|
STATE OF MINNESOTA
IN COURT OF APPEALS
C4-00-1379
R. Edwin Powell, et al.,
Respondents,
vs.
MVE Holdings, Inc., et al.,
Appellants,
MVE Investors, LLC., et al.,
Defendants.
Filed May 15, 2001
Affirmed
Lansing, Judge
Dakota County District Court
File No. C59710024
James H. Kaster, Nicholas G. May, Diane M. Odeen, Nichols, Kaster & Anderson, 4644 IDS
Center, 80 South Eighth Street, Minneapolis, MN 55402-2242; and
Eric J. Magnuson, Rider, Bennett, Egan & Arundel, LLP, 333 South Seventh Street, Suite 2000,
Minneapolis, MN 55402; and
Paul J. Rogosheske, Thuet, Pugh, Rogosheske & Atkins, Ltd., 222 Grand Avenue West, Suite
100, South St. Paul, MN 55075 (for respondents)
Robert L. DeMay, Daniel Oberdorfer, Leonard, Street & Deinard, P.A., 150 South Fifth Street,
Suite 2300, Minneapolis, MN 55402; and
Gerald Walpin, Rosenman & Colin, LLP, 575 Madison Avenue, New York, NY 10022-2585
(for appellants)
Considered and decided by Anderson, Presiding Judge, Lansing, Judge, and Randall, Judge.
S Y L L A B U S
A corporate president has apparent authority to enter into a contract with an employee when the
contract involves matters within the corporation's ordinary course of business, the employee
reasonably believes that the corporate president has authority to enter into the contract, and the
belief is traceable to the corporation's conduct.
O P I N I O N
LANSING, Judge
MVE Holdings, Inc. (Holdings), appeals from judgment and denial of its new-trial motion in a
breach-of-contract action brought by R. Edwin Powell, its former employee and shareholder. The
district court found that Holdings contracted to redeem Powell's stock and then breached that
contract. Holdings appeals, claiming that it did not agree to redeem Powell's stock; that its
president and CEO did not have authority to make such an agreement; and that any agreement was
not the parties' final expression but rather evidence of negotiation, is void for lack of consideration,
and is against public policy. We conclude that the evidence supports the district court's findings and
affirm.
FACTS
From 1993 until January 23, 1997, R. Edwin Powell was CEO and president of CAIRE, Inc., a
Delaware company based in Burnsville, Minnesota. CAIRE manufactures home health-care
products, including portable oxygen tanks. Powell had worked for CAIRE, a subsidiary of
Holdings, for the preceding 13 years as an at-will employee. In addition, Powell and the Powell
Family Limited Partnership were minority shareholders in Holdings, owning 63,747 shares or
11.9% of the company. Trial testimony established that Powell paid $114,000 to $344,000 for the
stock during his employment.
In 1996, a group of investors decided to acquire Holdings and CAIRE. They formed MVE
Investors, LLC (Investors), a Delaware limited-liability company with its principal place of business
in New York. Investors, organized solely to acquire a majority interest in Holdings, purchased the
shares of three retiring Holdings shareholders in June 1996 as part of a recapitalization of the
company. Investors paid the retiring shareholders $125.456 per share, investing $47 million in
Holdings to become its primary owner.
Powell declined Investors' offer to sell his stock and retire with the shareholders who had accepted
Investors' offer. Powell continued as CAIRE's CEO and president. To compensate Powell for
losing his chance to sell his shares in the recapitalization, Holdings loaned Powell $1.5 million
secured by 24,793 of Powell's shares of Holdings' common stock. Holdings called the loan in
January 1998; at the time, an independent company valued the shares at $5.37 per share.
In response to CAIRE's financial setbacks, David O'Halloran, Holdings' CEO and president, met
with Powell on January 23, 1997, to fire Powell. O'Halloran gave Powell the option to resign in lieu
of termination, and Powell chose to resign, writing a resignation letter on January 28, 1997.
