IN THE COURT OF APPEALS OF IOWA

No. 22-0501

Filed June 7, 2023

SCOTT POSTMA,

Plaintiff-Appellee/Cross-Appellant,

vs.

DIANE WEDEBRAND, as Guardian and Conservator of MIKE KATS, ARVIN 

BRENNEMAN, HAROLD VANDER VLIET, and DIANE WEDEBRAND,

Defendants-Appellants/Cross-Appellees,

________________________________________________________________

Appeal from the Iowa District Court for Sioux County, Patrick H. Tott, Judge.

The defendants appeal the trial court’s ruling in this declaratory judgment 

action finding Scott Postma is a shareholder of Ozone Solutions, Inc. and was 

entitled to notice of the meeting held on May 31, 2018. Plaintiff cross-appeals the 

court’s rulings on requests for sanctions, which we treat as a petition writ for 

certiorari. AFFIRMED ON APPEAL; WRIT SUSTAINED IN PART AND 

REMANDED.

Jeffrey T. Myers of Goosmann Law Firm and Angie J. Schneiderman of 

Moore Corbett Law firm, Sioux City, for appellants/cross-appellees.

William G. Beck of Woods, Fuller, Shultz & Smith P.C., Sioux Falls, South 

Dakota, for appellee/cross-appellant.

Heard by Bower, C.J., and Tabor and Greer, JJ.
2

BOWER, Chief Judge.

Diane Wedebrand, Mike Kats, Arvin Brenneman, and Harold Vander Vliet 

(collectively, the Defendants) appeal the trial court’s ruling in this declaratory 

judgment action finding Scott Postma is a shareholder of Ozone Solutions, Inc. 

(Ozone) and was entitled to notice of the meeting held on May 31, 2018. Postma 

cross-appeals the court’s rulings on his requests for sanctions.

Because Postma was a shareholder and received no notice for the May 31, 

2018 meeting, the actions taken at that meeting are void. We affirm on the appeal. 

We treat the cross-appeal as a petition writ of certiorari, grant the petition, 

and sustain the writ in part. We find no abuse of discretion in the trial court’s 

determination sanctions were to be imposed upon Kats alone for the bad faith 

presentation of an affidavit under Iowa Rule of Civil Procedure 1.981(7). But, 

because the district court employed the wrong standard in determining whether 

sanctions should be imposed under rule 1.517(3)(b), we sustain the writ in part 

and remand for consideration under the correct standard. 

I. Background Facts and Proceedings.

Prior to the formation of Ozone, Vander Vliet and Brenneman had started 

an ozone business. About a year later they met Kats who joined the business. 

During this time Kats developed an ozone system that he was using on his farm. 

Kats wanted an engineer to look at his ozone system and had his sister, Gina Kats, 

approach Postma while he was a senior at Dordt College majoring in mechanical 

engineering. After the conversation, Postma began researching ozone and ozone 

systems during his final semester of college and, after meeting with Kats, an 
3

additional meeting was set up with Brenneman and Vander Vliet as possible

investors.

Ozone was incorporated on April 15, 1997. The initial incorporators of the 

company were Kats, Postma, Brenneman, Vander Vliet, Randy Curry, and Mitch

Gramstead.

At the organizational meeting of the shareholders and board of directors of 

the company on July 1, 1997, Kats was elected president of the company and 

Postma was elected as the secretary/treasurer. At this meeting a buy-sell 

agreement between the corporation and its shareholders was approved as were 

the corporate bylaws and stock certificate form; it was decided that the business

would be a “Subchapter S” corporation. Ozone was located at 32 Sixth Street NW,

Sioux Center, Iowa.

The terms of the buy-sell agreement approved at the July 1, 1997 meeting

required a shareholder who wished to sell his shares to first offer those shares to 

the company and then to each of the other shareholders of the company on the 

terms set out in the agreement before being able to transfer the shares to a third 

party. It also provided the terms for the sale and purchase of the shares of a 

deceased shareholder. The buy-sell agreement did not contain any provisions 

under which a shareholder would be required to sell their shares or surrender their 

shares to the company. The bylaws of the company, among other things,

established shareholder rights, created a board of directors, and designated

officers for the company. The bylaws made no reference to the manner of 

acquiring or transferring ownership of shares of stock of the company. The bylaws 

did require notice to be given to all shareholders prior to any meetings or, in the
4

alternative, that the shareholders unanimously agreed in writing to certain action 

in lieu of a formal meeting. For board-of-director meetings, regularly scheduled 

annual meetings were to be conducted without any additional notice but, for special 

meetings, at least one day’s notice was required to be given to all directors. 

At the time of the filing of the Subchapter S election with the Internal 

Revenue Service in 1997, the only shareholders of Ozone were Kats, who held 

7500 shares, and Postma, who held 2500 shares.

On June 21, 2018, Postma filed a petition for declaratory judgment seeking 

to void the actions taken by the Defendants at a corporate meeting held on May

31, 2018. That meeting involved the purchase of shares of Ozone owned by 

Brenneman and Vander Vliet, the issuance of a loan to Ozone by Wedebrand, a 

payment or issuance of shares by Ozone to Kats, and the forgiveness of debts to 

Ozone owed by Kats, Brenneman, and Vander Vliet. 

