Puy v. Puy, No. 2008AP512 (Wis. App. 1/14/2009), 2008AP512.

• Decision Date: 14 January 2009
• Docket Number: No. 2008AP512.,2008AP512.
• Parties: Timothy Van Der Puy, Plaintiff-Appellant-Cross-Respondent, v. David Van Der Puy, Rebecca Rooks, Thomas Van Der Puy and Van Der Puy LLC, Defendants-Respondents-Cross-Appellants.
• Court: Wisconsin Court of Appeals

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Timothy Van Der Puy, Plaintiff-Appellant-Cross-Respondent, v. David Van Der Puy, Rebecca Rooks, Thomas Van Der Puy and Van Der Puy LLC, Defendants-Respondents-Cross-Appellants.

No. 2008AP512.

Court of Appeals of Wisconsin, District II.

Opinion Filed: January 14, 2009.

APPEAL from orders of the circuit court for Sheboygan County: JAMES J. BOLGERT, Judge. Affirmed.

Before Brown, C.J., Snyder and Neubauer, JJ.

¶ 1 PER CURIAM.

Timothy Van Der Puy (Timothy) appeals an order granting summary judgment in favor of his siblings, David Van Der Puy, Rebecca Rooks and Thomas Van Der Puy, and Van Der Puy, LLC (the Van Der Puys). The summary judgment dismissed Timothy's action to dissolve Van Der Puy, LLC, as well as Timothy's claim that David breached his fiduciary duties as personal representative of their father's estate. Timothy insists numerous facts are in dispute, which typically disqualifies a case from resolution by summary judgment. We conclude, however, that no genuine issues of material facts remain. At bottom, this really is a contract matter. The Van Der Puys cross-appeal an order denying their motion for frivolous costs. We affirm both orders.

¶ 2 Gerhardt Van Der Puy founded Paper Box and Specialty Company. Gerhardt passed ownership to his son, Gerald, who passed it to his four children, Timothy, David, Rebecca and Thomas. Gerald formed Van Der Puy, LLC, a limited liability company whose sole asset is a warehouse. In March 2003, the LLC and Paper Box entered into an eight-year lease. Rental payments from Paper Box to the LLC were suspended sometime in 2004.

¶ 3 Timothy began working at Paper Box in 1976. In 1987 he became sales manager, corporate secretary and a vice president. In September 2003, Timothy, Thomas and David—Paper Box's vice presidents and president, respectively—signed a Small Business Administration note as guarantors and a real estate mortgage giving Associated Bank a security interest in Paper Box. Timothy resigned in July 2004. Pursuant to a Stock Purchase and Redemption Agreement (Redemption Agreement), Paper Box agreed to buy out Timothy's shares of stock for $ 400,000. The Redemption Agreement released Timothy from the loan guarantees he made as an officer of Paper Box.

¶ 4 When Gerald died in April 2005, Timothy consented to David being named personal representative of the estate. Gerald had personally guaranteed loans from Associated Bank, Paper Box's principal lender. In August 2005, Associated Bank called due the notes and filed a claim against Gerald's estate for the approximately $1.3 million outstanding debt. Paper Box could not repay the loans. To save Paper Box from liquidation and to preserve estate assets, the four siblings each entered into a forbearance agreement,¹ essentially a loan to Paper Box from their respective inheritances. The forbearance agreement, which incorporated a debt subordination agreement and a promissory note, allowed Paper Box to continue operating and to pay down its outstanding debt to Associated Bank through the loans from the heirs and refinancing from Oostburg State Bank. By signing, Timothy agreed to forbear pursuing claims against Paper Box in regard to collecting on the Redemption Agreement and gave Oostburg State Bank discretion as to when payments to him and rental payments from Paper Box to the LLC could resume. Timothy also demanded a partial distribution of $55,000 from his $132,000 share of the estate. His siblings took no cash distribution. Oostburg State Bank required Thomas and David to take a two-year pay freeze as part of the refinancing agreement.

¶ 5 Timothy filed suit in 2007 alleging that David, Thomas and Rebecca were operating the LLC in an illegal, oppressive and fraudulent manner and were wasting the LLC's assets. He sought to have a receiver appointed to oversee a judicial dissolution of the LLC. Timothy also claimed that David breached his fiduciary duty to the estate because he did not disclose the conflicts inherent in his various roles and failed to act in the estate's best interest.

