Title: JOAN BAKER, an individual, as a representative shareholder, and as personal representative of the Estate of Alvin R. Baker V. AYRES AND BAKER POLE AND POST, INC., a Wyoming corporation; LARRY W. AYRES, an individual; and KARAN L. AYRES, an individual

State: wyoming

Issuer: Wyoming Supreme Court

Document:

JOAN BAKER, an individual, as a representative shareholder, and as personal representative of the Estate of Alvin R. Baker V. AYRES AND BAKER POLE AND POST, INC., a Wyoming corporation; LARRY W. AYRES, an individual; and KARAN L. AYRES, an individual2005 WY 97117 P.3d 1234Case Number: 04-221Decided: 08/22/2005
APRIL 
TERM, A.D. 2005

 
 
JOAN 
BAKER, an individual, as a representative

shareholder, 
and as personal representative of

the 
Estate of Alvin R. Baker,

 
 
Appellant

(Plaintiff),

 
 
v.

 
 
AYRES 
AND BAKER POLE AND POST, INC., a

Wyoming 
corporation; LARRY W. AYRES, an

individual; 
and KARAN L. AYRES, an individual,

 
 
Appellees

(Defendants).

 
 
 
 

Appeal 
from the DistrictCourtofUintaCounty

The 
Honorable Dennis L. Sanderson, Judge

 
 

Representing 
Appellant:

            
Clark D. Stith of Greenhalgh, Beckwith, Lemich, Stith & Cannon, P.C., 
Rock Springs, Wyoming. Argument by Mr. 
Stith.

 
 

Representing 
Appellees:

            
Ford T. Bussart and William B. Payne of Bussart, West & Tyler, P.C., 
Rock Springs, Wyoming. Argument by Mr. Payne.   

 
 
 
 
Before 
HILL, C.J., and GOLDEN, KITE, VOIGT, and BURKE, JJ.

 
 
 
 
KITE, 
Justice.

 
 
[¶1]      After Alvin Baker 
passed away, the proceeds of a life insurance policy issued in his name were 
delivered to the named beneficiary, his wife, Joan Baker. Mrs. Baker then sought 
payment from Mr. Baker's business associates, Larry and Karan Ayres, and the 
corporation in which he and Mr. Ayres were the sole shareholders, Ayres and 
Baker Pole and Post, Inc. (the Company) for the value of Mr. Baker's shares in 
the Company. The Ayres and the Company asserted that the proceeds of Mr. Baker's 
life insurance policy were intended to be applied against the value of his 
interest in the Company, such that Mrs. Baker was only entitled to payment of 
the difference between the insurance proceeds and the value of the stock. 

 
 
[¶2]      After the Company 
refused to pay Mrs. Baker the full value of Mr. Baker's shares, she brought suit 
in district court.  On cross-motions 
for summary judgment, the district court ruled in favor of the Ayres and the 
Company and this appeal followed. We hold the Stock Purchase Agreement clearly 
and unambiguously required the Company to procure and own insurance on the lives 
of Mr. Baker and Mr. Ayres. The evidence was undisputed that the Company did not 
purchase and own the life insurance required by the Stock Purchase Agreement. 
Thus, no genuine issue of material fact existed on Mrs. Baker's breach of 
contract claim and she was entitled to judgment as a matter of law on that 
issue. However, we also find from the evidence presented that genuine issues of 
material fact existed on the Ayres' and the Company's claims for imposition of a 
constructive trust and promissory estoppel. Therefore, we hold that the district 
court erred in granting summary judgment as to those 
claims.

 
 
[¶3]      Reversed and 
remanded.

 
 
 
 
ISSUES

 
 
[¶4]      Mrs. Baker 
presents seven issues for consideration:

 
 

1.      
Whether 
the district court erred by imposing a constructive trust in favor of the 
Corporation on life insurance proceeds from a personal life insurance policy 
paid to Widow Baker.

 
 

2.      
Whether 
the district court erred in finding promissory estoppel against Widow Baker 
where there was no promise by Widow Baker or her late husband to buy life 
insurance for the Corporation.

 
 
 
 

3.      
Whether 
the district court erred in finding that Widow Baker breached the provisions of 
a Stock Purchase Agreement where Widow Baker complied with all of her 
obligations under that agreement.

