No. 88-627 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

DOUGLAS E. DANIELS, 

Plaintiff and Respondent, 

THOMAS, DEAN & HOSKINS, INC., 

a corporation, THOMAS and DEAN 

PROPERTIES, INC., a corporation, 

T.H. THOMAS, an individual and 

as President and Director, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable Joel G. Roth, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

William Conklin, Conklin, Nybo and LeVeque, P.C., 

Great Falls, Montana 

For Respondent: 

Joe Bottomly, Bottomly Law offices, Great Falls, 

Montana 

Monte Beck, Beck Law Offices, Bozeman, Montana 

Filed: 

Submitted: March 22, 1990 

Decided: December 21, 1990 L 
Justice Diane G. Barz delivered the Opinion of the Court. 

The District Court of the Eighth Judicial District, Cascade 

County, Judge Joel G. Roth presiding without a jury, concluded that 

Daniels, a minority shareholder in T & D Properties, was entitled 

to $53,128 for his shares in T & D Properties. The District Court 

based this conclusion on breach of fiduciary duty, oppressive 

negotiation tactics, constructive fraud, and the presence of a 

contract between Daniels and Thomas in which Thomas allegedly 

promised to pay Daniels fair market value for his shares in T & D 

Properties. The court then granted Daniels his costs in this 

matter, which included his costs of hiring an appraiser. The 

court, however, did not find a contractual or statutory right which 

would allow Daniels to recover his attorney's fees. Defendants 

appeal. We reverse. 

The following issues are raised on appeal: 

1. Whether the filing of Danielst motion for substitution of 

judge divested Judge Roth of the power to render a judgment on this 

matter. 

2. Whether the District Court erred in ruling that a contract 

existed which required T & D Properties to purchase Danielst shares 

in T & D Properties. 

3. Whether the District Court erred in ruling that Daniels 

was entitled under Montana law to have his shares in T & D 

Properties appraised and purchased. 

4. Whether the pleadings fairly apprised the defendants of 

the nature of the claims against them. 
5. Whether the judgment rendered by the District Court 

properly lies against all three defendants, TD & HI a corporation, 

T.H. Thomas, an individual, and T & D Properties, a corporation. 

6. Whether the District Court erred in awarding Daniels his 

appraisal fees. 

7. Whether the restrictive covenant in the TD & H buy-sell 

agreement is void under 5 28-2-703, MCA. 

On cross-appeal, Daniels raises the following issue: 

Whether the District Court erred by not awarding Daniels his 

attorney's fees. 

Thomas, Dean & Hoskins, Inc. (TD & H) , a defendant, is an 

engineering firm founded in 1965. TD & H's principal place of 

business is in Great Falls with branch offices in Kalispell and 

Bozeman. Thomas & Dean Properties, Inc. (T & D Properties), also 

a defendant in this lawsuit, is a separate corporation from TD & H. 

T & D Properties was formed in 1970 for the purpose of developing 

real estate and for the purpose of holding real and personal 

property. This property is then leased to TD & H. T & D 

Properties has never paid dividends, but instead pays "management 

fees1' to TD & H. These fees are then generally distributed as 

bonuses to TD & H's employees and shareholders. T.H. Thomas, 

another defendant, is the president and a director of both TD & H 

and T & D Properties and also a major shareholder in both of these 

corporations. 

Douglas E. Daniels, the plaintiff, is a civil engineer who 

began working for TD & H in 1969. In 1976, Daniels began 

purchasing stock in TD & H. TD & H employees who purchased stock 
in TD & H were also initially expected to purchase an identical 

proportion of stocks in T & D Properties, however, the TD & H 

shareholder agreement that was signed in 1979 abolished this 

requirement. The shareholder agreement also contained a buy-sell 

agreement for TD & H stock upon the voluntary or involuntary 

termination from TD & H. The agreement established a formula price 

for the purchase of the TD & H stocks, a time period in which they 

will be paid, and a restrictive covenant. No buy-sell agreement 

was established for the T & D Properties stock. 

In 1985, Daniels was living in Bozeman and managing TD & H's 

branch off ice in Bozeman. Upon Dean's retirement from TD & H in 

1986, Thomas requested that Daniels move to Great Falls to manage 

the Great Falls office. Daniels had just built a home in Bozeman 

and therefore requested that alternatives to his moving to Great 

Falls be considered. In mid-February 1986, Thomas and Daniels met 

to discuss possible alternatives. The parties agreed to a threemonth trial period beginning February 18, 1986, whereby Daniels 

lived in Bozeman and commuted to Great Falls. 

On April 16, 1986, two months after the three-month trial 

period began, Thomas and Daniels met again at Thomas1 request to 

review the situation. The meeting did not go well. Daniels then 

suggested that they discuss a termination agreement and Thomas 

agreed to prepare a proposed termination agreement. 