On July 9, 2020, the district court found a number of facts were deemed 

admitted by the individual Defendants due to their failure to respond to Postma’s 

requests for admissions, including that on January 1, 2013, Kats owned 5414 

shares of Ozone, Postma owned 4296 shares, Brenneman owned 340 shares, and 

Vander Vliet owned 900 shares and, if called to testify, a custodian of records at 

the law offices of Oostra, Bierma, Van Engen & Mouw, P.L.C. would testify that 

Kats temporarily removed Ozone’s corporate books and records on March 14, 

2006, and permanently removed Ozone’s books and records in 2009.

1

 

1 Defendants attempted to admit into evidence a promissory note dated May 8, 

2003, which provides in part:

The undersigned Scott Postma agrees to pay Ozone Solutions, Inc. 

at 789 7th Street NW Sioux City, Iowa 51250. The amount of 
5

A trial to the court was held on October 13-15, 2020, and April 22, 2021. 

Postma argued that he remained a shareholder of Ozone as of May 31, 2018, and 

as shareholder he was entitled to notice of the May 31 meeting and maintained the 

right to vote on the agenda items. Because he had no notice, the actions taken at 

that meeting were void. 

For their part, the individual defendants asserted Postma was required to 

sell his 4296 shares back to Ozone after his employment was terminated in 2013

(pursuant to the 2003 transaction). The trial court made extensive findings of 

fact—all of which are fully supported by the record before us.

(6) Kats testified that Ozone conducted regular shareholder 

and directors’ meetings pursuant to the company bylaws. He 

indicated that there were both formal and informal meetings and that 

minutes of each meeting were taken by hand during the meetings 

with formal typed minutes prepared which were approved at the next 

meeting. Postma was the secretary of Ozone from 1997 to 2004 or 

2005 and was responsible for preparing and recording these 

minutes. Brad Kats became the secretary in 2005 and Nic Van 

Engen later succeeded Brad as the secretary of the company.

(7) Over the first four or five years after Ozone was formally 

established, Postma worked on additional research on the ozone 

systems and did extensive travel to visit farmers about the system as 

well as to several major universities to try to get them involved in 

researching the ozone systems. Ultimately Michigan State 

University agreed to install one of Ozone’s ozone systems at the 

university and to conduct research on the same. During this time 

Ozone moved to 653 1st Ave NE, Sioux Center, Iowa.

(8) During this time Postma was to receive a salary of $25,000

per year which would be paid in either cash or shares of Ozone stock. 

Postma indicated that he took little pay as cash and primarily tried to 

$16,389.12 for 3201 Shares at $5.12 a Share. These 3201 shares 

and all remaining unpaid equity is to be returned to Ozone Solutions 

Inc. at any time that Mr. Postma[] decides to leave for voluntary 

reason or his employment is terminated.

Kats contended the promissory note reflects Postma’s agreement to return his 

shares to the company if he left the employment of the company. The trial court 

found his contention contradicted by other evidence in which Kats and others 

acknowledge that Postma’s early shares were earned by sweat equity. 
6

build up his share equity in Ozone. Internal corporate records would 

indicate that as of November 31, 2002, Postma had accumulated 

5466 shares of Ozone stock. 

(9) Shortly after October 8, 2003, Ozone moved to its third 

physical location at 789 7th St. NW, Sioux Center, Iowa. Ozone 

made its first rent payment for this location on November 3, 2003.

Ozone moved to this location after sales started to pick up and a 

larger space was needed. At an informal meeting of the 

shareholders and directors of Ozone on November 13, 2003, a 

distribution of 3201 shares of stock was authorized to Postma. At 

this time Kats also received 3417 shares after converting his loan for 

his pickup and equipment into shares.

(10) On February 17, 2005, Lloyd Bierma who was the 

attorney for Ozone sent a letter to Kats and Postma setting out the 

stock ownership of Ozone as of that time. Mr. Bierma’s records 

indicated that as of February 17, 2005, Kats owned 6767 shares;

Postma owned 4500 shares[2]; Mitch Gramstead owned 1110 

shares; Vander Vliet owned 1125 shares; and Brenneman owned 

425 shares.

(11) As Ozone continued to grow, discussions were held 

about letting new employees buy into the company. By that time Joel 

Leusink, Brad Kats, and Adam Bradshaw had been hired as 

employees of Ozone. At an informal meeting of the board of 

directors and shareholders of Ozone on December 31, 2005, it was 

agreed that existing shareholders would sell 20% of their existing 

shares back to the company and that the employees of the company 

would then be able to purchase those shares. As a shareholder, 

Postma was also able to purchase these shares. After the 

transaction was completed, Postma held 4296 shares and Joel 

Leusink, Brad Kats, and Adam Bradshaw each held 696 shares 

respectively. As a condition for the purchase of these shares, the

new “shareholder employees” had to agree to sign a Customer NonCompete Agreement and a Stock Buy-Sell Agreement. The shares 

issued pursuant to this arrangement would have full voting rights as 

of January 1, 2006. Joel Leusink, Bradley Kats, and Adam Bradshaw 

signed an “Addendum to the Agreement to Buy and Sell Stock” and 

agreed to join and consented to the terms of the Buy-Sell Agreement 

dated July 1, 1997. Postma’s percentage ownership of Ozone went

from 32.31134% in 2005 to 31.63942% in 2006 as is reflected in the 

2005 and 2006 K-1’s from Ozone received by Postma.[3]

2 Bierma’s letter indicated that Postma’s shares were acquired as follows: 1000 

shares on July 1, 1997; 299 shares on August 26, 1998; and 3201 shares on 

November 13, 2003.