 
 

4.      
Whether 
the district court should have granted Widow Baker's motion for partial summary 
judgment for breach of contract based on the Corporation's failure to pay the 
amounts owing to Widow Baker under the Stock Purchase 
Agreement.

 
 

5.      
Whether 
the district court should have granted Widow Baker's motion for partial summary 
judgment for anticipatory breach of contract based on the Corporation's clear 
and unequivocal announcement that the Corporation had no intention of paying 
what it owed under the Stock Purchase Agreement.

 
 

6.      
Whether 
the district court should have computed interest on amounts owing by the 
Corporation to Widow Baker at eight percent (8%) from October 31, 2000, the date 
of Mr. Baker's death, as provided in the Stock Purchase Agreement, rather than 
arbitrarily giving the Corporation a 61 month interest free grace period until 
June 2003, or, in the alternative, whether statutory interest should be 
imposed.

 
 

7.      
Whether 
the district court erred by granting summary judgment to the Corporation and the 
Ayres on causes of action for constructive trust, promissory estoppel and breach 
of contract where neither the Corporation nor the Ayres ever pleaded those 
causes of action.

 
 
The 
Ayres and the Company present three issues:

 
 

A.                 
Whether 
the District Court correctly granted Appellees' Motion for Partial Summary 
Judgment enforcing the terms and conditions of a corporate Stock Purchase 
Agreement?

 
 

B.                 
Whether 
the District Court correctly found clear and convincing evidence to establish a 
constructive trust upon life insurance proceeds to fund the terms and conditions 
of a corporate Stock Purchase Agreement?

 
 

C.                
Whether 
the District Court correctly imposed the doctrine of promissory estoppel to 
apply proceeds of a life insurance [policy] to fund the terms and conditions of 
a corporate Stock Purchase Agreement?

 
 
 
 
FACTS

 
 
[¶5]      On May 1, 1972, 
Alvin Baker and Larry Ayres formed a partnership to operate a saw mill in 
Mountain View, Wyoming.  
The partnership existed until 1993, when both men and their wives, Joan 
Baker and Karan Ayres,1 formed a Wyoming corporation to 
operate the saw mill. 

 
 
[¶6]      In conjunction 
with the formation of the Company, on April 26, 1993, the Bakers and the Ayres 
executed a Stock Purchase Agreement which provided that they each owned half of 
the corporate stock and, upon the death of Mr. Baker or Mr. Ayres, the surviving 
shareholder would succeed to full ownership and control of the Company. In order 
to effectuate a buy-out of the deceased stockholder's share, the agreement 
provided that "the company has, or plans on procuring insurance" on the lives of 
both men, "which [insurance policies] will be owned by the company." The 
agreement further provided that upon the death of Mr. Ayres or Mr. Baker, the 
proceeds of the deceased's insurance policy would be used to purchase his 
interest in the Company.  Thus, the 
life insurance policies procured by the Company were intended to fund a buyout 
in the event of the death of one of the shareholders, thus securing the 
surviving member's succession to sole ownership and control of all 
stock.

 
 
[¶7]      In 1988, five 
years before the formation of the Company and execution of the Stock Purchase 
Agreement, Mr. Ayres procured a life insurance policy and named the partnership 
as beneficiary. In 1990, Mr. Baker likewise procured a life insurance policy; 
however, he named Mrs. Baker as beneficiary. The Company was never named 
beneficiary of Mr. Baker's life insurance policy, before or after execution of 
the Stock Purchase Agreement, and Mr. Baker never transferred or assigned his 
insurance policy to the Company. Additionally, the Company never procured a 
separate insurance policy on Mr. Baker's life naming itself as 
beneficiary.

 
 
[¶8]      Mr. Baker died on 
October 31, 2000, and Mrs. Baker received the benefits under his life insurance 
policy.  Mrs. Baker subsequently 
asserted her right to the value of the Bakers' share of the corporate stock 
which was valued at $719,000.2  The Ayres and the Company responded that 
the proceeds from Mr. Baker's life insurance policy should be applied to the 
redemption price of the Baker stock pursuant to the Stock Purchase 
Agreement.  They asserted that the 
life insurance policy procured by Mr. Baker in 1990 was the policy procured on 
the life of Mr. Baker referred to in the Stock Purchase Agreement and the Bakers 
breached the agreement by failing to transfer the policy to the Company. They 
contended the life insurance policy proceeds of $500,000 should offset the 
$719,000 worth of stock, resulting in a payment by the Company to Mrs. Baker in 
the amount of $219,000.