The termination agreement was drafted by an attorney for 

TD & H and mailed to Daniels on April 18, 1986. Besides providing 

for the termination of Daniels1 employment with TD & H, the 

termination agreement also provided for the purchase of Daniels' 
T & D Properties stock. A disagreement arose over the valuation 

of Daniels' T & D Properties stock. Daniels therefore did not sign 

the agreement. On May 13, 1986, Daniels and Thomas met and 

attempted to negotiate the value of the T & D Properties stock, but 

without success. 

On September 17, 1986, in response to a letter written by 

Daniels, Thomas offered to settle the dispute through negotiations 

with Jack Holland, an employee of TD & H. On September 24, 1986, 

Daniels was advised that Jack Holland had been authorized by each 

corporation to settle Daniels1 claims against the corporations with 

Daniels separately. Holland met with Daniels for two days in 

September but the negotiations were unsuccessful. 

The relationship between Daniels and Thomas continued to 

deteriorate and on March 27, 1987, Daniels filed a complaint in the 

District Court of the Eighth Judicial District, Cascade County, 

alleging bad faith and wrongful termination against TD & H and 

fraud, breach of fiduciary duty, undue influence, and negligent 

misrepresentation against Thomas and both corporations. Along with 

the complaint, Daniels filed a motion for substitution of judge. 

The case was never transferred to another judge. Just prior to the 

trial, on June 10, 1988, Judge Roth brought the parties1 attention 

to the motion. At that time, the parties1 attorneys stipulated 

that Judge Roth may sit as trial judge in the case. 

This case was bifurcated into two separate actions over 

vigorous objection by defendants. The action involving legal 

claims of wrongful termination and breach of good faith and fair 

dealing in an employment situation was postponed until a later date 
for a jury. The action in equity involving whether Daniels was 

entitled to an appraisal remedy in regard to his T & D Properties 

stock was then tried without a jury on July 6, 7 and 8, 1988. The 

trial was recessed until August 15, 1988 when testimony was 

completed. Earlier, on July 5, 1988, the District Court had 

granted Daniels' motion for partial summary judgment, ordering that 

the restrictive covenant found in the 1979 shareholder agreement 

was an unreasonable burden on the employee and ordered the 

provision void under 5 28-2-703, MCA. 

The District Court rendered its judgment on September 14, 

1988, concluding that T & D Properties entered into an enforceable 

contract to pay Daniels, a minority shareholder, for his T & D 

Properties stock; that Thomas, as president of both TD & H and 

T & D Properties violated his fiduciary duty by inducing Daniels 

to leave his employment and by his adversarial negotiation stance; 

that Daniels, as a minority shareholder, demonstrated an equitable 

right to have his stocks in T & D Properties appraised and 

purchased by T & D Properties because of Thomas1 oppressive 

negotiation tactics; and that Thomas1 attempts to gain an unfair 

advantage over Daniels amounted to constructive fraud under Montana 

law. The court then concluded that the valuation method used by 

T & D Properties was unfair and therefore adopted the net asset 

approach as a reasonable method for determining the value of the 

corporate stock owned by a minority shareholder. The court ordered 

that under this method Daniels' T & D Properties stocks were worth 

$53,128. The court also concluded that Daniels was entitled to his 

costs in this matter, which included his cost of hiring an 
appraiser. The court, however, also concluded that no contractual 

or statutory right existed for ~aniels to recover his attorney's 

fees from the defendants. Defendants appeal, and plaintiff crossappeals, raising the following issues. 

The first issue this Court will address on appeal is whether 

the filing of Danielsv motion for substitution of judge divested 

Judge Roth of the power to render a judgment on this matter. 

Defendants cite 5 3-1-804, MCA (1987), to argue that Danielsv 

filing of the motion for substitution of judge divested Judge Roth 

of the power to decide the case. This statute states in pertinent 

part that: 

After a timely motion has been filed, the 

substituted judge shall have no power to act 

on the merits of the cause and shall call in 

another judge. 

Section 3-1-804 (1) (a) , MCA (1987) . However, Daniels motion for 

substitution of judge was filed on March 27, 1987. The law in 

effect on that date provided in pertinent part that: 

A motion for substitution of a judge 

shall be made by filing a written motion for 

substitution reading as follows: 

"The undersigned hereby moves for 

substitution of another judge for Judge 

in this cause.If The clerk of court shall 

immediately give notice thereof to all parties 

and to the judge named in the motion. Upon 

filing this notice, the judge named in the 

motion shall have no further power to act in 

the cause other than to call in another judge, 

which he shall do forthwith, and to set the 

calendar. 

Section 3-1-802, MCA (1985). The record indicates that the clerk 

of court did not give notice to either the judge or the opposing 

parties nor was a notice of this substitution filed as required by 
5 3-1-802, MCA (1985). Because the requirements of the 1985 

statute were not followed,.Judge Roth retained jurisdiction of the 

case. 