The critical factual issues in this litigation revolve around O'Halloran and Powell's January 23,
1997, meeting. The two men sharply disagree on the severance package O'Halloran offered Powell
on behalf of Holdings at the meeting, the terms of which were to be included in a “separation
agreement.” Both men agree that O'Halloran offered Powell six months' salary and an additional six
months' salary if Powell was not re-employed within the six months immediately following his
departure. They also agree that O'Halloran offered Powell $30,000 in out-placement services, a
continuation of Powell's health insurance and other benefits for a year, and a cash bonus if Powell
was successful in lobbying Congress for particular legislation.
But the two men disagree on the terms for the disposition of Powell's stock. Powell testified that
O'Halloran agreed, on behalf of Holdings, to buy Powell's stock at the same price that the retiring
shareholders had been paid at the recapitalization that occurred in August 1996. According to
Powell, O'Halloran told Powell that Holdings would be able to buy the shares within a few weeks
and would buy them no later than August 1997.
O'Halloran maintains that he did not promise Powell that Holdings would buy Powell's stock. But
O'Halloran concedes that at the meeting, he gave Powell a detailed chart showing the number of
shares Powell owned on January 23, 1997, and how much money Powell would receive if those
shares were sold or redeemed at a price of $125.456, the same price the retiring shareholders had
received. O'Halloran also testified that he wrote a letter terminating Powell's employment if he
chose not to resign. In the letter, O'Halloran expressed Holdings' intent to buy Powell's stock in the
same manner as it had bought the retiring shareholders' stock.
After his termination, Powell continued to attend trade-association meetings and to lobby Congress
on Holdings' behalf until April 1997. Holdings and Powell continued to discuss Powell's separation
agreement until April 1997, when O'Halloran informed Powell in writing that Holdings would no
longer reimburse Powell for any expenses he incurred on behalf of Holdings. Also, Powell testified
that O'Halloran called Powell in April to tell him that O'Halloran had lost board support for the
stock redemption and that the deal was off.
Holdings fired O'Halloran from his position as CEO and president of Holdings in August. As part
of the separation agreement that followed O'Halloran's discharge, he agreed to represent that he
did not “make any statements or provide any writings that [he] in good faith believe[d] could
reasonably be construed to constitute any agreement, oral or written, concerning the payment of
severance or similar payments to, or the redemption or other disposition of capital stock of, R.
Edwin Powell.”
Powell brought this action against Holdings in October 1997, claiming, among other things, that
Holdings had contracted to buy back his shares and then breached that contract. Chart Industries
merged with Holdings in February 1999, paying $78 million for Holdings' stock. The merger
agreement specified that shareholders who released claims against Holdings would receive $45 per
share, but shareholders refusing to release claims against Holdings would receive only $25 per
share. Powell refused to drop his lawsuit, and Holdings redeemed his shares at $25 per share,
paying him a total of about $860,000 and retaining about $680,000 for defense costs associated
with Powell's lawsuit. Powell also received shares of stock in a Holdings subsidiary as a result of
the merger.
Following a nine-day bench trial, the district court found that Holdings had contracted to buy
Powell's stock and breached the contract. The district court awarded Powell $3,455,887.20, the
amount that Powell would have received had he sold his non-pledged stock for $125.456 per
share, less $860,050 Powell received for his shares after the Chart merger, and also ordered
Powell to transfer to Holdings the Holdings subsidiary shares he had acquired in the Chart merger.
Both parties brought posttrial motions for amended findings and a new trial. The court amended its
findings, but denied the new-trial motions. Holdings appeals, claiming that O'Halloran did not have
authority to agree on its behalf to buy Powell's stock; that the district court's finding that O'Halloran
and Powell entered into a contract is contrary to the evidence; and that any agreement was not the
parties' final expression, is void for lack of consideration, and is against public policy.
ISSUES
I. Did the district court err in finding that O'Halloran had apparent authority to act for Holdings in
entering into a stock-redemption agreement with Powell?
- Did the district court err in finding that the evidence established a stock-redemption
agreement between O'Halloran and Powell?