3 A “K-1” is an IRS schedule used to report a partner’s share of income, deductions, 

credits, and other items. Partner’s Instructions for Schedule K-1 (Form 1065), 
7

(12) Postma’s percentage ownership interest in Ozone 

ranged from 31.29% to 33.4538% between 2007 and 2013 as shown 

on the Ozone K-1’s issued to him those years. Each year during this 

period Postma had income reported to him on each K-1 for which he 

paid income taxes.

(13) In August 2008, Ozone moved its physical location to 439 

Black Forest Road, Hull, Iowa, as the company had outgrown the 7th 

Street facility.

(14) ln 2013, Kats, Vander Vliet, and Brenneman had decided 

that they wanted to allow Brenneman’s shares to be jointly owned 

with his wife Lorna and that the three of them wanted to purchase 

Mitch Gramstead’s shares in the company without offering those 

shares first to the company or to the other shareholders pursuant to 

the Buy-Sell Agreement. Postma indicated that he was not in 

agreement with either of these items. On July 19, 2013, Kats, 

Vander Vliet, and Brenneman met with Postma and told him that they 

were going to give him a two-week break. Postma indicated that he 

sat by for a month or two thinking they would let him back into the 

operation of Ozone but that this never happened. After it became 

clear to Postma that the other owners of Ozone were not going to let 

him back into the day-to-day operations of the business, Postma 

started his own ozone company called Big Foot Ozone LLC. In 

essence, Postma was terminated from his employment with Ozone 

effective August 2013. Kats indicates that he fired Postma in 2013 

for what he described as “lack of performance” but did not provide 

any specific details.

(15) ln response to Postma forming Big Foot Ozone LLC, 

sometime around October 21, 2013, Ozone caused to be drafted a 

Petition for Temporary and Permanent Injunction which sought to 

enjoin Postma and Big Foot Ozone LLC from competing with Ozone. 

A draft of said petition was forwarded to Postma but apparently the 

petition was never filed. At paragraph 4 of the petition it asserts that 

Postma as a stockholder and former employee of Ozone owns 

roughly 30% of the outstanding shares of Ozone. As a result of the 

threatened lawsuit, Postma indicated that he gave up Big Foot 

Ozone and decided to wait things out a bit. During this time, Kats 

indicated that then counsel for Ozone, Scott Rhinehart, requested 

copies of the corporate records for the company and it was 

discovered that the corporate records from 1997 to 2013 were 

missing.

(16) On November 19, 2013, Postma received an email from 

Brad Kats in which Brad forwarded an email Mike Kats had sent 

earlier that day to four other persons including Brad, Joel Leusink 

and Lorna Vander Vliet. The email sent by Mike Kats included two 

Department of the Treasury, Internal Revenue Service (Jan. 17, 2023),

https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf. 
8

proposed amendments to Ozone’s [1997] Buy and Sell Agreement. 

The first proposed amendment would require the sale of any shares 

in the company to be first offered in equal shares to Kats, Vander 

Vliet, and Brenneman. The second proposed amendment indicated 

that should an employee shareholder be terminated without cause,

that the employee would have to surrender their shares to the 

company and be paid out at the current value for those shares. If an 

employee was terminated with cause, they would likewise have to 

surrender their shares but they would receive no pay-out for their

shares unless it was approved by a majority of the remaining 

shareholders.

(17) On December 6, 2013, Postma, along with five other 

individuals, received an email from Kats regarding a special 

shareholders meeting to be held on December 16, 2013. This email

set forth the agenda and items to be voted on, which included 

resolutions to approve the following:

(a) to allow joint ownership of Harold’s stock in Ozone by 

Harold and Lorna;

(b) to allow Kats, Brenneman, and Vander Vliet to 

purchase Mitch Gramstead’s shares in Ozone;

(c) to define who the attorneys for Ozone are;

(d) whether the corporation should relinquish and redeem 

the corporate shares of Postma;

(e) whether the shares redeemed from Postma be offered 

to Kats, Brenneman, and Vander Vliet;

(f) to authorize legal action against Postma to recover 

Postma’s shares of Ozone;

(g) to authorize legal action to recover corporate 

documents from Postma.

(18) Prior to the December 16, 2013 meeting, Postma 

received an email from Joel Leusink, which had attached to it an 

email received from the De Koster law firm to Ozone. Said letter

warned Ozone that actions proposed to be taken at the 

December 16th meeting may be in violation of the law as they were 

not aware of any corporate documents that would require a 

shareholder to sell their shares back to the company and that other

proposed transactions were not in compliance with Ozone’s 1997 

Buy-Sell Agreement. As a result, the De Koster law firm advised that 

the taking of such action could result in Ozone having liability for 

damages to Postma. A copy of this letter was given to all

shareholders of Ozone.[4]

4 De Koster Law Firm was terminated by Ozone in April 2014. Phil De Koster 

testified that he believed the primary reason his firm was terminated was that Kats 

wanted “baseless” claims advanced against certain persons and that Kats would 

need to find new counsel for Ozone as a result.
9

(19) A shareholder meeting was held on December 16, 2013. 

At that meeting Kats, Vander Vliet, and Brenneman voted in favor of 

all the proposed resolutions listed in paragraph 17 above. Postma 

voted against all the resolutions and the three remaining

shareholders voted against all of the resolutions except the one 

allowing Harold and Lorna to jointly own Harold’s shares in Ozone.