¶ 6 The Van Der Puys responded by filing a motion for frivolous sanctions. The court denied the motion without a hearing. The Van Der Puys then moved for summary judgment on grounds that Timothy agreed to the manner in which the LLC was being managed; knew that David was both president of Paper Box and personal representative of their father's estate; and, fully advised by counsel, signed documents agreeing to loan a portion of his inheritance to Paper Box to preserve the estate's assets. The court granted summary judgment to the Van Der Puys. It concluded that the dissolution claim failed the statutory grounds under WIS. STAT. ch. 183 (2005-06),² and that Timothy, without objection and with benefit of counsel, entered into agreements knowing David was "wearing four hats." Timothy appeals.

APPEAL

¶ 7 When reviewing a grant of summary judgment, we apply the same methodology as the trial court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987). We need not repeat that well-established methodology here. See, e.g., Lambrecht v. Estate of Kaczmarczyk, 2001 WI 25, ¶¶20-24, 241 Wis. 2d 804, 623 N.W.2d 751. We state only that summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Green Spring Farms, 136 Wis. 2d at 315. The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment," however. Baxter v. DNR, 165 Wis. 2d 298, 312, 477 N.W.2d 648 (Ct. App. 1991). A disputed fact must be material and the issue genuine. See id. A material fact is one that is "of consequence to the merits of the litigation." Schmidt v. Northern States Power Co., 2007 WI 136, ¶24, 305 Wis. 2d 538, 742 N.W.2d 294 (citation omitted). A factual issue is genuine if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Id.

Alleged Breach of Fiduciary Duties

¶ 8 Timothy contends several factual disputes remain in regard to David's fiduciary obligations. The elements of a claim for breach of fiduciary duty are: (1) the defendant owed the plaintiff a fiduciary duty that (2) the defendant breached (3) causing the plaintiff damage. Berner Cheese Corp. v. Krug, 2008 WI 95, ¶40, ___ Wis. 2d ___, 752 N.W.2d 800. A trustee who fails to make a full disclosure of material facts to a beneficiary or who personally profits from his or her role as a trustee breaches the trustee's duty of loyalty. Zastrow v. Journal Commc'ns, Inc., 2006 WI 72, ¶35, 291 Wis. 2d 426, 718 N.W.2d 51. Whether one breached a fiduciary duty is a question of law that we review independently. Id., ¶12.

¶ 9 The issues Timothy raises largely concern his claims that he entered into agreements without full information due to David's failure to provide it or to disclose his various roles and the conflicts of interest they posed. Timothy points to his counsel's affidavit that counsel did not know David and Thomas were co-guarantors on Paper Box's loan obligations to Associated Bank. But the record is clear that Timothy knew they were co-guarantors as early as September 2003 because he, too, was a co-guarantor of the Associated Bank loan and they signed in each other's presence.

¶ 10 Timothy also contends David failed to disclose potential conflicts of interest resulting from his roles as guarantor, president of Paper Box, the personal representative of the estate, and an heir to Gerald's estate. Timothy alleges that the estate had claims for contribution against its guarantors, and asserts that David failed to pursue that claim against himself and Thomas, as guarantors, or an indemnification action against Paper Box, of which he was president. Timothy argues that David's simultaneous roles posed an irreconcilable conflict of interest that he did not disclose.

¶ 11 Whether or not explained to him using the phrase "conflict of interest," the forbearance agreement clearly advised Timothy, as we paraphrase below, that:

1. he was forbearing exercising any remedies under the Redemption Agreement, promissory notes of Paper Box assigned to him, and all other obligations of Paper Box;

2. no interest would accrue on the amount owed to him under the Redemption Agreement until Oostburg State Bank permitted payments to resume;

3. no interest would accrue on any unpaid balance on the promissory notes assigned to him from the estate;

4. he would receive no rental payments as to his interest in the LLC until Oostburg State Bank permitted them to resume;

5. he would execute a debt subordination agreement; and

6. he would execute a promissory note assigning forever all of his distributable cash interest in the estate as a loan to Paper Box.

¶ 12 Timothy's affidavit avers that he was advised in 2005 that Paper Box "was in financial difficulties" and was presented with "a structured deal that would save Paper Box from going out of business." To make it work, Timothy had to execute the forbearance agreement, debt subordination agreement and promissory note. These requirements and the reasons for them are set forth in a series of "Whereas" clauses and elsewhere in the forbearance agreement. The document corroborates his testimony: that he wanted to help save Paper Box.

¶ 13 In addition, Timothy's deposition testimony and the documents he signed demonstrate that he knew that David wore each of these hats. A seasoned businessman, a seventeen-year officer of Paper Box, a former co-guarantor and an heir himself, any conflicts of interest David might have had were self-evident to Timothy. Moreover, Timothy was advised by the same counsel throughout the probating of the estate and before signing the agreements at issue here. Indeed, his counsel testified that he carefully went over the forbearance agreement with Timothy, advised Timothy that he did not think the terms were...