Oldcastle Materials, Inc. v. Rohlin

• Decision Date: 18 November 2004
• Docket Number: No. C 04-4034-MWB.,C 04-4034-MWB.
• Citation: 343 F.Supp.2d 762
• Parties: OLDCASTLE MATERIALS, INC., Plaintiff, v. Roy ROHLIN, Phyllis Rohlin, Gregory A. Bruening, and Keith B. Bruening, Defendants.
• Court: U.S. District Court — Northern District of Iowa

343 F.Supp.2d 762

OLDCASTLE MATERIALS, INC., Plaintiff, v. Roy ROHLIN, Phyllis Rohlin, Gregory A. Bruening, and Keith B. Bruening, Defendants.

No. C 04-4034-MWB.

United States District Court, N.D. Iowa, Western Division.

November 18, 2004.

COPYRIGHT MATERIAL OMITTED

Mark McCormick, Belin Lamson McCormick Zumbach Flynn, Des Moines, IA, for Plaintiff.

Harold W. White, Fitzgibbons Bros. Law Office, Estherville, IA, for Defendant.

MEMORANDUM OPINION AND ORDER REGARDING THE ROHLIN DEFENDANTS' MOTION TO BE DISCHARGED FROM FURTHER LIABILITY AND THE PLAINTIFF'S AND THE BRUENING DEFENDANTS' CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT

BENNETT, Chief Judge.

                TABLE OF CONTENTS
                I. INTRODUCTION ...............................................................765
                     A. Factual Background ......................................................765
                        1. The parties ..........................................................765
                        2. The buy-sell agreement ...............................................765
                        3. The Rohlins' attempts to sell their shares ...........................766
                        4. Notice to the Zeiglers of the Bruenings' offer and the Zeiglers'
                response ...........................................................768
                        5. The Bruenings' offer to the Zeiglers .................................769
                        6. The Zeiglers' attempt to close the deal ..............................769
                     B. Procedural Background ...................................................770
                        1. Oldcastle's Complaint ................................................770
                        2. The Pending Motions ..................................................771
                 II. LEGAL ANALYSIS .............................................................772
                     A. The Motions For Partial Summary Judgment ................................773
                        1. Arguments of the parties .............................................773
                           a. The Bruenings' arguments ..........................................773
                           b. Oldcastle's arguments .............................................774
                        2. Applicable law .......................................................775
                           a. Standards for summary judgment ....................................775
                           b. Applicable contract law ...........................................776
                               i. Specific performance ..........................................776
                              ii. Contract formation ............................................776
                        3. Analysis .............................................................778
                           a. Was the March 22, 2004, letter an "offer"? ........................778
                           b. Did the Rohlins accept the offer? .................................781
                           c. Was the resulting agreement only an agreement to agree? ...........781
                           d. Are the Zeiglers entitled to specific performance? ................782
                

                B. The Rohlins' Motion For Discharge .......................................783
                     C. Immediate Entry Of Judgment .............................................784
                III. CONCLUSION .................................................................786
                

Somebody bought the majority shareholders' shares in the paving company at issue here, but who? The plaintiff, the assignee of the minority shareholders, contends that the minority shareholders bought the shares when they exercised their right of first refusal to match an offer from third-party buyers to buy the shares for approximately $9.3 million. The third-party buyers, on the other hand, contend that the minority shareholders exercised their right of first refusal "prematurely," while the third-party buyers were still verifying and negotiating a final purchase price, then failed to match the third-party buyers"' final offer" for $12.5 million. Consequently, the third-party buyers contend that they bought the shares in question. The majority shareholders concede that they sold the shares to somebody; they just cannot tell who. Confronted with what they contend are conflicting claims that could subject them to double liability, the majority shareholders assert that they should be discharged from liability upon delivering their shares to the court, and that the court should then determine, in an interpleader action between the claimants, who was the successful buyer and at what price. The plaintiff and the third-party buyers, however, contend that the issue of who bought the shares can be resolved on their cross-motions for summary judgment. The parties all assert that the resolution of this matter is urgent, or the paving company's value and very existence will be threatened. Therefore, this matter comes before the court for expedited resolution of the majority shareholders' motion for discharge from liability and the plaintiff's and third-party buyers' cross-motions for summary judgment.