- Is the agreement between O'Halloran and Powell invalid because it is not a final written
agreement, lacks consideration, or is in violation of public policy?
- Is Holdings entitled to a new trial because the district court's findings are manifestly contrary
to the weight of the evidence?
ANALYSIS
In a case tried without a jury, the scope of review is limited to determining whether the district
court's findings are clearly erroneous and whether the court erred as a matter of law. Schweich v.
Ziegler, 463 N.W.2d 722, 729 (Minn. 1990). The district court's findings “shall not be set aside
unless clearly erroneous, and due regard shall be given to the opportunity of the trial judge to judge
the credibility of the witnesses.” Minn. R. Civ. P. 52.01. On appeal, the district court's findings will
be reversed only if the “reviewing court is left with a definite and firm conviction” that the district
court has made a mistake. Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987) (citation
omitted). But this court exercises independent judgment on purely legal questions. Frost-Benco
Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).
I
Holdings argues that O'Halloran did not have apparent authority to enter into a stock-redemption
agreement with Powell. Powell does not dispute that O'Halloran did not have express authority to
enter into such an agreement.
A principal is bound not only by an agent's actual authority but also by authority that the principal
has apparently delegated to the agent. Duluth Herald & News Tribune v. Plymouth Optical Co.,
286 Minn. 495, 498, 176 N.W.2d 552, 555 (1970). Apparent authority is authority a principal
“holds an agent out as possessing, or knowingly permits an agent to assume.” Foley v. Allard, 427
N.W.2d 647, 652 (Minn. 1988). To find apparent authority, (1) “the principal must have held the
agent out as having authority, or must have knowingly permitted the agent to act on its behalf,” (2)
third parties “must have [had] actual knowledge that the agent was held out by the principal as
having such authority or had been permitted by the principal to act on its behalf,” and (3) “proof of
the agent's apparent authority must be found in the conduct of the principal, not the agent.”
Hockemeyer v. Pooler, 268 Minn. 551, 562, 130 N.W.2d 367, 375 (1964); Restatement
(Second) of Agency § 8 (1958).
Whether an agent is clothed with apparent authority is a question of fact. Hagedorn v. Aid Ass'n
for Lutherans, 297 Minn. 253, 257, 211 N.W.2d 154, 157 (1973). In determining whether
apparent authority exists, the court may consider any statements, conduct, lack of ordinary care, or
manifestations of the principal's consent, such that a third party might be justified in concluding that
the agent acted with apparent authority. McGee v. Breezy Point Estates, 283 Minn. 10, 22, 166
N.W.2d 81, 89 (1969); Restatement (Second) of Agency § 27 (1958) (describing creation of
apparent authority).
The district court found that O'Halloran had apparent authority to enter into a stock-redemption
agreement with Powell. Holdings can be held to O'Halloran's agreement only if Powell's belief that
O'Halloran had authority to make that agreement is reasonable and traceable to Holdings. See
Hockemeyer, 268 Minn. at 562, 130 N.W.2d at 375. But because corporate presidents generally
control and supervise a corporation's business, unless there is contrary evidence, contracts made
by a corporation's president in the ordinary course of business are presumed to be within the
president's authority. 2A William Meade Fletcher et al., Fletcher Cyclopedia of the Law of
Private Corporations § 559 (perm. ed., rev. vol. 1992); see also Foley v. Wabasha Nelson
Bridge Co., 207 Minn. 399, 401, 291 N.W. 903, 905 (1940) (quoting with approval earlier
version of the treatise). Holdings argues that the stock-redemption agreement was so extraordinary
that, as a matter of law, Powell could not reasonably have believed that O'Halloran was authorized
to agree to it. The evidence, however, does not support this argument.