We also note, however, that contrary to what Daniels attempts 

to assert, a judge could not obtain jurisdiction through the 

consent of the parties in this case. See, e.g., Corban v. Corban 

(1972), 161 Mont. 93, 96, 504 P.2d 985, 987; In re WoodsideFlorence Irrigation Dist. (1948), 121 Mont. 346, 352, 194 P.2d 241, 

244. The parties' stipulation was therefore not effective in 

allowing Judge Roth to retain jurisdiction of the case. If the 

motion was filed only three months later, the pertinent law in 

effect would have been the 1987 statute, and Judge Roth would not 

have retained jurisdiction.of the case. However, in light of the 

unique set of facts in this case Judge Roth did retain 

jurisdiction. 

The second issue raised on appeal is whether the District 

Court erred in ruling that a contract existed which required T & 

D Properties to purchase Daniels1 shares in T & D Properties. 

In spite of the absence of a written agreement, the District 

Court concluded that T & D Properties entered into an enforceable 

contract to pay Daniels for his stock in T & D Properties. The 

court stated that Thomas1 testimony at trial indicated that he 

promised to pay fair market value for Daniels1 stock. The 

testimony the District Court apparently relied upon to find a 

contract between Daniels and Thomas stated that: 

Q: (By Mr. Lynch) What promise was made to 

him about purchasing the stock at the fair 

market value? 
A: We said that we would be willing to 

negotiate that separate from T, D & H to 

negotiate a reasonable settlement and that we 

would be willing to prepare--pay fair market 

value, and with that the way it had to be an 

agreement that was made that he was willing to 

take it, and we made no suarantee we would 

reach an asreement with him or pay him 

whatever [he] wanted. (Emphasis added.) 

The District Court also justified its position by stating that this 

Court indicated that the district courts are to look beyond the 

statutory criteria and I1into the equities of the situationl1 

(citing Maddox v. Norman (1983), 206 Mont. 1, 11, 669 P.2d 230, 

All contracts must contain four essential elements. These 

elements are: (1) identifiable parties capable of contracting, (2) 

the partiesf consent, (3) a lawful object, and (4) consideration. 

Section 28-2-102, MCA; Modern Machinery v. Flathead County (1982), 

202 Mont. 140, 144, 656 P.2d 206, 209. In the present case, the 

purported contract fails for a lack of consent. To have consent, 

there must both offer and acceptance that offer. 

Modern Machinery, 202 Mont. at 144, 656 P.2d at 209. Thomas1 

testimony that the District Court apparently relied upon to 

conclude that an agreement existed between Daniels and Thomas for 

the purchase of Danielsf stock in T & D Properties was not 

sufficient to establish that Thomas made an offer to Daniels for 

the stock. In addition, no evidence exists that Daniels ever 

accepted any offer that was purportedly made by Thomas. 

The Restatement (Second) of Contracts, 9 24 defines an offer 

as: 
[tlhe manifestation of willingness to enter 

into a bargain, so made as to justify another 

person in understanding that his assent to 

that bargain is invited and will conclude it. 

In the present case, Thomast testimony does not rise to the level 

of an offer. Although Thomas did testify that he would be willing 

to pay fair market value for Danielsv stock in T & D Properties, 

Thomas also clearly stated that "we would be willing to negotiate 

. . . a reasonable settlement" and that "we made no guarantee we 

would reach an agreement with him or pay him whatever [he] wanted." 

Thomas1 testimony on which the District Court relied upon is 

merely evidence of the negotiations that occurred between Thomas 

and Daniels and not an offer made by Thomas. The District Court 

had previously recognized that no agreement existed when it denied 

defendants1 motion for directed verdict, stating that It[t]here was 

a promise made to pay fair market value of the T & D [Properties] 

stock and the parties have been negotiating but have never reached 

an agreement and they are at a definite impasse.It In addition, the 

District Court's reliance upon Maddox to justify ignoring the 

statutory criteria and to look into the equities of the situation 

is not appropriate under these set of facts. As this Court has 

previously stated I1[e]quity can enforce provisions of contracts but 

it cannot supply them. l1 Myhre v. Myhre (1976) , 170 Mont. 410, 424, 

554 P.2d 276, 283. Thomasv testimony does not contain language 

that rises to an offer and therefore equity cannot be relied upon 

to create an offer. 

The third issue that will be addressed on appeal is whether 

the District Court erred in ruling that Daniels was entitled under 
Montana law to have his stock in T & D Properties appraised and 

purchased. 

T & D Properties is a closely held corporation but has not 

elected to become a statutory close corporation under the Montana 

Close Corporation Act, 5 35-9-101 et seq., MCA. Therefore, 

Danielsf claims are governed by the provisions of the Montana 

Business Corporation Act, 5 35-1-101 et seq., MCA. The District 

Court concluded that Daniels was entitled to $53,128 for his three 

and one-half shares of T & D Properties. The court based its 

conclusion on findings of a breach of a fiduciary duty, oppression 

of a minority shareholder and constructive fraud. In light of 

these findings, the District Court apparently concluded that under 

55 35-1-810, 35-1-921, MCA, and case law that it was empowered to 

appraise the stock of a minority shareholder and order T & D 

Properties to purchase Daniels1 stock in T & D Properties for the 

sum of $53,128. 