 
 
[¶9]      Mrs. Baker 
claimed she was the beneficiary under her deceased husband's life insurance 
policy, making the insurance company's payment of the $500,000 proceeds to her 
appropriate. In addition, she claimed the Company was obligated to pay her the 
full value of the Baker corporate stock, $719,000, pursuant to the terms of the 
Stock Purchase Agreement. 

 
 
[¶10]   When the Company refused to pay the 
entire $719,000 plus interest, Mrs. Baker filed two actions in district 
court.  First, she filed a 
shareholder's derivative action to compel election of directors, allow 
inspection of books and records of the Company, and compel the Company to honor 
its obligations under the buy-out provision of the Stock Purchase 
Agreement.  Second, she filed a 
complaint alleging that the Ayres and the Company breached the Stock Purchase 
Agreement by failing to redeem the Baker stock, repudiated the agreement when 
they refused to pay the full value of the Baker stock, and breached Mr. Baker's 
employment contract by failing to pay wages due. Mrs. Baker also alleged Mr. 
Ayres breached his fiduciary duty by paying bonuses to himself each year after 
Mr. Baker's death and not paying equal bonuses to her. In her second complaint, 
Mrs. Baker also requested an accounting of partnership property. 

 
 
[¶11]   The Ayres and the Company filed 
answers generally denying the claims. They also filed a counterclaim for 
declaratory judgment, seeking a declaration of the rights and obligations of the 
parties under the Stock Purchase Agreement and with respect to certain corporate 
assets.  Specifically, they sought 
judgment declaring:  the Bakers 
breached the Stock Purchase Agreement by failing to effectuate a change in 
beneficiary on Mr. Baker's insurance policy; the Bakers held the insurance 
policy in constructive trust for the benefit of the Ayres and the Company; upon 
payment of the $500,000 policy proceeds, Mrs. Baker breached the Stock Purchase 
Agreement by failing to surrender her 1,000 shares of stock; and, Mrs. Baker was 
entitled to payment from the Ayres and the Company of $219,000 plus interest in 
the amount of $7,200. The Ayres and the Company also moved to consolidate the 
actions filed by Mrs. Baker and to deposit the amount they claimed was owed to 
Mrs. Baker with the clerk of court.

 
 
[¶12]   The district court granted the 
motion to deposit the $219,000 plus interest with the clerk of court and 
consolidated the cases.  The Company 
and the Ayres then moved for partial summary judgment on their counterclaim and 
Mrs. Baker moved for partial summary judgment on her claims for breach and 
anticipatory breach of the Stock Purchase Agreement. After a hearing, the 
district court denied Mrs. Baker's summary judgment motion and granted the Ayres 
and the Company's summary judgment motion.  
Based upon the arguments and evidence presented, the district court found 
that Mr. Ayres and Mr. Baker explicitly agreed that the insurance policies they 
procured in 1988 and 1990 respectively were intended to fund the buy-out 
provision of the Stock Purchase Agreement executed in 1993. The district court 
further found that although Mrs. Baker signed the agreement without reading it, 
she understood that she and her husband were bound by its terms. The district 
court concluded that Mrs. Baker breached the Stock Purchase Agreement, imposed a 
constructive trust on the life insurance policy proceeds and applied them 
against the purchase price of the Baker stock, and applied the doctrine of 
promissory estoppel to deduct the amount already paid to Mrs. Baker under her 
husband's life insurance policy from the amount owed to her for the sale of the 
Baker stock under the Stock Purchase Agreement. Accordingly, the district court 
ordered:

 
 

1.                  
That the 
proceeds of the Farmers New World Life Insurance policy upon the life of Alvin 
R. Baker in the amount of $500,000 are credited under the terms of the Stock 
Purchase Agreement to the amounts owed [Mrs. Baker] for the redemption of her 
stock in [the Company.] 

 
 

2.                  
That the 
Unita County Clerk of District Court shall pay to [Mrs. Baker] from funds 
previously deposited with this Court, the sum of $219,000, together with 
interest thereon at 8% per annum from June 3, 2003, to November 10, 2003, in the 
amount of $7,200.

