their Notice of Appeal of the February 13, 2012, order. On March 12, 2012, the district court found the Thompsons' appeal to be premature, denied their request for Kerbs to pay a bond, denied their motion to stay judgment, and denied their request for an appeal bond.
Our court originally ordered the district court to hold an evidentiary hearing to determine whether an appeal bond was necessary but later determined the district court had not appointed a receiver; therefore, our court vacated its prior order and found a lack of appellate jurisdiction. The appeal was dismissed on March 26, 2012. On the same day, the Harnesses filed their motion for dismissal with prejudice. The funds from the corporation had been distributed to each shareholder on March 16, 2012, and CCF was officially dissolved on March 27, 2012. At a hearing held April 4, 2012, the district court found that the corporation had been dissolved and all conditions had been met in Provision 10 of the settlement agreement to dismiss all claims with prejudice. During the hearing, the district court clarified that it chose not to officially rule on the Thompsons' partial summary judgment motion because it had become moot.
The Thompsons timely appeal the order for dismissal.
Did the Thompsons Acquiesce to the District Court's Judgment by Accepting the Custodian's Distribution of the Corporation's Funds?
Standard of Review and Analysis
Though not raised by the parties, it is our court's duty to determine if there are jurisdictional issues which would act as a bar to any appeal. Almack v. Steeley, 43 Kan.App.2d 764, 770, 230 P.3d 452 (2010). “Acquiescence in the lower court's judgment by an appealing party raises a jurisdictional issue.” 43 Kan.App.2d at 770. A jurisdictional question is a question of law subject to unlimited review. Uhlmann v. Richardson, 48 Kan.App.2d 1, 6, 287 P.3d 287 (2012) (citing Alliance Mortgage Co. v. Pastine, 281 Kan. 1266, Syl. ¶ 2, 136 P.3d 457 [2006] ).
“The general rule, subject to certain exceptions, is that a party to litigation who has acquiesced in the judgment of the trial court either by assuming the burden of such judgment or by accepting the benefits thereof will be deemed to have acquiesced in such judgment and may not thereafter adopt an inconsistent position and appeal from such judgment.' “ McDaniel v. Jones, 235 Kan. 93, 101, 679 P.2d 682 (1984) (quoting Brown v. Combined Ins. Co. of America, 226 Kan. 223, Syl. ¶ 6, 597 P.2d 1080 [1979] ).
“[I]f a party actually collects money obtained through a judgment, the party who collected funds—and thus accepted a benefit from the judgment—loses the right to appeal.” Uhlmann, 48 Kan.App.2d at 13; see also Hemphill v. Ford Motor Co., 41 Kan.App.2d 726, 728, 206 P.3d 1 (2009) (appellants' acceptance of arbitration award barred appeal). However, the party accepting payment “ ‘shall not be deemed to have acquiesced in the judgment so long as the issues on appeal do not affect the obligation for the payment of or the right to receive such portion of the judgment.’ “ McDaniel, 235 Kan. at 102 (quoting Brown, 226 Kan. 233, Syl. ¶ 8).
The record in the present case shows that the proceeds of the property sale, the main asset of CCF, were distributed to each shareholder on March 16, 2012. In fact, all monies due the shareholders were distributed. Moreover, while the record is unclear as to whether the checks were cashed, there is no indication in the record that the Thompson shareholders rejected the money. Since it is obvious that, given the various claims between the parties such payments could be easily affected or offset by continuing this litigation, the Thompsons have acquiesced and waived any arguments on appeal challenging the district court's judgment.
Are the Thompsons' Allegations Of Error Moot?
Alternatively, because the record is unclear as to whether the Thompson shareholders cashed their distribution checks, we find that the Thompsons' numerous allegations of error committed by the district court to be without merit. Specifically, the Thompsons contend the district court erred in failing to rule on their motion for summary judgment, in dismissing all claims without an evidentiary hearing, in appointing a custodian to handle the dissolution of the corporation, and in granting the Harnesses' motion to dismiss and granting the motion without construing the facts in the light most favorable to the Thompsons. Standard of Review and Analysis
Interpretation of a settlement agreement is a question of law over which this court exercises unlimited review. See Osterhaus v.. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011). The contract “may be construed and its legal effect determined by the appellate court regardless of the construction made by the district court.” Osterhaus, 291 Kan. at 768. “The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the language of the contract without applying rules of construction.” Osterhaus, 291 Kan. at 768. However, if the court determines that the settlement agreement's language is ambiguous, then extrinsic or parol evidence may be considered to construe it. Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 963, 298 P.3d 250 (2013).
First, under the settlement agreement, all claims then existing and ones that could be brought between the parties were resolved, making any appeal of such issues moot. See Hall v. Mid–Century Ins. Co., 248 Kan. 847, 853, 811 P.2d 855 (1991) (settlement of attorney fee dispute mooted such issues on appeal). Provision 10 of the parties' settlement agreement states:
“10. Pending Action. Upon execution of this agreement, the parties shall jointly agree to a continuance of the pending trial date. Upon the sale closing and liquidation of the company, the pending action in Comanche County Case No.2009 CV 8 and all claims that are or would have been asserted therein by and between the parties shall be dismissed with prejudice.”
The district court granted the Harnesses' motion to dismiss all claims under the above provision in the settlement agreement. The contract language conditions the dismissal of all claims upon the sale of the CCF property and liquidation of the company. Finding both conditions satisfied, the district court dismissed all claims, including all allegations of breach of fiduciary duty and breach of contract. The parties' settlement agreement was designed to end the fighting and provide for the orderly dissolution and winding up of CCF. Once the sale and liquidation of CCF was completed, any and all claims the parties had, or could have had, were to be dismissed. The district court was carrying out the wishes of the parties when it dismissed the case. Therefore, any complaints the Thompsons may have about the trial court's handling and dismissal of the parties' claims are moot.