The proceedings in the District Court were of a broad 

equitable nature. Furthermore, many issues raised on appeal are 

mixed questions of law and fact. This Court's duty upon review of 

equity cases and proceedings of an equitable nature is to review 

all questions of fact arising upon the evidence presented in the 

record, whether the evidence is alleged to be insufficient or not, 

and to determine the same, as well as questions of law. Section 

3-2-204(5), MCA. "There is in that statutory requirement for our 

appellate review a measure of protection for the losing party 

coming to us on appeal, at least in equity cases such as this." 

Sawyer-Adecor Intll, Inc. v. Anglin (1982), 198 Mont. 440, 447, 

646 P.2d 1194, 1198. We recognize that Rule 52(a), M.R.Civ.P. 

requires findings of fact made by the district court to be upheld 

unless they are clearly erroneous and that Rule 52(a) does not make 

any distinction between cases of an equitable nature and cases at 

law. However, this Court has stated that we will review both 

questions of law and questions of fact but will not reverse the 

trial court in an equity case on questions of fact unless there is 

a decided preponderance of the evidence against those findings. 
Sawyer-Adecor, 646 P.2d at 1199; Boz-Lew Builders v. Smith (1977), 

174 Mont. 448, 452, 571 P.2d 389, 391. After reviewing the record 

we hold there is a preponderance of the evidence in the record 

against the findings the District Court. 

A. Dissenter's Riqhts 

The District Court found that one of the bases of Daniels1 

right to an appraisal was a corporate resolution to pay Daniels for 

his shares, thus, triggering the following provision: 

Any shareholder of a corporation shall have the right to 

dissent from and to obtain payment for his shares in the 

event of any of the following corporate actions: 

(e) any other corporate action taken pursuant to a 

shareholder vote with respect to which the . . . resolution of the board of directors directs that 

dissenting shareholders have a right to obtain payment 

of their shares. 

Section 35-1-810(1)(e), MCA. 

The District Court's ruling is unsupported by the evidence 

presented. No such corporate resolution was entered into the 

record. Thomas testified that he was authorized to offer up to 

$35,000 for Daniels1 stock, but there was no testimony that Thomas 

was directed to purchase the stock. Exhibit 19c is a stockholder 

letter dated September 24, 1986, authorizing Jack Holland, an 

employee of TD & HI to settle any and all claims against T & D 

Properties. It is not a board resolution directing purchase of 

Daniels ' stock. Moreover, the requirements of 5 35-1-810 (e) , MCA, 

were not satisfied. This section clearly contemplates corporate 

action pursuant to a shareholder vote from which a shareholder 
dissents, followed by a resolution of the board of directors 

directing that such dissenter has a right to withdraw his 

investment and obtain payment for his shares. That is not what 

occurred in this case. 

B. Fiduciary Duty 

In the present case, Thomas' actions do not rise--either 

statutorily or in equity--to the level in which a court should 

interfere with a close corporation's business affairs. In its 

conclusions of law, the District Court first found that Thomas had 

breached his fiduciary duty to Daniels. In particular, the court 

found that Thomas: (1) induced Daniels to leave his employment; (2) 

represented that Daniels would receive 100% of his TD & H stock and 

"fair value1' for his T & D Properties stock; (3) failed to disclose 

material facts relating to his interpretation of the fair market 

value of the T & D Properties stock; (4) attempted Ifto forcet1 

Daniels to accept an unfair price for the T & D Properties stock 

in order for Daniels to receive full value for the TD & H stock; 

(5) took an adversarial negotiation stance; (6) did not fully 

disclose the value of the stock when considering his highest offer 

of $25,000 and the court's subsequent valuation of the stock at 

$53,128; (7) refused to share the cost of an independent appraiser; 

(8) refused to take the suggestions by Daniels for a resolution for 

the dispute; and (9) attempted to use his accountant's analysis of 

some property in an unfair manner. 

In finding that Thomas breached his fiduciary duty to Daniels, 

a minority shareholder, the District Court primarily relied upon 

this Court's decisions in Skierka v. Skierka Bros., Inc. (1981), 
192 Mont. 505, 629 P.2d 214; Deist v. Wachholz (1984), 208 Mont. 

207, 678 P.2d 188; and Dunfee v. Baskin-Robbins (1986), 221 Mont. 

447, 720 P.2d 1148. In each of these three cases, fiduciary 

duties were addressed. However, the relationship between the 

parties in those cases are substantially different fromthe present 

case, and therefore the court's reliance on them for defining 

Thomas1 fiduciary duty was not appropriate. 

In Deist, this Court determined that the unique relationship 

between a bank's agent and a customer created a fiduciary duty 

running from the agent to the customer. Deist, 208 Mont. at 219- 

20, 678 P.2d at 194-95. This Court in Dunfee determined that it 

did not have to decide whether the special facts and circumstances 

of that case gave rise to a fiduciary duty. Dunfee, 221 Mont. at 

452, 720 P.2d at 1151. Neither of these two cases addressed the 

unique relationship between shareholders of a close corporation. 