 
 
[¶13]   Following the district court's 
ruling, the parties filed a joint motion for a determination under W.R.C.P. 
54(b) that there was no just reason for delay and final judgment should be 
entered. The district court entered an order pursuant to Rule 54(b) and this 
appeal followed.3 

 
 
STANDARD 
OF REVIEW

 
 
[¶14]   We review orders granting summary 
judgment according to the following standards: 

 
 
Wyo. R. 
Civ. P. 56 governs summary 
judgments. A summary 
judgment is appropriate when there are no genuine issues of 
material fact and the moving party is entitled to judgment as a matter of law. 
W.R.C.P. 56(c). When reviewing a summary 
judgment, we consider the record in the 
perspective most favorable to the party opposing the motion and give that party 
the benefit of all favorable inferences which may be fairly drawn from the 
record. We review questions of law de novo without giving any deference 
to the district court's determinations.

 
 

Finch 
v. Farmers Co-Op Oil Co., 
2005 WY 41, ¶ 7, 109 P.3d 537, ¶ 7 (Wyo. 2005) (citations omitted).

 
 
 
 
DISCUSSION

 
 
[¶15]   Mrs. Baker argues error in the 
imposition of a constructive trust, the application of promissory estoppel, and 
the failure to find that the Ayres and the Company breached the Stock Purchase 
Agreement.  The Ayres and the 
Company respond that the district court properly concluded Mrs. Baker breached 
the agreement, imposed a constructive trust, and applied promissory 
estoppel.  We begin with 
consideration of the breach of contract claims.

 
 
 
 
1.         
Breach of Contract 

 
 
[¶16]   In its order, the district court 
found that: 

 
 
Joan 
Baker signed the Stock Purchase Agreement without reviewing it.  She nonetheless understood that 
Alvin was bound 
by its terms and she was, likewise, bound by its terms.  Alvin Baker informed his wife of the 
buyout provision and that it was to be funded with life 
insurance.

 
 
The 
court ultimately found that Mrs. Baker signed the agreement, was bound by its 
terms, and breached the agreement.  
Implicit in the court's ruling is the conclusion that no genuine issues 
of material fact existed and the Ayres and the Company were entitled to judgment 
as a matter of law.

 
 
[¶17]   In determining whether the district 
court erred in concluding Mrs. Baker breached the Stock Purchase Agreement, we 
apply our established rules of contract interpretation. 

 
 
[O]ur basic purpose in 
construing or interpreting an insurance contract is to determine the parties' 
true intent. We must determine intent, if possible, from the language used in 
the [contract], viewing it in light of what the parties must reasonably have 
intended. The nature of our inquiry depends upon how clearly the parties have 
memorialized their intent. Where the contract is clear and unambiguous, our 
inquiry is limited to the four corners of the document. 

 
 
We 
interpret an unambiguous contract in accordance with the ordinary and usual 
meaning of its terms. The parties to an insurance contract are free to 
incorporate within the [contract] whatever lawful terms they desire, and the 
courts are not at liberty, under the guise of judicial construction, to rewrite 
the [contract]. It is only when a contract is ambiguous that we construe the 
document by resorting to rules of construction. Whether a contract is ambiguous 
is a question for the court to decide as a matter of law.

 
 
A 
contract is ambiguous if indefiniteness of expression or double meaning obscures 
the parties' intent. Ambiguity cannot be created by the subsequent disagreement 
of the parties regarding the meaning of a contract. If the meaning of a 
provision in a contract is not readily apparent, the court may resort to 
competent evidence of extraneous circumstances to determine the parties' intent. 
Reviewing courts are free to make a determination as to the existence of 
ambiguity whether or not the parties agree one way or the other and whether or 
not the trial court has reached a conclusion one way or the other. 

 
 

Principal 
Life Insurance Co. v. Summit Well Service, Inc., 2002 
WY 172, ¶¶ 17-19, 57 P.3d 1257, ¶¶ 17-19 (Wyo. 2002) (citations 
omitted).