Whether a contract is in “the ordinary course of business” is, in most instances, part of the
fact-specific inquiry of whether apparent authority exists. Lee v. Jenkins Bros., 268 F.2d 357, 370
(2d Cir. 1959) (surveying cases deciding what is or is not an extraordinary contract and concluding
that except in certain limited circumstances the inquiry is the same factual inquiry as whether
apparent authority exists). See also Restatement, supra, § 27 cmt. a (“[A]pparent authority can be
created by appointing a person to a position, such as that of manager or treasurer, which carries
with it generally recognized duties * * *.”). The factual inquiry depends on a number of factors,
including the nature of the contract, the officer negotiating it, and the corporation's usual manner of
conducting business. Id. at 369 (finding that corporation president's promise to pay pension to
newly hired manager was not extraordinary); see also Foley, 207 Minn. at 403-04, 291 N.W. at
905-06 (finding that corporate president's contract modification to allow agent to collect a salary
was not in corporation's ordinary course of business).
A number of facts support a determination that the contract between O'Halloran and Powell was
not extraordinary. Just six months earlier, in August 1996, Holdings had redeemed other
shareholders' stock for the same price O'Halloran offered Powell. At the time of the 1996
recapitalization, with board approval, O'Halloran signed the shareholders' agreement on behalf of
Holdings, agreeing to buy the shares of the departing shareholders for $125.456 a share, the same
amount O'Halloran offered to Powell. Powell could have reasonably believed that if O'Halloran had
the authority to agree on behalf of Holdings to buy stock in August 1996, he had similar authority in
January 1997. See Temple, Brissman & Co. v. Greater St. Paul Corp., 189 Minn. 236, 237,
248 N.W. 819, 819 (1933) (holding that corporate president was clothed in apparent authority to
bind corporation to pay for corporate audit because corporation had previously paid for two other
audits).
Holdings also alleges that the district court based its apparent-authority finding solely on
O'Halloran's position as Holdings' president, CEO, and member of its board of directors and that
proof of O'Halloran's authority cannot be found in his title without some other manifestation of
authority traceable to Holdings. To make its point, Holdings cites cases standing for the proposition
that an agent's position alone is not sufficient evidence of apparent authority to bind the corporation
to obligations incurred by that agent. See, e.g., Thompson v. North Star Muskrat Farm, Inc.,
183 Minn. 314, 315-16, 236 N.W. 461, 462 (1931) (finding no apparent authority for corporate
vice-president to enter into agreement with real-estate broker when vice-president made agreement
without board authorization); Bloomingdale v. Cushman, 134 Minn. 445, 450, 159 N.W. 1078,
1080 (1916) (finding no apparent authority when president signed bank notes without board
authorization).
Although a job title alone will not conclusively establish apparent authority for a contract, Powell's
belief that O'Halloran was authorized to redeem Powell's stock is traceable, in part, to O'Halloran's
position as Holdings' top-ranking executive. See Frank Sullivan Co. v. Midwest Sheet Metal
Works, 335 F.2d 33, 40-41 (8th Cir. 1964) (finding that superintendent had apparent authority to
bind contractor because superintendent was highest-ranking person sent to assess construction job
and communicate with subcontractor); Associated Lithographers, Inc. v. Stay Wood Prods.,
Inc., 279 N.W.2d 787, 790 (Minn. 1979) (holding that executive vice-president had apparent
authority to bind corporation to printing contract); Lindstrom v. Minnesota Liquid Fertilizer Co.,
264 Minn. 485, 497, 119 N.W.2d 855, 863 (1963) (finding that branch manager had apparent
authority to bind company to contract because fertilizer company led salesperson to believe that
branch manager's position included authority to enter into contract to buy materials).
Because corporations are engaged in many different transactions and because the pace of
corporate business is too swift to insist on express approval by a corporation's board of directors
for every transaction labeled “unusual,” third parties commonly rely on the authority bestowed on
corporate officials. Lee, 268 F.2d at 366; Note, Inherent Power as a Base of a Corporate
Officer's Authority to Contract, 57 Colum. L. Rev. 868, 885 (1957) (describing courts'
“increasing tendency” to vest a corporate president with broad apparent authority to bind the
corporation to contracts executed by that president). In fact, Holdings' officers' conduct after
Powell left its employ demonstrates additional unapproved action and illustrates the way in which
Holdings conducted its business. In February and March 1997, Holdings' in-house counsel made
two separate proposals to Powell to buy Powell's stock, despite not having prior board approval
for those proposals.