While the facts of Skierka involved shareholders of a close 

corporation, the relationship between the shareholders in Skierka 

consisted of special circumstances that are not necessarily found 

between all shareholders of a close corporation. The trust 

relationship between the shareholders that this Court focused on 

in Skierka was that of an executor's trusteeship over the assets 

of the decedent 's estate for the benefit of the devisees. Skierka, 

192 Mont. at 513, 629 P.2d at 218. This Court therefore relied 

completely on the trustee's statutes--§§ 72-20-201 through -211, 

MCA (1979). These statutes are not applicable when the 

relationship between the two close corporation's shareholders does 

not involve an executor of an estate and the beneficiaries. 
This Court has previously noted that the relationship between 

close corporations closely approximates the relationship between 

partners. Fox v. 7L Bar Ranch (1982), 198 Mont. 201, 212-13, 645 

P. 2d 929, 935. This Court, however, has never elaborated on the 

fiduciary duty between shareholders in a close corporation when no 

other type of relationship between the shareholders existed. The 

Supreme Judicial Court of Massachusetts in Donahue v. Rodd 

Electrotype Co. of New England, Inc. (Mass. 1975), 328 N.E.2d 505, 

has addressed the fiduciary duty in such a relationship. In 

Donahue, the Massachusetts court held that shareholders in a close 

corporation have a duty to act in the I1utmost good faith and 

loyaltyw to one another. Donahue, 328 N.E.2d at 515-17. The 

Massachusetts court further stated that "[tlhey may not act out of 

avarice, expediency or se1.f-interest in derogation of their duty 

of loyalty to the other stockholders and to the cor~oration." - 

(Emphasis added.) Donahue, 328 N.E.2d at 515. See also, Solomon 

v. Atlantis Development, Inc. (Vt. 1986), 516 A.2d 132; Jones v. 

H. F. Ahmanson & Co. (Cal. 1969), 460 P. 2d 464; Fix v. Fix Material 

Co., Inc. (Mo. Ct. App. 1976), 538 S.W.2d 351; Baker v. Commercial 

Body Builders, Inc. (Or. 1973), 507 P.2d 387. 

The Massachusetts court subsequently refined this duty in 

Wilkes v. Springside Nursing Home, Inc. (Mass. 1976), 353 N.E.2d 

657. In Wilkes, the court acknowledged that the controlling group 

in a close corporation have certain rights to what has been termed 

"selfish ownershipI1 in the. corporation which need to be balanced 

against their fiduciary obligation to minority stockholders and 

stated: 
Therefore, when minority stockholders in a close 

corporation bring suit against the majority alleging a 

breach of the strict good faith duty owed to them by the 

majority, we must carefully analyze the action taken by 

the controlling stockholders in the individual case. It 

must be asked whether the controlling group can 

demonstrate a legitimate business purpose for its action. . . . In asking this question, we acknowledge the fact 

that the controlling group in a close corporation must 

have some room to maneuver in establishing the business 

policy of the corporation. . . . If called on to settle 

a dispute, our courts must weigh the legitimate business 

purpose, if any, against the practicability of a less 

harmful alternative. (Citations omitted.) 

Wilkes, 353 N.E.2d at 663. 

We determine that the reasoning of the Massachusetts court is 

persuasive and also hold that the fiduciary duty between 

stockholders of a close corporation is one of the "utmost good 

faith and loyalty." However, the controlling group should not be 

stymied by a minority stockholder's grievances if the controlling 

group can demonstrate a legitimate business purpose and the 

minority stockholder cannot demonstrate a less harmful alternative. 

The facts of the present case, as set forth above in the 

District Court's findings, do not exhibit a breach of the fiduciary 

duty by Thomas to the shareholders of T & D Properties. The 

evidence demonstrates that there were five shareholders in T & D 

Properties. Besides Daniels, who had three and one-half shares, 

the other shareholders are listed as Duanne C. Dean, with eighteen 

and one-half shares, Marilyn P. Thomas with eighteen and one-half 

shares, Sandra K. Cummings, with three and one-half shares, and 

Dorothy E. Lorang, who held three shares. Duanne Dean, Marilyn 

Thomas and Sandra Cummings received their shares from their 

husbands, Wayne Dean, T.H. Thomas and James ~ummings, respectively. 
Dorothy Lorang, the TD & H office manager, held her T & D 

properties stock in her own name. Daniels initially had his three 

and one-half shares in his.wifels name, but received it back in a 

dissolution settlement in 1980. Although Thomas1 wife held his 

eighteen and one-half shares of T & D Properties, neither party 

disputes Thomas1 real interest in T & D Properties. Rather, Thomas 

testified that he controlled the eighteen and one-half shares of 

the forty-seven shares of T & D Properties, or approximately 

thirty-nine percent. We therefore determine that Thomas was a 

majority shareholder in T & D Properties for the purpose of this 

appeal. To hold otherwise would ignore the realities of the 

situation in this close corporation and rely merely upon 

technicalities. 