(20) On February 18, 2014, Postma received an email from 

Lorna Vander Vliet with the agenda for the February 20, 2014 Board

of Directors meeting attached. Said agenda included, among other 

things, the dividend distribution schedule and the percentage of

profits to be distributed as dividends. The agenda included Postma 

as a voting participant in the meeting.

(21) During 2014, Brad Kats and Nic Van Engen quit as 

employees of Ozone and voluntarily sold their shares back to the 

company. ln all, a total of four shareholder/employees left Ozone 

over time and all four voluntarily sold their shares back to the

company. . . . 

(22) On or about May 15, 2014, Postma received a letter from 

Marc Cord III who was acting as the corporate attorney for Ozone. 

ln the May 15, 2014 letter, Postma was advised that a special 

meeting of the shareholders of Ozone had been scheduled for 

June 9, 2014. Included with the letter was a notice of the June 9, 

2014 meeting which indicated that the purpose of the meeting was 

to vote on a proposed amendment to Ozone’s bylaws to reduce the 

number of board members to three, with the three remaining board

members being Kats, Brenneman, and Vander Vliet.

(23) On March 12, 2015, a shareholder meeting was held at 

which Postma did attend. Per the minutes of this meeting, Postma 

was elected to the Board of Directors.

(24) On June 16, 2015, Postma received an email from Lorna 

Vander Vliet informing him, as well as Kats and Brenneman, that a 

shareholders meeting had been rescheduled for June 23, 2015, to 

discuss shares of the company.

(25) On February 22, 2016, a shareholders meeting was 

purportedly held, although the only persons participating were Kats, 

Brenneman, and Vander Vliet. Minutes of this meeting reflected 

discussion of missing corporate records, the removal of Postma as a

director, and the need to resolve shareholder disputes primarily 

dealing with Postma.

(26) On August 4, 2016, another purported shareholders’

meeting was held which again was only attended by Kats, 

Brenneman, and Vander Vliet. The minutes of this meeting reflect 

that the purpose for the meeting was to attempt to resolve the 

ownership termination and payout to Postma. The minutes indicated 

that a payout of $378,250 to Postma had been unanimously 

approved at the August 14, 2015 meeting and that as of August 4, 

2016, Postma had not deposited the $378,250 payout. The minutes 
10

also indicated that it was approved to “update all buy-sell and 

corporate books” to alleviate any and all past misunderstandings.

The minutes [signed only by Kats] also reflected that Postma’s 

“board positions or any involvement are now voted unnecessary in 

any obligation and unanimously voted to be completely terminated.”

(27) Despite these minutes of action by the shareholders, 

Postma received a K-1 from Ozone for tax year 2016 showing 

Postma to have a 39.23431% ownership interest in Ozone and 

distributing income to him.

(28) On February 10, 2017, Postma received an email from 

Kats regarding Kats’ dissolution of marriage from his former wife 

Lorinda. Per the email, Kats indicated to Postma that he would have 

to be responsible, along with Vander Vliet and Brenneman, to pay 

over 50% of his alimony obligation because of Postma’s testimony in 

his divorce. ln November 2019, Kats wrote a check on Ozone’s 

account at American State Bank for $51,600.22 to his ex-wife for 

payment of alimony and attorney fees through December 2018. The 

bank contacted Kevin York, the CEO of Ozone, prior to cashing the 

check.

(29) The 2017 and 2018 K-1’s received by Postma continued 

to show his ownership interest in Ozone at 39.23431% and continued 

to distribute income to him. 

(30) On May 1, 2018, Brenneman executed an “Offer to sell 

owner equity of Ozone Solutions.” This offer stated Brenneman’s 

desire to sell 100% of the shares of Ozone owned by him. His offer 

specifically stated that “[A]ll transfer of stock must be done in

compliance within the current rules outlined within the Agreement to 

Buy and Sell Stock, dated July 1, 1997.” The offer then provided 

Ozone with the right to exclusively buy his shares for the 30-day 

period after May 1, 2018. The offer further provided that should

Ozone not exercise its rights within [thirty] days to buy his shares, he 

requested that each shareholder exercise their right to purchase 

pursuant to the Agreement to Buy-Sell Stock.

(31) Ozone issued Board of Director Minutes for a special 

meeting of the board of directors held on May 31, 2018. Postma was 

not invited to nor given notice of this meeting. At this meeting the 

board of Ozone purportedly approved the purchase of the shares of

Vander Vliet and Brenneman by Ozone, to accept a loan from Diane

Wedebrand to assist in paying for Brenneman’s shares and to pay 

Kats a consulting fee of $5000 per month from Nov[ember] 2017 to 

June 2018. The minutes from this purported meeting were signed 

on June 5, 2018, by Kats, Vander Vliet, and Brenneman. After this

meeting Ozone did in fact purchase the shares of Brenneman and 

entered into the loan agreement with Wedebrand to fund the 

purchase of those shares.

(32) On September 20, 2018, counsel for Postma received an 

email from Ozone corporate counsel indicating that American State 
11

Bank was demanding that Postma provide certain identifying 

information as a person with a greater than 20% ownership interest 

in the company to extend the company’s operating loan. ln response 

to this email, Postma provided the requested information. American 

Bank also sought additional clarification as to the ownership of 

Ozone in light of the purported sale of Brenneman’s stock to the 

corporation.

