Rennhack v. Rennhack
| Decision Date | 12 May 2022 |
| Docket Number | 2021AP1257 |
| Parties | Michael H. Rennhack, Plaintiff-Appellant, v. Roy H. Rennhack, Howard H. Rennhack, Jr., and Howard H. Rennhack, Sr., Defendants-Respondents, Rennhack Construction Co., Inc., Defendant. |
| Court | Wisconsin Court of Appeals |
Not recommended for publication in the official reports.
APPEAL from an order of the circuit court for Dodge County No 2020CV273 JOSEPH G. SCIASCIA, Judge. Affirmed.
Before Blanchard, P.J., Graham, and Nashold, JJ.
¶1 Michael Rennhack appeals a circuit court order granting summary judgment in favor of Roy Rennhack, Howard Rennhack Jr., and Howard Rennhack, Sr.[1] Michael argues that the terms of a shareholder agreement, which he contends are unambiguous require Roy to sell his shares in a closely held family business, Rennhack Construction Co., Inc.[2] We conclude that the pertinent provisions in the shareholder agreement are ambiguous. However, no party has offered extrinsic evidence to resolve the ambiguity. Therefore, the circuit court properly interpreted the contract on summary judgment as a matter of law. We further conclude that the circuit court's interpretation of the agreement is the most reasonable available interpretation. Therefore, we affirm.
¶2 Rennhack Construction Co., Inc. is a family-owned business established in 1972. It currently has four shareholders Howard Sr., who founded the company and is now retired, and Howard Sr.'s three sons, Michael, Roy, and Howard Jr. Up through 2016, at least, the three Rennhack brothers were the sole directors and officers of the company.[3] Additionally, up through 2016, all three brothers were employed by the company in positions related to its day-to-day operations. For his part, Roy was employed as a construction crew supervisor.
¶3 In 2003, well before the current dispute, the company and its four shareholders entered into the shareholder agreement that is at issue here. The current dispute is about the legal effect-if any-that Roy's decision to terminate his employment in 2016 has under the agreement. We discuss the agreement's pertinent terms in detail below.
¶4 Roy provided notice to the company that he intended to "terminate his employment from the Company effective February 1, 2016." The notice did not specify whether he intended to resign from his position as a crew supervisor only, or whether he also wished to resign from his role as an officer and his role as a director.
¶5 At the same time, Roy initiated negotiations with the other shareholders to sell his shares to them or to the company itself. The parties engaged in a process to determine the value of Roy's shares, but they were unable to agree on a share price. An appraiser determined that the total fair market value of Roy's shares was $569, 826. However, due to a failure to agree on the correctness of the appraised share value, Roy's attorney informed the company in 2017 that Roy would not be selling his shares. Roy continued to serve as an officer and director of the company, at least in name. His signature is on company construction contracts and company checks from the time period following his resignation, and annual filings with the state department of financial institutions have listed Roy as an officer and a director at least through 2020, the year in which the parties submitted their summary judgment materials to the circuit court.
¶6 The conflict over the family business eventually escalated. In April 2020, Michael's legal counsel advised Roy, by letter, that the company was purchasing Roy's shares for the appraised value. The letter also stated that Roy owed the company $225, 452.17 for distributions and benefits that he improperly received after he terminated his employment in 2016, and that his debts to the company would be deducted from the purchase price of Roy's shares.