When negotiating for the purchase of Daniels1 shares of T & D 

Properties, Thomas1 fiduciary duty of the I1utmost good faith and 

loyaltyI1 was to all of the shareholders of T & D Properties, not 

just to Daniels. And as the evidence demonstrates, Daniels was not 

the only minority shareholder, Lorang and Cummings were also 

minority shareholders. When applying the balancing test, we hold 

that Thomas successfully demonstrated that his duty to these other 

shareholders was not to pay Daniels a price for Daniels1 three and 

one-half shares that the corporation could not afford so as not to 

harm the other shareholders or the corporation. Daniels, however, 

failed to demonstrate the practicability of a less harmful 

alternative, he merely insisted that the corporation buy his shares 

at the price he named. This Court is not in a position to make a 

corporationls business decision when the controlling group can 
demonstrate a legitimate business purpose for its decision and the 

minority shareholder cannot demonstrate the practicability of a 

less harmful alternative. Additionally, the evidence demonstrates 

that Thomas offered to step aside and let Jack Holland handle the 

negotiations with Daniels, thereby eliminating any potential 

conflict of interest or undue influence. 

Thomas was also a director of T & D Properties, therefore 

Thomasf actions must also be measured by the ffbusiness judgment 

rule.If In Ski Roundtop, Inc. v. Hall (1983), 202 Mont. 260, 658 

P.2d 1071, this Court adopted the business judgment rule. This 

Court recognized that when a reasonable basis exists to indicate 

that the directors of a corporation acted in good faith, the 

directors are immunized from liability for honest errors. Ski 

Roundtop, Inc., 202 Mont. at 273, 658 P.2d at 1078. Daniels failed 

to offer proof that Thomas' actions were unreasonable in that they 

would not have been taken by "'an ordinarily prudent man . . . in 

the management of his own affairs of like magnitude and 

importance.fff Alaska Plastics, Inc. v. Coppock (Alaska 1980), 621 

P.2d 270, 278 (quoting Nanfito v. Tekseed Hybrid Co. (D. Neb. 

1972), 341 F.Supp. 240, 244). Judges are not business experts and 

therefore should not substitute their judgment for the judgment of 

the directors. Alaska Plastics, Inc., 621 P.2d at 278. We hold 

that Thomas acted prudently and in accordance with the business 

judgment rule. 

C. Oppression 

The District Court also found that it had the power in equity 

to liquidate the corporation's assets or require the purchase of 
a minority shareholderls shares for fair market value whenever the 

acts of those that control the corporationls actions are illegal, 

oppressive or fraudulent (citing 5 35-1-921, MCA; Maddox, 206 Mont. 

1, 669 P.2d 230; and Skierka, 192 Mont. 505, 629 P.2d 214). The 

District Court then found that Thomas1 negotiation tactics with 

Daniels were oppressive to Daniels. In particular, the District 

Court found that Thomas1 actions were oppressive when he (1) 

attempted to force Daniels to accept his valuation of stock in 

T & D Properties by tying Daniels1 acceptance of the T & D 

Properties stock to the TD & H shareholder agreement; (2) refused 

to waive the anti-competition clause unless Daniels would accept 

Thomas1 $20,458 offer for his T & D Properties stock; (3) used his 

position as president of TD & H to influence the negotiations with 

Daniels and T & D Properties; and (4) mentioned to Daniels in the 

May 13, 1986 meeting that if Daniels did not sell his stock in 

T & D Properties that TD & H could, in effect, bleed the assets 

from T & D Properties. The court therefore determined that Thomas 

used unfair negotiation tactics and that he unfairly used his 

positions with TD & H and T & D Properties to influence the 

negotiations with Daniels. The court found these actions by Thomas 

were oppressive and rose to the level in which the court could 

require T & D Properties to purchase Daniels1 three and one-half 

shares. 

This Court has held that oppression may be more easily found 

in a close corporation than a larger, public corporation because 

shares in a closely held corporation are not offered for public 

sale. Fox, 198 Mont. at 209, 645 P.2d at 933; Skierka, 192 Mont. 

19 
at 519, 619 P.2d at 221. We have also held that when addressing 

these type of cases, we will proceed on a case-by-case basis. Fox, 

198 Mont. at 210, 645 P.2d at 933; Skierka, 192 Mont. at 519, 629 

P.2d at 221. While the District Court correctly cited 5 35-1-921, 

MCA, as the statute that allows a court to dissolve a corporation 

upon a showing of oppression, we hold, as discussed below, that 

Thomas' actions did not rise to the level that would allow a court 

to take the drastic remedy of dissolution or to require a close 

corporation to purchase a minority shareholder's stock. 