(33) On November 8, 2018, Kevin York, the manager for 

Ozone, sent an email to Postma and others regarding a Special 

Shareholders Meeting to be held on November 27, 2018. Attached 

to the email was a “Call and Notice” for said meeting. The notice

provided that the purpose of the meeting was to determine the 

current members of the board since the redemption of Brenneman’s 

shares, to discuss reformation of the current Agreement to Buy and 

Sell dated July 1, 1997, and to discuss litigation options against

Postma. Postma testified that he was at the location for this meeting 

but was not allowed to attend.

(34) Kats, Vander Vliet, and Brenneman signed a “Resolution 

Adopted by the Board of Directors of Ozone Solutions, lnc.” on 

November 9, 2018. Said resolution indicated that the Board of 

Directors of Ozone had confirmed the company’s right to reacquire 

and redeem outstanding shares of employee-owners once 

employment with the company ended. The resolution further 

provided that the company elected to exercise that right as it related 

to Postma’s shares and authorized the company to demand the 

relinquishment of Postma’s shares and authorized the company to 

accept a loan from Vander Vliet in the amount of $206,752.00 to 

facilitate the reacquisition of Postma’s shares. As a result of this 

resolution, Ozone advised American State Bank that Postma was no 

longer a shareholder of Ozone and that Postma would no longer 

receive K-1’s from the company. American State Bank did not 

accept that explanation and indicated that it still viewed the situation 

regarding Postma’s ownership of stock as being unresolved.

(35) A new CPA, Matthew Kelderman, performed the 

corporate tax returns for Ozone. Kelderman had previously done 

accounting and tax work for Kats. For the 2018 Ozone corporate 

return, Postma was issued a “Final K-1” showing ordinary business

income of $7887.00. Said return also reflected loans from 

shareholders; in particular, a loan from Vander Vliet to the company 

to fund the buyout of Postma’s shares. Mr. Kelderman indicated that 

Postma’s K-1 was issued as a Final K-1 as corporate counsel for 

Ozone had advised him that Postma’s shareholder rights had been

terminated.

(36) Ozone’s CPA, Todd Van Bruggen, testified that he did 

the corporate tax returns for Ozone through 2017. Based on his 

representation of the company, he testified that he was not aware of 

any agreement regarding what happened if a shareholder left the
12

company other than the original 1997 Buy-Sell Agreement. He 

testified that he was aware that efforts had been made to amend the 

Buy-Sell Agreement through his review of materials from Ozone’s 

counsel but had never been advised that any amendments had been 

approved.

The trial court found “overwhelming” evidence Postma continued to own 

4296 shares of Ozone stock on May 31, 2018, and the 1997 buy-sell agreement 

did not contain any provisions requiring a shareholder to sell or surrender their 

shares. 

The court rejected the Defendants’ assertion that at the time Postma 

acquired 3201 shares of stock in 2003, he agreed to sell his shares back to the 

company if he decided to leave the company for any reason or his employment 

with the company was terminated. The court explained:

The individual defendants assert that this agreement was set forth in 

a purported Promissory Note dated May 3, 2003, in which they claim 

funds were “loaned” to Postma by Ozone for his purchase of 3201 

shares, the note purportedly being signed by Kats and Postma. . . . 

[T]he Court finds this assertion of the individual defendants not 

credible. While Postma admits to receiving a check for $16,389.12 

from Ozone at this time and that he returned the same amount to

Ozone a few days later, that does not overcome the highly suspicious 

circumstances surrounding the “discovery” of this note during these 

proceedings and the numerous inconsistencies involving the note 

discussed [previously]. . . . [I]t is much more likely that the exchange 

of the checks was simply a paper trail to reflect the value of Postma’s 

“sweat equity” that he had used to acquire ownership interest in the

company during the early years. lt also appears that these 3201 

shares were not actually issued by Ozone to Postma until November 

2003, six months after the purported Note.

Even if the Promissory Note was a valid transaction, the 

Promissory Note is not an amendment to the 1997 Agreement to Buy 

and Sell Stock. For any amendment to that agreement to be valid, it 

must be agreed to by all of the persons who held stock at the time of 

the amendment to the agreement. As indicated above, even if the 

Promissory Note was valid, it was only signed by Kats and Postma 

and as such did not include all of the existing shareholders at that 

time as would be required to effectively amend the Buy-Sell 

Agreement.
13

The court found the actions taken at the May 31, 2018 board of directors 

meeting “were self-serving actions that directly benefit the three members of the 

board.” Particularly noted were the price of the shares authorized, the terms of 

payout, and the payment of “consulting fees” to Kats. The court concluded, “As 

self-dealing transactions, the resolutions should have also been approved by the 

shareholders of the company.” 

The court explained:

Brenneman and Vander Vliet were having their shares purchased by 

the company at a price in excess of the last determined share price 

made by the shareholders. Section 3 of the 1997 Agreement to Buy 

and Sell Stock provided that the value of the stock would be 

determined at each annual meeting of the shareholders. Last share 

price so determined was $150 per share at the stockholder meeting 

held on March 12, 2015. As such, the purported sale price of $170

per share had not been previously established by the shareholders 

as required by the Agreement to Buy and Sell Stock. . . . As Postma 

was a shareholder he should have been involved in the decision 

making as to what the proper share price for the stock should have 

been.

The resolutions were further self-serving in that the payout 

approved for Brenneman’s shares called for an immediate payment 

of the full $57,800 sale price while Vander Vliet was to be paid in full 

within 60 days. The terms of the Agreement to Buy and Sell Stock 

provided that if insurance proceeds were not available to pay the 

purchase price, 20% would be paid at the time of closing and balance 

would be paid out in not more than four equal annual installments, 

the first of which was to be paid one year after the closing. . . . 