Further illustrating the importance of an agent's corporate position as a manifestation of the
principal's consent to the agent's actions, the tentative draft of the third restatement of agency
partially defines apparent authority based on an agent's position:
When an agent holds a position within an organization, or has been placed in
charge of a transaction or situation, a third party acts reasonably in believing that
the agent has authority to do acts consistent with the position the agent occupies
absent knowledge of circumstances that would lead a reasonable third party to
inquire into the existence, extent or nature of the agent's authority.
Restatement (Third) of Agency § 2.03 (Tentative Draft No. 1, 2000).
It is significant that O'Halloran's appearance of authority resulted from Holdings' conduct. Holdings
placed O'Halloran in the position to ask Powell to resign or to be fired and to offer Powell a
severance package. Holdings also invested authority in O'Halloran to buy shares from the retiring
shareholders at the time of the recapitalization, leading to Powell's reasonable belief that O'Halloran
had authority to buy Powell's stock as well.
Holdings points out that in the face of evidence raising questions as to the agent's authority, third
parties dealing with agents are put on inquiry and must discover whether the agent has the authority
to complete the proposed act. See Truck Crane Serv. Co. v. Barr-Nelson, 329 N.W.2d 824,
827 (Minn. 1983). Holdings contends that Powell was on notice that O'Halloran lacked authority
because at the time of the recapitalization he had entered into a stockholders' agreement specifying
that Holdings could not repurchase securities without the approval of a majority of the board of
directors and three Investors' directors. But even accepting that Powell knew O'Halloran needed
board and Investors' approval to agree to buy the stock, it is unclear what Powell could have done
to ascertain whether O'Halloran had the necessary approval. Both O'Halloran and Holdings'
in-house counsel testified that Holdings' board acted informally and secretly, generally preparing
board resolutions only when a third party such as the IRS required them. In fact, although
O'Halloran testified that Holdings' board had approved the decision to terminate Powell, there are
no corporate minutes reflecting this decision. Had Powell looked to the board for a writing
confirming the stock-redemption agreement, he would likely not have found one even if the board
did agree to redeem Powell's stock.
The district court did not err in concluding that O'Halloran had apparent authority to enter into a
stock-redemption agreement.
II
Holdings asserts that whether or not O'Halloran had apparent authority, the evidence is insufficient
to support the district court's finding that O'Halloran agreed to buy the stock from Powell. “If in
dispute, the existence and terms of a contract are questions for the fact finder.” Morrisette v.
Harrison Int'l Corp., 486 N.W.2d 424, 427 (Minn. 1992) (citation omitted). An appellate court
has limited review over findings of fact, and those findings may only be overturned if manifestly
contrary to the evidence. Id.; Greer v. Kooiker, 312 Minn. 499, 507, 253 N.W.2d 133, 139-40
(1977) (upholding district court finding of oral contract because finding was not clearly erroneous).
Whether a contract has been formed is judged objectively by the parties' conduct, not by the
parties' subjective intent. Cederstrand v. Lutheran Bhd., 263 Minn. 520, 532, 117 N.W.2d 213,
221 (1962). The court must determine not what the parties really meant, but what words and
actions justified the other party to assume what was meant. Crince v. Kulzer, 498 N.W.2d 55, 57
(Minn. App. 1993). In determining whether a contract was formed, this court may look behind
words to “consider the surrounding facts and circumstances in the context of the entire transaction,
including the purpose, subject matter and nature of it.” Capital Warehouse Co. v.
McGill-Warner-Farnharm Co., 276 Minn. 108, 114, 149 N.W.2d 31, 35 (1967).