¶7 Roy and Howard Jr. called a special meeting of the shareholders and directors, at which they purported to issue five additional shares to each of the company's shareholders. The effect of this issuance of shares would have been to change the voting power of different blocks of shareholders, and it would have deprived Michael of his existing effective veto power over certain company decisions. Michael objected to the actions at the shareholder meeting on multiple grounds. Pertinent to this appeal, Michael argued that, under the shareholder agreement, Roy was obligated to sell his shares upon termination of his employment with the company. Therefore, Michael asserted, Roy could not properly call a special meeting of the shareholders and could not vote his shares at any special meeting.[4]
¶8 In July 2020, Michael commenced this action by filing a complaint in the circuit court, which names Roy, Howard Jr., and Howard Sr., as defendants.[5] In addition to requesting relief concerning actions taken at the special meeting, Michael also seeks specific performance of Roy's obligations under the shareholder agreement. More specifically, Michael interprets the agreement as obligating Roy to transfer his shares to the company in exchange for $344, 373.83, [6] and Michael seeks an order compelling Roy to do so.[7]
¶9 Michael moved for summary judgment. At a hearing, the circuit court identified the ultimate question as whether Roy is required to sell his shares at the appraised price pursuant to the shareholder agreement. And, as discussed at length below, that question comes down to the meaning of the term "employment," as that term is used in section 6.01 of the agreement. If it refers exclusively to Roy's position as a construction crew supervisor, then Roy is obligated under the agreement to sell his shares after resigning from that position. However, if it could encompass his other roles in the company as an officer or director, then Roy is not obligated to sell his shares.
¶10 The circuit court initially questioned whether it could resolve the dispute over the meaning of the shareholder agreement as a question of law on summary judgment, or whether there are material factual disputes that would require a trial. In the supplemental briefing that followed, Michael acknowledged that the agreement contained "some duplicative or inartful language," and Roy conceded that it was "not a model of clarity or careful draftsmanship." Nevertheless, while their reasoning and interpretations differed, Michael and Roy both insisted that pertinent terms of the agreement could be interpreted as a matter of law. For his part, Michael argued that the agreement is unambiguous, presenting a question of law for the circuit court to decide. For his part, Roy argued that portions of the agreement are ambiguous, but that it is not ambiguous as a whole, and that it has to be interpreted as a matter of law because "no extrinsic evidence or other circumstances exist for the court to consider."
¶11 The circuit court issued a written decision granting partial summary judgment in Roy's favor. It concluded that, even though the pertinent contract provisions were not models of clarity and appeared to conflict, Roy's interpretation was the better one. Therefore, it determined, Roy was not required to sell his shares as a result of the termination of his employment as a construction crew supervisor. Apart from Michael's claim regarding the issuance of new shares at the special meeting discussed above, the court granted summary judgment to the defendants on all other claims.
¶12 The circuit court later issued a final order resolving all remaining matters in litigation between the parties. Michael appeals the court's determination that, under the terms of the shareholder agreement, Roy remains a director and officer and is not obligated to sell his shares.
¶13 "Summary judgment is appropriate 'if the pleadings depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Affordable Erecting, Inc. v. Neosho Trompler, Inc., 2006 WI 67, ¶19, 291 Wis.2d 259, 715 N.W.2d 620 (quoting Wis.Stat. § 802.08(2) (2019-20)). "We review summary judgment de novo, viewing the facts in the light most favorable to the non-moving party … and making all reasonable inferences in [the non-moving party's] favor." Id.
¶14 Resolution of this appeal turns on whether, based on the terms of the shareholder agreement, Roy is obligated to sell his shares at the appraised price because he is no longer employed as a construction crew supervisor. This requires us to interpret the agreement, which is a contract between the company and its shareholders.
¶15 "Contract interpretation generally seeks to give effect to the parties' intentions." Tufail v. Midwest Hospitality, LLC, 2013 WI 62, ¶25, 348 Wis.2d 631 833 N.W.2d 586. "We presume the parties' intent is evidenced by the words they chose" to use, and therefore, "unambiguous contract language controls contract interpretation." Id., ¶¶26, 25. A contract provision is unambiguous if it is susceptible to only one construction. Id., ¶27. When the meaning of a contract is unambiguous, its interpretation is limited to the four corners of the contract, and we construe it as a matter of law according to its literal terms. Id., ¶26. On the other hand, if the terms of the contract are ambiguous, the parties may introduce extrinsic evidence, and such evidence may be used to determine the parties' intent. Town Bank v. City Real Estate Dev., 2010 WI 134, ¶32, 330 Wis.2d 340, 793 N.W.2d 476. In such cases, our supreme court has explained that interpretation of the contract presents a question of fact to be decided by a jury. Id. ¶16 In this case, for reasons that we...
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