  

[¶18]   Mrs. Baker argues that application 
of these rules requires us to consider first the four corners of the contract 
and, if no ambiguity is found, look no further. Mrs. Baker argues the Stock 
Purchase Agreement unambiguously states that "the company has, or plans on 
procuring insurance upon the lives of Larry W. Ayres and Alvin R. Baker, which 
will be owned by the company." Asserting that the only life insurance policy on 
her husband's life was the Farmers policy, which was owned and procured by him, 
and there was no insurance policy on his life procured or owned by the Company, 
Mrs. Baker contends she was entitled as a matter of law to both the proceeds of 
the Farmers policy ($500,000) and payment for the full value of the Bakers' 
stock in the Company ($719,000), for a total of $1,219,000, plus interest.  

 
 
[¶19]   The Ayres and the Company respond 
that the district court correctly found Mrs. Baker signed the Stock Purchase 
Agreement and was bound by its terms whether she read it or not. They also 
assert the district court correctly found that Mr. Ayres and Mr. Baker intended 
the policies procured in 1988 and 1990 to fund the buy-out provision of the 
Stock Purchase Agreement. Because the agreement provided that the life insurance 
policy proceeds would be used to fund a buyout of Mr. Baker's stock after his 
death, they assert, the district court also correctly concluded Mrs. Baker 
breached the agreement by not accepting the difference in value between the 
insurance proceeds and Mr. Baker's share of the stock as payment for the buy-out 
and instead asserting a right to both the insurance proceeds and the full value 
of Mr. Baker's stock. 

 
 
[¶20]   Before consideration of the Stock 
Purchase Agreement, we consider the Farmers insurance contract, looking to the 
printed policy itself, the application for insurance and any policy amendments. 
Principal Life Ins. Co., ¶ 22.  The insurance application lists Mr. 
Baker as the owner and applicant and Mrs. Baker as the beneficiary.  The Bakers' children are listed as 
contingent beneficiaries. The policy provides that the beneficiary may be 
changed by signed request of the owner. No request for change of beneficiary 
signed by Mr. Baker appears in the record. Looking at the four corners of the 
life insurance policy, the document unambiguously provides that Mrs. Baker was 
the intended beneficiary of the policy proceeds. Thus, as a matter of law Mrs. 
Baker was entitled to payment of the $500,000 benefits payable under the 
policy.    

 
 
[¶21]   Three years after the policy took 
effect, however, the Ayres and the Bakers entered into an agreement  the Stock 
Purchase Agreement  which provided in relevant part as 
follows:

 
 
WHEREAS, 
the Shareholders own capital stock of [the Company], a Wyoming Corporation, with 
principal office located at Mountain 
View, Wyoming, as 
follows:

 
 
            
Alvin R. Baker and Joan E. Baker  
1,000 shares

 
 
            
Larry W. Ayres and Karan L. Ayres            
1,000 shares

            
and

 
 
WHEREAS, 
the Shareholders do desire to limit new shareholders; and 

 
 
* * 
*

 
 
WHEREAS, 
the Shareholders realize that in the event of the death of either of them, or 
the sale of their stock during their life, should the stock in the corporation 
owned by such Shareholder pass into the ownership or control of a person other 
than the remaining Shareholder it would tend to disrupt the harmonious and 
successful management and control of the corporation; and

 
 
* * 
*

 
 
WHEREAS, 
the Shareholders desire to facilitate 
liquidation of the stock of a deceased Shareholder by the creation of a 
guaranteed market for their stock at a fair value; 
and

 
 
WHEREAS, 
the Shareholders desire to use life 
insurance to help achieve these objectives; and 

            

* * 
*

 
 
NOW, 
THEREFORE, in consideration of the premises, the mutual promises hereinafter 
made, and other good, valuable and sufficient consideration the parties hereto 
do execute this Stock Purchase Agreement and do mutually promise each 
other:

 
 
* * 
*

 
 

3.                  
Purchase 
of Stock on Death.

 
 

(a)               
Redemption 
by Company. Except 
as provided in paragraph 3(b), upon the death of any shareholder, their 
estate shall sell and the Company shall redeem all of the Shareholder's stock in 
the Company. . . . 