Further self-dealing involved in the May 31, 2018 resolution 

involves the payment of “consulting fees” to Kats of $5000 a month 

for the months of November 2017 to June 2018. Also Kats, 

Brenneman and Vander Vliet forgave any debts owed by them to

Ozone. All of these actions affect the financial health of the company 

and as a result would have a direct impact on the shareholders of the 

company.

The trial court provided this declaratory ruling:

(1) That Postma is the owner of 4296 shares of stock of 

Ozone Solutions, Inc. and was an owner thereof on May 31, 2018.
14

(2) That the following actions taken by Ozone in reliance on 

the resolutions “approved” by the Board of Directors on May 31, 2018 

are void:

A. Accepting the offer to purchase the shares offered 

for sale from Vander Vliet and Brenneman to Ozone 

Solutions, lnc.

B. Paying Brenneman on June 5, 2018, $170 a share 

for his 340 shares for a total of $57,800.

C. Accepting a loan from Diane Wedebrand for 

$57,800 to pay for Brenneman’s shares.

D. Entering a loan agreement with Wedebrand.

E. Paying Vander Vliet on before July 31, 2018, $170

a share for his 900 shares for a total of $153,000.

F. Paying Kats consulting fees of $5000 per month for 

the period of November 2017 to June 2018.

G. All financial debts due to Ozone from Brenneman, 

Vander Vliet, and Kats are forgiven purportedly in exchange 

for the work and services they have performed for the

company.

The court imposed a sanction pursuant to Iowa Rule of Civil 

Procedure 1.981(7) against Kats only “for the bad faith presentation of the 

affidavits at summary judgment claiming the validity of the Promissory Note as well 

as additional expenses incurred to combat said assertion at trial.” The court 

declined to impose any sanction pursuant to rule 1.517(3)(b). 

The Defendants appeal, and Postma cross-appeals.

On their appeal, the Defendants assert the trial court erred in finding Postma 

was entitled to notice of the May 31, 2018 meeting, Postma is barred by laches 

from claiming he was entitled to notice, the court abused its discretion in not 

accepting as credible evidence two exhibits—the purported May 2003 Promissory 

Note and unsigned minutes of a June 19, 2006 meeting of directors and 

shareholders, and the court erred in concluding the buy-sell agreement was not 

otherwise modified by Ozone’s course of dealing with other employees. 
15

On cross-appeal, Postma contends the court erred in not assessing fees as 

a sanction against Wedebrand and Vander Vliet for their “sham” affidavits in 

support of the “discovered” Promissory Note. He also asserts the court employed 

the wrong standard in ruling on his motion for sanctions under Iowa Rule of Civil 

Procedure 1.517(3)(b). 

II. Scope and Standard of Review.

“Our standard of review in a declaratory judgment action usually depends 

on how the case was tried in the district court.” McNaughton v. Chartier, 977 

N.W.2d 1, 8 (Iowa 2022). Both sides assert our review is for correction of errors 

at law; the court ruled on objections. We agree with the parties that this action was 

tried at law; so we are bound by the district court’s findings of fact if supported by 

substantial evidence. Grinnell Mut. Reins. Co. v. Recker, 561 N.W.2d 63, 68 (Iowa 

1997). “Evidence is substantial if reasonable minds would find it adequate to reach 

a conclusion.” Id. But we are not bound by the district court’s conclusions of law, 

and “we may inquire into whether the court’s ultimate conclusions were materially 

affected by improper conclusions of law.” Id. We give weight to the trial court’s 

findings when it comes to the credibility of witnesses. City of Cedar Rapids v. Leaf, 

923 N.W.2d 184, 196 (Iowa 2018). 

III. Discussion.

A. Appeal. 

1. Laches. The Defendants assert that Postma should not be allowed to 

bring his claim on the equitable doctrine of laches. “Laches is an equitable doctrine 

premised on unreasonable delay in asserting a right, which causes disadvantage 

or prejudice to another.” First Fed. Sav. & Loan Ass’n v. Blass, 316 N.W.2d 411, 
16

414 (Iowa 1982). “The party asserting the defense has the burden to establish all 

of the essential elements thereof by clear, convincing, and satisfactory evidence. 

Prejudice is an essential element of laches.” Id. at 414–415 (internal citation 

omitted). “Prejudice cannot be inferred merely from the passage of time.” Cullinan 

v. Cullinan, 226 N.W.2d 33, 36 (Iowa 1975). 

Defendants note, “[Postma] did not receive any notices of shareholder 

meetings even though he knew meetings were taking place and the company was 

still operating” and Postma did not request he be provided notice. They claim they 

were “entitled to rely on their belief that [Postma] did not want to receive notice.” 

They are wrong. Defense counsel acknowledged at trial that the bylaws 

require notice be given. Ozone was required to provide notice to its shareholders. 

As the trial court noted, a shareholder does not have to request notice when they 

are entitled to it under the corporation’s bylaws. The parties were not functioning 

under an informal relationship, and the Defendants cannot evade the corporate 

bylaws when it is convenient for them.