A review of the other Montana decisions addressing closely 

held corporations and oppressive behavior by the controlling 

shareholders is helpful. In Skierka, the finding of oppression was 

based on the exclusion of the minority shareholder from 

participation in the operation of the corporation. Skierka, 192 

Mont. at 518, 629 P.2d at 221. In Fox, we upheld the district 

court which found that the controlling shareholders' conduct 

revealed a calculated and oppressive plan designed to deprive the 

minority shareholder of his rightful portion of the corporate 

holdings and profits by making sure he did not have access to them. 

Fox, 198 Mont. at 210, 645 P.2d at 933. The district court in Fox 

further found that the minority shareholder had been effectively 

deprived of any voice in management. Fox, 198 Mont. at 210, 645 

P.2d at 934. This Court then held that these actions by the 

controlling shareholders violated the minority shareholder's 

reasonable expectations of realizing monetary remuneration and of 

having a voice in management. Fox, 198 Mont. at 210, 645 P.2d at 

934. On the other hand, the district court in Maddox found that 
although the controlling shareholders' conduct Itwas not per forma 

as to corporate law or the corporation's by-laws, 'its informality 

was not oppressive toward the plaintiff, nor was she defrauded."' 

Maddox, 206 Mont. at 9, 669 P.2d at 234. This Court therefore 

affirmed the district court's conclusion in Maddox of denying 

liquidation. Maddox, 206 Mont at 13, 669 P.2d at 236. 

In the present case, Thomas' actions were more consistent with 

negotiation tactics than oppressive actions. Merely because Thomas 

attached conditions to his offer does not necessarily mean that his 

actions were oppressive. Additionally, the District Court's 

finding that Thomas attempted to force Daniels to accept a 

settlement by tying in the TD & H shareholder agreement completely 

ignores the evidence that Thomas stepped aside in the negotiations 

and Jack Holland took over and attempted to settle the claims 

against the corporations separately. The court's finding that 

Thomas made a statement in which he threatened to bleed the assets 

from T & D Properties also does not rise to the level of oppressive 

conduct that would warrant the ordering of T & D Properties to buy 

Daniels1 shares. Possible future oppressive actions are not 

sufficient to invoke § 35-1-921, MCA. On the other hand, if Thomas 

were to carry through with his threats, Daniels may then have had 

a legitimate cause of action in which he could allege that Thomas 

was engaging in oppressive actions against him as a minority 

shareholder. However, the mere possibility of oppression is not 

sufficient to warrant the remedy the District Court ordered here. 

In addition, Thomas offered Daniels up to $25,000 for his 

shares in T & D Properties. Although Thomas also seemingly 

2 1 
attached other conditions to this offer, Daniels did not have to 

accept the offer. In fact, Daniels rejected all of Thomas' offers. 

The Supreme Court of Alaska addressed a similar situation in Alaska 

Plastics, Inc. v. Coppock (Alaska 1980), 621 P.2d 270. Alaska 

Plastics, Inc. involved the rights of a minority shareholder in a 

close corporation. In particular, the minority shareholder, Muir, 

held one-sixth of the Alaska Plastics, Inc. shares. The 

controlling shareholders consistently failed to inform Muir of 

shareholder meetings or informed her only a few hours before the 

meetings. In 1971 and 1972, the controlling group also traveled 

to Seattle for a shareholder's meeting and brought their spouses 

at the company's expense even though there was no business purpose 

for doing so. The controlling shareholders also voted themselves 

each an annual $3,000 director fee, however they never paid 

dividends. Coincidentally, Muir was the only shareholder who was 

not a director. Muir never received any money from the 

corporation. In May, 1974, the controlling shareholders offered 

Muir $15,000 for her shares in Alaska Plastics, Inc. Muir rejected 

and subsequently hired an accountant to investigate the company's 

books. The accountant estimated the value of Muir's stock between 

$23,000 and $40,000. In 1975, Muir offered her stock to the 

corporation for $40,000. The board subsequently offered her 

$20,000 which she again rejected. Muir then filed a complaint. 

In its findings of fact and conclusions of law, the district 

court concluded that: 

[Tlhe continued retention by Plaintiff [Muir] 

of one-sixth of the shares in Alaska Plastics, 

Inc. . . . was oppressive to Plaintiff and 
. . . an appropriate remedy would be to direct 

the transfer of Plaintiff Is shares to Alaska 

Plastics, Inc. in exchange for a fair and 

equitable value. . . . 11 

Alaska Plastics, Inc., 621 P.2d at 273. The court then ordered the 

corporation to purchase ~uirls shares for $32,000. The Alaska 

Supreme Court rejected the lower courtls conclusion that once the 

corporation made an offer to Muir it was under an obligation to 

purchase her stock at a "fairM price, regardless of the price the 

corporation had initially offered. Alaska Plastics, Inc., 621 P.2d 

at 276. 