The district court found that a contract had been formed between Powell and Holdings and that
Holdings had breached the contract. The court's findings specifically took into account its
determinations on credibility, stating that
[t]he Court has had the opportunity to be in the unique position to observe the
witnesses and weigh their credibility. The Court has considered their relationship to
the parties, their interest or lack of interest in the outcome of the case, their age,
experience, manner and appearance, their ability and opportunity to know,
remember and relate facts, their frankness and sincerity, or lack thereof, and the
reasonableness of their testimony in light of all the other evidence in the case.
The court went on to state that “[t]he critical issue for the Court's consideration was the credibility
of Powell and O'Halloran as to what was said at the January 23, 1997 meeting, how it was said,
and what was meant. This credibility judgment was pivotal in the Court's decision-making.” The
court specifically discredited O'Halloran's testimony, stating in a memorandum attached to an order
amending its findings that it did not find O'Halloran's testimony to be credible and did not accept his
version of the events.
The record contains ample evidence supporting the district court's determination that O'Halloran
offered, on behalf of Holdings, to redeem Powell's stock and that Powell agreed to that
redemption. The strongest evidence pointing to a contract between Holdings and Powell is the
chart and letter O'Halloran prepared for the January 23 meeting. The handwritten chart depicts
Powell's shares on that date: 24,793 shares pledged as collateral for Powell's loan and another
34,402 shares labeled “non-optioned/non-restricted.” The chart shows 16,590 of Powell's shares
redeemed for cash at the same sum that was paid the retiring shareholders, $125.456, for a total
sum of $2,081,315. The chart also depicts Powell's remaining “non-optioned/non-restricted”
17,812 shares being redeemed for preferred B stock, at a value of $2,234,622. This amount of
money is identical to what Powell would have been paid had he sold his shares after Holdings'
1996 recapitalization.
While Holdings maintains that the chart was meant as a “draft” for O'Halloran's use only and points
out that the word “draft” is written on the top of the chart, O'Halloran's act of giving a copy of the
chart to Powell and later directing Holdings's human-resources director to type the chart and give
Powell the typed version of the chart belies that argument.
Equally damaging to Holdings's claim that the two men made no agreement is O'Halloran's
“termination” letter to Powell, prepared in case Powell refused to resign and O'Halloran was forced
to fire him. O'Halloran wrote Powell that “[w]hile there is never a desirable time for a decision like
this, I do feel that the recent investment and redemption process provide both a model and a means
for this separation to occur in a very fair and enriching way.” He went on to state that “as part of
the separation and release process, I have arranged for the Company to redeem your non-optioned
and nonrestricted stock for cash and securities in the same proportions to that received by other
redeeming shareholders in August.”
Other evidence tends to prove that O'Halloran, on behalf of Holdings, agreed to redeem Powell's
stock at the January 23, 1997, meeting. O'Halloran prepared an agenda for the meeting, listing
“Stock redemption” as an agenda item. Powell took notes at the meeting, and his notes
corroborate O'Halloran's agenda, listing discussed items in the same order and stating “cash + pref.
B for remaining stock.”
Further, at trial, Powell entered into evidence a document provided by Holdings's bank stating,
“[a]n additional $2.6 [million] will be left in MVE Holdings account which will be potentially utilized
to repurchase Ed Powell's stock. The Ed Powell transaction will be completed by August * * *.
The stock would then be available for key officers and/or the Investor group to purchase.”
In February and March 1997, while negotiating Powell's separation agreement, Holdings offered to
buy a portion of Powell's stock at the same price that Powell alleged it had agreed to buy all the
stock—$125.456—and also offered to attempt to arrange for the repurchase of the rest of the
stock. In the February offer letter to Powell, Holdings' counsel stated that Holdings would attempt
to arrange the sale of the stock by August 31, 1997, and stated, “we are confident we would be
able to achieve this goal.” In June, O'Halloran sent a letter soliciting Holdings' officers to buy
Powell's stock. These communications evidence Holdings' officers' belief that Holdings had agreed
to buy Powell's stock in January 1997.