2. Proffered exhibits. The defense asserts the court abused its discretion in 

rejecting their proposed exhibits with which they attempted to prove the 1997 buysell agreement had been amended. “We review evidentiary rulings for an abuse 

of discretion[, that is,] when the trial court exercises its discretion in grounds clearly 

untenable or to an extent clearly unreasonable.” See In re Condemnation of 

Certain Rights in Land, 974 N.W.2d 103, 111 (Iowa 2022) (internal quotation marks 

and citation omitted). 

The court noted, and the Defendants acknowledge, “The bylaws did require 

notice to be given to all shareholders prior to any meetings or in the alternative that 
17

the shareholders unanimously agreed in writing to certain action in lieu of a formal 

meeting.”

5

“The ‘Best Evidence’ rule requires production of original documents unless 

their absence is sufficiently explained.” State v. Khalsa, 542 N.W.2d 263, 268 

(Iowa Ct. App. 1995); see Iowa R. Evid. 5.1002 (“An original writing, recording, or 

photograph is required to prove its content . . . .”). With respect to a purported 

2003 amendment via the promissory note, the Defendants claim the proffered 

exhibit is a “duplicate promissory note in place of the lost original.” Iowa Rule of

Evidence 5.1001(e) states: “A ‘duplicate’ means a counterpart produced by a 

mechanical, photographic, chemical, electronic, or other equivalent process or 

technique that accurately reproduces the original.” The proffered exhibit is not a 

duplicate. Kats testified the exhibit was a November 2003 recreation of a 

purported transaction several months prior—on May 8, 2003, which he prepared 

“to clarify the paper trail of the checks for $16,389.12 and a loan that I gave to 

Ozone Solutions for $17,000.” 

The trial court expressed significant concern for the authenticity of the 

proffered document in light of the “highly suspicious circumstances surrounding 

the ‘discovery’ of this note during these proceedings.” It found the proposed exhibit 

lacked sufficient credibility to be received. It specifically found the individual 

5 See Iowa Code § 490.732(2) (2022) (“An agreement authorized by this section 

shall satisfy all of the following requirements: (a) Be as set forth in any of the 

following: (1) The articles of incorporation or bylaws and approved by all persons 

who are shareholders at the time of the agreement. (2) A written agreement that 

is signed by all persons who are shareholders at the time of the agreement and is 

made known to the corporation. (b) Be subject to amendment only by all persons 

who are shareholders at the time of the amendment, unless the agreement 

provides otherwise.”).
18

defendants’ assertion that the 2003 promissory note amended the 1997 buy-sell 

agreement was “not credible.” The trial court did not abuse its discretion in 

rejecting the exhibit.

The Defendants also contend the court erred in concluding the buy-sell 

agreement was not amended by a June 2006 shareholder meeting, relying on 

“unsigned minutes of the June 19, 2006” meeting to support this claim. The trial 

court did not admit the proposed exhibit, noting: 

Kats asserts that in June 2006 a meeting of shareholders was held 

to amend the company Buy-Sell Agreement to address what would 

happen if shareholder employees were to leave their employment. 

Kats testified that the meeting was specifically to address employee 

Adam Bradshaw. Likewise, Vander Vliet and Brenneman testified

that they remember discussions involving buy-sell terms in 2005 or 

2006, although their recollection of specifics was very limited. It is 

likely [they were] recalling the discussions involving the new 

employee shareholders at that time. In any event, no written records 

of this meeting were produced nor was evidence of notice of the 

meeting to substantiate what was discussed or voted on at any such 

meeting.

The trial court concluded, “[N]o credible evidence has been presented to

indicate that the original 1997 Agreement to Buy and Sell Stock has ever been 

effectively amended.” We agree. The reasons provided by the trial court in 

rejecting the Defendants’ proposed exhibits are neither unreasonable nor 

untenable. 

3. Course of dealing. Defendants also assert they can show the buy-sell 

agreement was amended by course of dealing with other employee-shareholders. 

Defendants offer no authority for this claim. See Iowa R. App. P. 6.903(2)(g)(3) 

(“Failure to cite authority in support of an issue may be deemed waiver of that 

issue.”). By failing to cite authority, Defendants have waived this claim. 
19

B. Cross-appeal.6

In his post-trial brief to the trial court, Postma complained Defendants’ 

failure to admit certain facts and their presentation of “sham” affidavits supported 

his request that sanctions be imposed against all individual defendants pursuant 

to Iowa Rules of Civil Procedure 1.981(7)7 and 1.517(3)(b).8 Postma contends the 

court erred in imposing sanctions only on Kats under rule 1.981(7). He also 

contends the court employed the wrong standard in ruling on his request for 

sanctions under rule 1.517(3)(b). 

We treat this [cross-]appeal as a petition for writ of certiorari. 

Everly v. Knoxville Cmty. Sch. Dist., 774 N.W.2d 488, 492 (Iowa 

6 Defendants have filed no response to Postma’s cross-appeal. That failure does 

not entitle Postma to reversal as a matter of right. See Bowen v. Kaplan, 237 

N.W.2d 799, 801 (Iowa 1976). However, we confine our consideration to issues 

raised in Postma’s cross-appeal. See id. We will not search the record for a theory 

upon which to affirm the trial court. Id.

7 Rule 1.981(7) provides:

Affidavits made in bad faith. Should it appear to the 

satisfaction of the court at any time that any of the affidavits 

presented pursuant to this rule are presented in bad faith or solely 

for the purpose of delay, the court shall forthwith order the party 

employing them to pay to the other party the amount of the 

reasonable expenses which the filing of the affidavits caused that 

party to incur, including reasonable attorney’s fees, and any 

offending party or attorney may be adjudged guilty of contempt.