I. INTRODUCTION

A. Factual Background

Despite their many differences, the plaintiff and the third-party buyers have stipulated to most of the facts giving rise to this litigation. The majority shareholders have not taken issue with the facts as stipulated by the other parties. Therefore, the court has drawn the following factual background from the parties' stipulation of facts and documents attached to that stipulation.

1. The parties

Rohlin Construction Company, Inc. (the Company), an asphalt contractor and sand and gravel producer, is a closely-held Iowa corporation with its principal place of business in Estherville, Iowa. The majority shareholders of the Company, and one set of defendants in this action, are Roy Rohlin and Phyllis Rohlin (the Rohlins). The Rohlins own 2,700 shares in the Company, or approximately 77.28 percent of the shares. The minority shareholders are James L. Zeigler and his wife, Joyce Zeigler (the Zeiglers). The Zeiglers own 794 shares, or approximately 22.72 percent of the shares. The Zeiglers have assigned their claims in this case to plaintiff Oldcastle Materials, Inc. (Oldcastle), which does business as Des Moines Asphalt & Paving Company. The third-party buyers referred to above, who are also defendants in this case, are Gregory A. Bruening and Keith B. Bruening (the Bruenings). The Bruenings are also involved in the paving business.

2. The buy-sell agreement

The original shareholders in the Company entered into a Buy and Sell Agreement on August 15, 1974, concerning sales of the Company's shares. The Zeiglers became parties to the Buy and Sell Agreement by amendment dated June 9, 1978. The Buy and Sell Agreement provides, in pertinent part, as follows:

During Rohlin's life he shall not, without consent of the other stockholder, sell, transfer, dispose of or encumber any shares of stock of the corporation now owned or hereafter acquired by him unless he shall have first offered to sell such stock as follows:

a. He shall first offer in writing to sell such stock for sale to the corporation, the offer to be based on a price determined in accordance with the provisions of Article III hereof. If not accepted by the corporation within sixty (60) days such offer shall be deemed revoked.

b. Any share or shares not purchased by the corporation within sixty (60) days after receipt of such offer shall be offered to the other stockholder, who shall have a right to purchase any or all of the stock offered for sale, at the same price and upon the same terms as it was offered to the corporation.

c. If the offer is not accepted by the other stockholder within sixty (60) days after it is offered for sale, Rohlin shall have the right to sell it [sic] to any other person, but shall not sell it without giving the corporation and the remaining stockholder the right to purchase such stock at a price and upon the terms offered by such other person. In any such case Rohlin shall promptly furnish written evidence of the identity of such third party purchaser, as well as the price and terms of such offer, after which the corporation and the other stockholder shall have thirty (30) days to meet such offer, the corporation to have the first right to purchase. Any stock which is not purchased by the corporation or the other stockholder within such thirty (30) day period shall no longer be subject to the terms of this agreement.

d. In the event any of the offers described in this article are accepted in whole or in part, payment of the purchase price shall be made in accordance with the provisions of Article IV hereof. Closing shall take place within 30 days after the offer to sell has been accepted.

Stipulated Appendix, A-1 — A-2 (Buy and Sell Agreement, Art. I).

3. The Rohlins' attempts to sell their shares

Oldcastle and the Bruenings agree, and the Rohlins do not dispute, that, on January 11, 2001, the Rohlins offered to sell their stock to the Company for $7,243,454.40 pursuant to Article I(a) of the Buy and Sell Agreement. However, the Company did not accept that offer within sixty days, so that the offer was deemed revoked. On March 15, 2001, the Rohlins offered to sell their shares to the Zeiglers, on the same terms that the shares had been offered to the Company, pursuant to Article I(b) of the Buy and Sell Agreement. However, the Zeiglers likewise did not accept the offer within sixty days.

The Rohlins apparently then commenced a search for a third-party buyer pursuant to Article I(c). Eventually, on March 22, 2004, the Bruenings made what was denominated as an "Offer to Purchase" the Rohlins' stock. The Bruenings' Offer to Purchase included the following terms:

PREAMBLE

The Buyer wishes to commence negotiating a definitive written agreement providing for the purchase of all of the issued and outstanding shares of the capital stock of the Company owned by Rohlin. To facilitate the negotiation of said Agreement, Buyer wishes to provide an offer to Rohlin which is predicated upon a cursory review of the books and records of the Company and an...