 
 
* * 
*

 
 
10.       
Insurance Provision.  In order to assure that all or a 
substantial part of the purchase price for the shares of a deceased shareholder 
will be available immediately in cash upon their death, the 
Company has, or plans on procuring insurance upon the lives of Larry W. 
Ayres and Alvin R. Baker, which will be owned by the Company, 
the proceeds of which will be used to 
purchase said deceased shareholder's interest.  The value of the deceased shareholder's 
stock shall be set as provided herein and the proceeds of said policy are not 
included in the value of the company under the terms of this agreement, but are 
to be used to pay for the deceased shareholder's stock and this agreement shall 
be effective as fixing the value of the business interest for estate tax 
purposes for all of the shareholders of the corporation.  The parties agree that the stock is 
jointly owned as set forth in the Agreement and in 
the event of either Larry W. Ayres or Alvin R. Baker's death, their spouse 
agrees to sell her interest to the surviving shareholder, pursuant to this 
Agreement.

 
 
(emphasis 
added.) The agreement was signed by Mr. and Mrs. Ayres and Mr. and Mrs. Baker. 

 
 
[¶22]   Looking at the four corners of the 
document, the Stock Purchase Agreement clearly and unambiguously provides that 
the Company has purchased or will 
purchase insurance on the lives of Mr. Ayres and Mr. Baker. The agreement 
further provides that the Company 
will own the insurance and that, in the event of a shareholder's death, the 
proceeds of the policy on his life will be used to purchase his interest in the 
Company. From the four corners of the document, it is clear as a matter of law 
that the agreement required the Company to purchase and own insurance on the 
lives of Mr. Ayres and Mr. Baker, the proceeds of which would be used to buy out 
their interest in the Company upon their death. 

 
 
[¶23]   Having concluded as a matter of law 
that the Stock Purchase Agreement required the Company to procure and own 
insurance on the lives of Mr. Ayres and Mr. Baker, we consider whether genuine 
issues of material fact existed on the question whether the Company breached the 
agreement by failing to comply with the insurance provision. No evidence was 
presented that the Company purchased and owned the life insurance required by 
the Stock Purchase Agreement. Thus, no genuine issue of material fact existed on 
Mrs. Baker's breach of contract claim and she was entitled to judgment as a 
matter of law on that issue. 

 
 
[¶24]   Our conclusion that the Company 
breached the agreement by failing to procure life insurance as required does not 
end the inquiry. The Ayres and the Company asserted, and the district court 
held, that the equities of this case supported imposition of a constructive 
trust or application of the doctrine of promissory estoppel. We turn to 
consideration of whether summary judgment was appropriate on these claims.  

 
 
 
 

2.      
Constructive 
Trust and Promissory Estoppel

 
 
[¶25]   After concluding that Mrs. Baker 
breached the Stock Purchase Agreement as a matter of law and that summary 
judgment was appropriate on the Ayres' contract claim, the district court 
imposed a constructive trust and invoked the doctrine of promissory estoppel to 
apply the insurance policy proceeds Mrs. Baker already received against the 
amount the Ayres and the Company owed to her for purchase of her share of the 
corporate stock. Like the district court's ruling on the breach of contract 
claim, these determinations were made on the Ayres' motion for summary judgment. 
Implicit in the court's ruling, therefore, is the conclusion that no genuine 
issues of material fact existed on the claims for constructive trust and 
promissory estoppel and the Company was entitled to judgment as a matter of law. 
We disagree.

 
 
[¶26]   A constructive trust arises by 
construction of the court when equity so demands. Rossel v. Miller, 2001 WY 60, ¶ 13, 26 P.3d 1025, ¶ 13 (Wyo. 2001). It is an equitable remedy imposed to compel a 
person who unfairly holds a property interest to hold property in trust for the 
person for whom in equity and good conscience it should be held.   Id. To warrant imposition of a constructive trust, the 
following elements must be proven:  
a promise, either express or implied; a transfer made in reliance on that 
promise; and unjust enrichment.  
Id.

            

"A 
constructive trust is the formula through which the conscience of equity finds 
expression.  When property has been 
acquired in such circumstances that the holder of legal title may not in good 
conscience retain the beneficial interest, equity converts him into a trustee." 

 
 

Id., ¶ 
19.