8 Rule 1.517(3)(b) provides:

Expenses on failure to admit. If a party fails to admit the 

genuineness of any document or the truth of any matter as requested 

under rule 1.510, and if the party requesting the admissions 

thereafter proves the genuineness of the document or the truth of the 

matter, the requesting party may move for an order requiring the 

other party to pay the reasonable expenses incurred in making that 

proof, including reasonable attorney’s fees. The court shall make the 

order unless it finds any of the following:

(1) The request was held objectionable pursuant to rule 1.510.

(2) The admission sought was of no substantial importance.

(3) The party failing to admit had reasonable grounds to 

believe that the party might prevail on the matter.

(4) There was other good reason for the failure to admit.
20

2009) (“The proper means to review a district court’s order imposing 

sanctions is by writ of certiorari.”); see Iowa R. App. P. 6.108. “We 

review a district court’s order imposing sanctions under our rules of 

civil procedure for an abuse of discretion.” Rowedder v. Anderson, 

814 N.W.2d 585, 589 (Iowa 2012). A district court abuses its 

discretion when it “exercises its discretion on grounds or for reasons 

clearly untenable or to an extent clearly unreasonable.” Id. [(citation 

omitted)]. “An erroneous application of the law is clearly untenable.” 

Id.

First Am. Bank v. Fobian Farms, Inc., 906 N.W.2d 736, 744 (Iowa 2018).

1. Rule 1.981(7) sanction against Kats only. In its final ruling, with respect 

to the affidavits the trial court ruled:

[I]mposition of sanctions pursuant to Rule 1.981(7) would be 

appropriate for the bad faith presentation of the affidavits at summary 

judgment claiming the validity of the Promissory Note as well as 

additional expenses incurred to combat said assertion at trial. The 

court specifically finds that said sanctions should be imposed upon 

Kats in his individual capacity as it appears clear to the court that he 

was the driving force behind this activity and that to impose sanctions 

against Ozone Solutions, lnc. would only cause to harm the 

shareholders in general, including Postma. As no affidavit regarding 

attorney fees incurred by Postma has been presented to the court at 

this time, the court finds that a hearing should be set to determine 

the amount of the sanction to be imposed against Kats under 

rule 1.981(7).

While Postma’s brief sought sanctions on all individual defendants, his 

complaints mentioned only Kats’s conduct, Kats’s affidavit, and Lorna Vander 

Vliet’s affidavit. Postma’s post-trial brief states, “[T]he court should fashion a 

sanction commensurate with the seriousness and magnitude of the misconduct.” 

The court did what was requested; it fashioned a sanction it found commensurate 

with misconduct. 

Rule 1.981(7) states, “Should it appear to the satisfaction of the court at any 

time that any of the affidavits presented pursuant to this rule are presented in bad 

faith or solely for the purpose of delay, the court shall forthwith order the party 
21

employing them to pay to the other party the amount of the reasonable 

expenses . . . .” (Emphasis added). Giving weight to the trial court’s finding that 

Kats was the “driving force” behind the sanctionable conduct, we cannot conclude 

it exercised its discretion on grounds or for reasons clearly untenable or to an 

extent clearly unreasonable in imposing sanctions on Kats alone. 

2. Rule 1.517(3)(b). Postma requested the individual defendants admit 

three requests, which he contends would have obviated the need for trial. He 

asserts the individual defendants refused to admit: (1) the buy sell was a complete 

and correct copy of the buy sell agreement, (2) the buy sell agreement governs 

transfer of stock, and (3) none of the individual Defendants provided Postma 

“notice of the meeting of Mike Kats, Arvin Brenneman, and Harold Vander Vliet 

that took place on or about May 31, 2018.”

The court concluded:

ln this case there was no objections raised to the requests for 

admission and the requests dealt with matters of substantial 

importance to this litigation. However, there was at least a colorable 

basis for the denials made regarding whether the 1997 Agreement 

was the full agreement as it does appear that some conditions were 

established when shares were issued to three employees involving 

their rights to their shares (dealing with non-compete language, etc.) 

that was not part of the 1997 Agreement. As such, the responses on 

this issue were not necessary completely incorrect. Likewise, 

regarding the request involving notice to Postma of a meeting on

May 31, 2018, the request was sufficiently vague that the response 

was not necessarily completely inaccurate in that the “meeting” was 

not completely identified. For instance, it was not referenced as a 

board meeting, Shareholder meeting or any other type of specific 

meeting. lt is also possible that Kats, Brenneman, and Vander Vliet 

had more than one meeting during the time frame on or about May 

31, 2018. Accordingly, the Court declines to impose any sanctions 

under rule 1.517(3)(b) at this time.
22

Postma contends the court’s reliance on the defendants’ “colorable claim” 

is contrary to the rule. He argues the court thus erroneously applied the rule and 

the defendants had no reasonable basis to deny the requests for admissions. 

Because there is to be a hearing for sanctions for rule 1.981(7) (bad faith 

affidavit attorney fees), we vacate the court’s conclusion under rule 1.517(3)(b)

and remand for the court to reconsider the motion using the correct “reasonable 

grounds” standard and determination of appropriate sanctions, if any. 

IV. Conclusion.

We affirm on appeal. We treat the cross-appeal as a petition for writ of 

certiorari, grant the petition, and sustain the writ in part. 

AFFIRMED ON APPEAL; WRIT SUSTAINED IN PART AND REMANDED.