Also, Powell's attorney sent a conflict-of-interest waiver to Holdings on January 23, 1997, stating
that “[Holdings] hereby waives any and all conflicts that may exist should [attorney] represent
Ralph E. Powell in connection with the sale of his company stock * * *.” Holdings' counsel signed
and returned the waiver, apparently not disavowing the waiver's purpose, the sale of Powell's
stock. Further, Powell's attorney testified that during a telephone conference with O'Halloran and
Holdings' counsel in March 1997, he asked whether Holdings intended to redeem Powell's stock,
and O'Halloran purportedly stated, “We are going to buy the stock. We just don't want to put it in
writing.”
To show that O'Halloran and Powell did not agree that Holdings would buy Powell's stock,
Holdings points out that the stock-redemption agreement is not part of the proposed separation
agreement O'Halloran gave Powell at the January meeting, Powell kept the stock-redemption
agreement secret until late February or early March, and in his letter of resignation written after the
January 23 meeting, Powell asked Holdings to buy his stock.
But Powell satisfactorily explains these facts, stating that the separation agreement was distinct from
the stock-redemption agreement and that O'Halloran wanted the latter agreement to remain
confidential. According to Powell, O'Halloran wanted the stock agreement and Powell's
termination to be private to avoid setting a “bad precedent.” Also, Powell states that he asked
Holdings to buy back his stock in his resignation letter at O'Halloran's request and styled the letter
“taking words and concepts off of Mr. O'Halloran's letter.”
The evidence, therefore, supports the district court's finding that O'Halloran agreed to buy Powell's
stock.
III
Holdings also challenges the validity and enforceability of the contract on three grounds. First,
Holdings asserts that the agreement between Powell and O'Halloran was not a final, written
expression, but only evidence of continued negotiations between the parties.
A signed agreement is not required for formation of a contract. Aratex Servs. Inc. v. Blue Horse,
Inc., 497 N.W.2d 283, 285 (Minn. App. 1993), review denied (Minn. May 11, 1993). But
“where the parties know that the execution of a written contract was a condition precedent to their
being bound, there can be no binding contract until the written agreement was executed.” Dataserv
Equip., Inc. v. Technology Fin. Leasing Corp., 364 N.W.2d 838, 841 (Minn. App. 1985),
(finding no contract after one party rejected the other's counteroffer), review denied (Minn. May
31, 1985) (citation omitted).
The record contains no evidence, however, that O'Halloran and Powell intended to impose a
condition precedent requiring a written contract. See Asbestos Prod., Inc. v. Healy Mechanical
Contractors, Inc., 306 Minn. 74, 78, 235 N.W.2d 807, 809 (1975) (finding no condition
precedent to reduce contract to a writing when parties have assented to all the essential terms of
the contract). Thus, in the absence of evidence to the contrary, the agreement between Powell and
O'Halloran was not a preliminary negotiation but, rather, the parties' final agreement.
Holdings alternatively argues that any agreement between Powell and Holdings is void because
Powell did not furnish adequate consideration. When a contract is not supported by consideration,
no valid contract is formed. Franklin v. Carpenter, 309 Minn. 419, 422, 244 N.W.2d 492, 495
(1976). Consideration is “something of value given in return for a performance or promise of
performance,” Deli v. Hasselmo, 542 N.W.2d 649, 656 (Minn. App. 1996), review denied
(Minn. Apr. 16, 1996), and requires that a contractual promise be the product of a bargain. Baehr
v. Penn-O-Tex Oil Corp., 258 Minn. 533, 538, 104 N.W.2d 661, 665 (1960). The
determination of whether sufficient consideration underlies an agreement raises a question of law,
which this court reviews de novo. Brooksbank v. Anderson, 586 N.W.2d 789, 794 (Minn. App.
1998), review denied (Minn. Jan. 27, 1999).