 
 
[¶27]   The Ayres presented substantial 
evidence to support their claim for imposition of a constructive trust. They 
showed that during the existence of the partnership, before the business was 
incorporated, Mr. Ayres procured an insurance policy on his life and named the 
partnership as the beneficiary. Mr. Ayres testified he named the partnership as 
the beneficiary on his policy because he and Mr. Baker had agreed they each 
would procure individual policies naming the partnership as beneficiary.  

 
 
[¶28]   At the time the business was being 
incorporated, the parties discussed with their attorney the idea of using Mr. 
Baker's and Mr. Ayres' existing life insurance policies to fund the buy/sell 
agreement. Corporate counsel testified that he understood from these discussions 
that the policies pre-existed the Company, were in the partnership name or were 
being paid for by the partnership, and were going to be transferred over to the 
Company.  He testified that it was 
clearly the intent of everyone involved that the assets of the partnership, 
including the life insurance policies, would be transferred to the Company. He 
testified: 

 
 
I knew 
they had these policies that were on their lives and it had been my 
understanding that those had been funded by the partnership, so whether it was 
the company who owned them  I didn't know who owned them, I didn't know who the 
beneficiary was, I knew they had the amounts and I remember the discussion that 
they were going to use  those existing policies were going to be the ones that 
were going to fund this stock purchase agreement initially, that's what I 
recall.

 
 
After 
Mr. Baker's death, corporate counsel re-confirmed by letter his understanding of 
the parties' intent. He stated:

 
 
            
Pursuant to the terms of [the stock purchase] agreement, the parties 
agreed that life insurance policies on the life of Alvin Baker and Larry Ayres 
would be maintained through the corporation and the proceeds of these policies 
would be used to partially pay for the acquisition of either Alvin or Larry's 
interest in the event of death. The agreement specifies that since the stock in 
the corporation was jointly owned, that in the event that either Alvin or Larry 
died, then their surviving spouse would sell to the other party their interest 
in the corporation pursuant to the terms of this stock purchase agreement, and 
that the life insurance policy would be used as the initial payment for this and 
would not be considered as part of the valuation of the company. 

 
 
            
I have contacted Dan Norris, who was the agent that the policy on 
Alvin's life was obtained through and he has 
advised me that the policy was owned by Alvin, and the beneficiary of the policy was 
Mrs. Baker. However, it is clear from the records that this policy was paid for 
and acquired through the company and the intent of that would have been to 
partially fund the stock purchase agreement. 

 
 
[¶29]   As proof that the Company paid the 
premiums for Mr. Baker's life insurance, the Ayres submitted copies of the 
Company's general ledger and cancelled checks written on its account showing 
premium payments to Farmers in the years 1990 and 1993 through 2000. The Ayres 
also submitted the testimony of insurance agent Van Johnson concerning his 
conversations with Mr. Baker in the course of procuring life insurance. Mr. 
Johnson testified Mr. Baker told him that he and Mr. Ayers had policies that 
would fund a buy-out of their shares in the Company in the event that one of 
them passed away. 

 
 
Q         
He made it explicitly clear to you that the purpose of the policy was to 
effectuate a buyout of Mr. Ayres in the event of his death; is that 
correct?

 
 
A         
Yes.

 
 
Q         
And that was, in fact, explicitly discussed between 
you?

 
 
A         
Yes.

 
 
Q         
And in fact there had been other discussions, had there not, in which 
Alvin remarked 
upon the importance of these policies for that purpose?

 
 
A         
Yes.

 
 
Q         
And again, how would you describe Alvin's view of the importance of these 
policies for the purpose of buying out a surviving partner in the 
entity?

 
 
A         
He was very proud that they had that in place because not very many 
companies did.

 
 
Q         
Did he remark upon what its importance was in terms of how it would 
affect the families in the event of a death of one of these 
gentlemen?

 
 
A         
Yes.

 
 
Q         
And what was that remark?

 
 
A         
That the families would be adequately taken care of in case the business 
did not succeed.

 
 
The 
Ayres also submitted Mrs. Baker's deposition testimony in which she acknowledged 
that a couple of years before his death, Mr. Baker told her that although Mr. 
Ayres had been trying to get him to do so, he was not going to sign his life 
insurance policy over to the Company because he did not think the Company needed 
the insurance for the buyout.       