Second, the Thompsons try to avoid this result by contending that the release in Provision 10 only applied to claims brought as of the date of execution of the settlement agreement—February 17,2010.
The Thompsons correctly indicate that a general release usually covers only those claims which were in contemplation when the parties executed the settlement agreement. See SOFCO, LLC v. Nat'l Bank of Kansas City, No. 08–2366–JAR, 2010 WL 3039567 (D.Kan .2010); 76 C.J.S., Release § 64. However, a release by its language may show the intent of the parties to settle all claims known or unknown, past, present, or future. See 76 C.J.S., Release § 66. Based on the language of the release, the court enforces the terms unless such terms are plainly against public policy. See 76 C.J.S., Release § 67.
Provision 10 states that “the pending action in Comanche County Case No.2009 CV 8 and all claims that are or would have been asserted therein by and between the parties shall be dismissed with prejudice.” (Emphasis added.) The district court interpreted this contract language to include all claims by either party regarding breaches of fiduciary duties and breaches of contract. Based on the plain reading of the provision, it is clear that the parties considered the possibility of future, yet unknown, claims arising within case number 2009 CV 8, because they went further than just agreeing to dismiss the case as presented on the day of execution of the agreement. Though it may not be the strongest language for a comprehensive release, it does specifically include all claims that “would have been asserted” by either party. Based on the plain and unambiguous language, the release applied to all claims raised or contemplated before or after the execution of the settlement agreement. None of the claims raised by either party during the course of litigation survived the dismissal order.
Third, the Thompsons attempt to get around the broadly worded language in Provision 10 by arguing that “liquidation” of the corporation was not complete before the district court dismissed the claims. They propose that liquidation is “a multi-step wind-up process which includes collecting debts owed the corporation (K.S.A.17–6808), preserving corporation property, paying and satisfying all liens on corporate funds and other debts (K.S.A.17–6810) and distributing remaining assets to shareholders.” The Thompsons seem to be arguing that “liquidation” of the corporation only occurs as one of the last steps of the corporate wind-up process and was not completed as of April 4, 2012.
The Harnesses' brief does not directly address what they believe to be the correct definition of liquidation; however, since they moved for dismissal of all claims, it is reasonable to assume they believed liquidation was completed as of April 4, 2012.
“Liquidation” is not defined within the contract and is used in the contract only one time: in Provision 10. Black's Law Dictionary lists three possible definitions of liquidation:
1. “The act of determining by agreement or by litigation the exact amount of something (as a debt or damages) that before was uncertain.
2. The act of settling a debt by payment or other satisfaction.
3. The act or process of converting assets into cash, esp. to settle debts.” Black's Law Dictionary 1015 (9th ed.2009).
All three of these definitions apply to this case, and each would dictate a slightly different timeframe for when “liquidation” of CCF would be complete as a condition for dismissal of the parties' claims. The settlement agreement set out the parties' intent for the contract in the Recitals, but that section does not assist in deciding which possible definition of liquidation the parties intended. It is clear from review of the entire settlement agreement that the parties' goals were to sell the CCF real estate, distribute all funds to the shareholders, completely dissolve the corporation, and end litigation between the parties. However, this does not clarify when “liquidation of the company” would be complete and trigger the dismissal of the parties' litigation. For these reasons, it is reasonable to conclude that the word “liquidation” in Provision 10 is ambiguous.
If a document is ambiguous, then “ ‘ “ ‘facts and circumstances existing prior to and contemporaneously with its execution are competent to clarify the intent and purpose of the contract in that regard, but not for the purpose of varying and nullifying its clear and positive provisions.’ “ [Citations omitted.]' “ Central Natural Resources v. Davis Operating Co., 288 Kan. 234, 245, 201 P .3d 680 (2009) (quoting Butts v. Lawrence, 22 Kan.App.2d 468, 473, 919 P.2d 363 [1996] ).
CCF's real estate was sold; the transaction closed on November 3, 2011. The proceeds of that sale were deposited in the bank, and Kerbs ordered the dissolution of CCF by December 31, 2011. Following difficulties between the parties, the funds from the sale of the real estate were distributed to the shareholders on March 16, 2012. CCF was officially dissolved on March 27, 2012, and the 2012 federal and state tax returns were completed on April 3, 2012.
At the hearing on the final dismissal motion, the Harnesses presented documentation to establish that all necessary dissolution documents had been filed with the Kansas Secretary of State and all tax forms had been completed. According to the documents, as of April 4, 2012, the sole asset of CCF (the real estate) had been successfully converted into cash, the parties had agreed on the exact amount of money each stockholder would receive from the corporation, and the payments to the stockholders had been made. It appears that regardless of which definition of liquidation was intended by the parties, all three definitions were satisfied before April 4, 2012; therefore, this court can conclude that the district court properly enforced Provision 10 and dismissed all claims between the parties.
Fourth, the settlement agreement provided for a remedy in case the parties had disputes arising out of the settlement agreement itself. Provision 7 provided for the binding arbitration of any disputes arising out of the settlement agreement. Kansas has a strong policy of favoring arbitration and will enforce such agreements even in the face of uncertainty. Hemphill, 41 Kan.App.2d at 735. As a result, any claims between the parties arising under the settlement agreement are barred unless first arbitrated. There has been no showing by the Thompsons that any of their allegations of error arising out of the settlement agreement were first brought before an arbitrator. Therefore, they are barred.
Accordingly, we hold that all of the Thompsons' allegations of error are without merit and we affirm the judgment of the district court.