Powell asserts and O'Halloran concedes that, in exchange for the stock redemption, O'Halloran
asked him to continue, even after he left CAIRE, to participate as a member of several
trade-association boards, to attend trade-association meetings, and to lobby Congress on behalf of
Holdings. Additionally, Powell and O'Halloran testified that to disrupt CAIRE's business as little as
possible and because of his belief that customer goodwill might be affected if customers felt that
Powell was fired, O'Halloran asked Powell to contact CAIRE's key customers and industry
contacts to reassure them that Powell's departure was a positive, voluntary step. Powell performed
these functions until April 1997, when O'Halloran wrote a letter requesting that Powell no longer
make those efforts and telling Powell that Holdings would no longer pay him or offer reimbursement
for any incurred expenses.
Holdings asserts that Powell's lobbying activities were not performed as consideration for stock
redemption but, instead, for a cash bonus tied to those efforts and that the other tasks Powell
claims to have performed were of no value to Holdings. But even if Powell's lobbying efforts are
discounted, he performed other tasks for Holdings at Holdings' request. Also, a court will not
examine the adequacy of consideration so long as something of value has passed between the
parties. Brooksbanks, 586 N.W.2d at 794; see also Cederstrand, 263 Minn. at 531, 117
N.W.2d at 220 (“[B]argain does not mean an exchange of things of equivalent, or any value.”).
Although the consideration that Powell furnished may not have been as significant as the benefits
that Holdings promised to confer, Powell provided adequate consideration, and the agreement
between Powell and Holdings is not void for lack of consideration.
Relying on Berreman v. West Publ'g Co., 615 N.W.2d 362 (Minn. App. 2000), review denied
(Minn. Sept. 26, 2000), Holdings also claims that the oral agreement between Holdings and Powell
is against public policy because the agreement prefers Powell as a shareholder at the expense of the
other shareholders. In Berreman, this court discussed the “equal-opportunity rule” found in
Donahue v. Rodd Electrotype Co., 328 N.E.2d 505, 518 (Mass. 1975), which forces a closely
held corporation buying shares from one shareholder to offer to buy shares from other shareholders
at an identical price. Berreman, 615 N.W.2d at 370. Holdings contends that under Berreman, this
court must find that O'Halloran breached his fiduciary duty to the remaining Holdings' shareholders
when he offered to buy Powell's shares for more than Holdings was willing to pay other
shareholders and, because of that breach of fiduciary duty, the agreement is void as against public
policy.
But Holdings' argument is unpersuasive in this context. The “equal-opportunity rule” is designed to
protect minority shareholders from being “frozen out.” Id. In making this argument, Holdings
ignores the fact that if this court applied the rule to the facts in the case, it would not be protecting a
minority shareholder. Further, buying one shareholder's shares at a premium could reasonably be
founded on a valid business judgment. See id. (recognizing that the Massachusetts Supreme Court
later retreated from the Donahue holding in Wilkes v. Springside Nursing Home, Inc., 353
N.E.2d 657, 663 (Mass. 1976), because legitimate business reasons may exist for treating different
shareholders differently).
Because the district court did not err in finding a contract between Holdings and Powell, we need
not address the district court's finding that, in the alternative, Holdings was bound to Powell by
virtue of promissory estoppel.
IV
Finally, Holdings claims that it is entitled to a new trial because the district court's findings are
manifestly contrary to the evidence. Ordinarily, a decision to grant a new trial rests within the sound
discretion of the district court and will not be disturbed absent a clear abuse of that discretion.
Halla Nursery, Inc. v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn. 1990). “On
appeal from a denial of a motion for a new trial, the verdict must stand unless it is manifestly and
palpably contrary to the evidence, viewed in the light most favorable to the verdict.” ZumBerge v.
Northern States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992) (citation omitted),
review denied (Minn. Apr. 29, 1992). The district court's decision was not so manifestly and
palpably contrary to the evidence as to require a new trial.
D E C I S I O N
The district court did not err in finding that O'Halloran had apparent authority to enter into a
contract with Powell and that the parties formed a valid contract supported by consideration, not in
violation of public policy, and not subject to a condition precedent requiring the agreement to be in
writing.
Affirmed.
|