   

[¶30]   Against this evidence, however, 
Mrs. Baker submitted evidence that her husband procured the Farmers' life 
insurance policy for two purposes:  
to cover his family and an SBA loan taken out by the partnership. Mr. 
Baker was listed on the insurance application as the owner and Mrs. Baker was 
listed as beneficiary.  Mrs. Baker 
testified that Mr. Baker told her he did not think the life insurance was 
intended for the buyout, the Company did not need it for the buy-out and the 
insurance was intended to cover an SBA loan and for the family. Mrs. Baker also 
testified that although the premiums for Mr. Baker's policy were paid by the 
business, her husband told her they were treated as part of his wages and he 
paid taxes on the amounts. In terms of the Stock Purchase Agreement provisions 
concerning insurance, Mrs. Baker testified her husband told her the Company 
"would probably get a smaller insurance policy than what he had" to fund the 
buy-out. 

 
 
[¶31]   Viewing the evidence presented in 
the light most favorable to Mrs. Baker, and giving to her all favorable 
inferences that can be drawn from the evidence, we hold that genuine issues of 
material fact existed on the claim for constructive trust that precluded summary 
judgment. Given the evidence that Mrs. Baker was listed as the intended 
beneficiary of the Farmers policy and that Mr. Baker told Mrs. Baker the 
insurance was not intended to fund the buy-out and the Company would get another 
policy for that purpose, we cannot conclude the evidence was so clear reasonable 
minds could not differ on the elements necessary to support imposition of a 
constructive trust. The insurance policies procured by the parties pre-existed 
the Stock Purchase Agreement.  They 
were not owned by the Company nor were they procured by the Company as provided 
in the Stock Purchase Agreement. Corporate counsel mistakenly believed the 
existing insurance had been transferred to the Company when in fact it had not 
and was surprised to learn after Mr. Baker's death that Mr. Baker owned the 
policy and Mrs. Baker was the beneficiary of the proceeds. These are genuine 
issues of material fact precluding summary judgment. We hold the district court 
erred in granting summary judgment on the Ayres' claim for constructive trust. 

 
 
[¶32]   We likewise hold the district court 
erred in granting summary judgment on the promissory estoppel claim. The 
required elements of a promissory estoppel claim are: the existence of a clear 
and definite agreement; proof that the party urging the doctrine acted in 
reasonable reliance on the agreement; and the equities support the enforcement 
of the agreement. Finch, ¶ 22. Here, 
issues of fact existed concerning whether the parties clearly and definitely 
agreed that the existing insurance policies would be used to fund the buy-out; 
if that was the agreement, whether the Ayres reasonably relied on Mr. Baker's 
statements that he would transfer his policy to the Company; and whether the 
equities supported enforcing any such agreement.   

  

[¶33]   The district court's order granting 
partial summary judgment for the Ayres and the Company is reversed. The case is 
remanded for entry of summary judgment for Mrs. Baker on her breach of contract 
claim and for trial on the issues of whether imposition of a constructive trust 
or application of promissory estoppel is appropriate. If the Ayres and the 
Company meet their burden of proof on one or the other of these claims, Mrs. 
Baker will be entitled to payment of the difference between the value of the 
Baker stock and the life insurance proceeds. Conversely, if the Ayres and the 
Company fail to meet their burden, Mrs. Baker will be entitled to payment for 
the full value of the Baker stock.   

            
 

FOOTNOTES

1Joan Baker 
and Karan Ayres are sisters.

 
 

2In a 
separate proceeding, an arbitrator determined the fair market value of the Baker 
shares at $719,000 as of the date of Mr. Baker's 
death.

 
 

3W.R.C.P. 
54(b) provides:

 
 
Judgment upon multiple 
claims or involving multiple parties.  When more than one claim for relief is 
presented in an action, whether as a claim, counterclaim, cross-claim, or 
third-party claim, or when multiple parties are involved, the court may direct 
the entry of a final judgment as to one or more but fewer than all of the claims 
or parties only upon an express determination that there is no just reason for 
delay and upon an express direction for the entry of judgment.  In the absence of such determination and 
direction, any order or other form of decision, however designated, which 
adjudicates fewer than all the claims or the rights and liabilities of fewer 
than all the parties shall not terminate the action as to any of the claims or 
parties, and the order or other form of decision is subject to revision at any 
time before the entry of judgment adjudicating all the claims and the rights and 
liabilities of all the parties.