Likewise, merely because T & D Properties had made an offer 

for Daniels1 stock and merely because Thomas testified that they 

were willing to pay fair market value if they could agree to the 

terms, does not obligate the corporation to purchase Daniels1 T & D 

Properties stock. The record also demonstrates that the minority 

shareholder, Lorang, had also wanted to sell her shares in T & D 

Properties to the corporation, but the corporation did not have the 

funds to purchase them. Daniels1 insistence that the corporation 

should nonetheless purchase his shares in T & D Properties merely 

because of possible future oppression by the controlling 

shareholders is not persuasive. Furthermore, we agree with the 

court in Alaska Plastics, Inc. in which it stated that: 

We are not aware of any authority which would 

allow a court to order specific performance on 

the basis of an unaccepted offer, particularly 

on terms totally different from those offered. 

Such a rule would place a court in the 

impossible position of making and enforcing 

contracts between unwilling parties. 

Alaska Plastics, Inc., 621 P.2d at 276. 
We hold that Thomast actions were not so oppressive as to 

warrant the appraisal remedy ordered by the District Court. 

D. Constructive Fraud 

The District Court concluded Thomasv attempts to gain an 

unfair advantage over Daniels constituted constructive fraud under 

§ 28-2-406, MCA. Section 28-2-406, MCA, provides that: 

Constructive fraud consists in: 

(1) any breach of duty which, without an 

actually fraudulent intent, gains an advantage 

to the person in fault or anyone claiming 

under him by misleading another to his 

prejudice or to the prejudice of anyone 

claiming under him; . . . 

As already determined above, Thomas did not breach his fiduciary 

duty to Daniels. In addition, Thomas did not mislead Daniels to 

his prejudice. Thomasv actions were not misleading but merely 

negotiation tactics. Daniels rejected all of Thomas' offers, and 

then failed to prove how he was thus prejudiced. 

We hold that the District Court erred in granting Daniels an 

appraisal remedy under 5 35-1-921, MCA. 

In light of our above holdings in this case, this Court does 

not need to address the following three issues raised on appeal: 

(1) whether the pleadings fairly apprised the defendants of the 

nature of the claims against them; (2) whether the judgment 

rendered by the District Court lies against all three defendants 

(TD & H, T.H. Thomas and T & D Properties) ; and (3) whether the 

District Court erred in awarding Danielst appraisal fees. 

The last issue raised on appeal is whether the restrictive 

covenant clause in the TD & H buy-sell agreement is void under 
§ 28-2-703, MCA. 

The District Court found that as a matter of law, the 

restrictive covenant found in the buy-sell agreement at paragraph 

seventeen was void pursuant to 28-2-703, MCA. Paragraph 

seventeen of the Agreement states that: 

Inasmuch as a shareholder has access to 

confidential information concerning the 

corporate business, it is mutually agreed that 

the compensation for a terminated shareholder 

who obtains employment with a competitive firm 

or enters any form of business in competition 

with the corporation shall be paid for his 

stock at the rate of seventy-five percent 

(75%) of the fair value. 

We disagree with the District Court on this issue. 

Section 28-2-703, MCA, states that "Contracts in restraint of 

trade [are] generally void. contract by which anyone is 

restrained from exercising a lawful profession, trade, or business 

of any kind, otherwise than is provided for by 28-2-704 or 28-2- 

705, is to that extent void." (Emphasis added.) The two 

exceptions allow parties to agree that upon either the sale of 

goodwill of a business or the dissolution of a partnership, one or 

more of the parties will refrain from carrying on a similar 

business within a narrow designated area. Sections 28-2-704 and 

-705, MCA. 

The contract in this case is a share purchase agreement. This 

Court has applied § 28-2-703, MCA, to both employment contracts and 

to a lease which prohibited a competing full service restaurant 

within the same building. See, State Medical Oxygen and Supply, 

Inc. v. American Medical Oxygen Co. (1989), 240 Mont. 70, 782 P.2d 

1272; Dobbins, DeGuire & Tucker v. Rutherford, MacDonald & Olson 
(1985), 218 Mont. 392, 708 P.2d 577; OINeill v. Ferraro (1979), 182 

Mont. 214, 596 P.2d 197. Since 5 28-2-703, MCA, applies to anv 

contract, the statute would also apply to a share purchase 

agreement. However, under certain factual circumstances a covenant 

restraining a lawful profession, trade or business of any kind may 

be acceptable if it passes a three part test of reasonableness. 

Under this test, a covenant not to compete is reasonable if it is: 

(1) limited in operation either as to time or place; (2) based upon 

some good consideration; and (3) affords reasonable protection for 

and not impose an unreasonable burden upon the employer, the 

employee, or the public. State Medical Oxygen and Supply, Inc., 

240 Mont. at 74, 782 P.2d at 1275; Dobbins, 218 Mont. at 396-97, 

708 P.2d at 580. 

Defendants in this case assert that the agreement does not 

violate 5 28-2-703, MCA, and therefore they have the burden of 

showing that the agreement does not violate the statute. State 

Medical Oxygen and Supply, Inc., 240 Mont. at 74, 782 P.2d at 1275; 

First American Ins. Agency v. Gould (1983), 203 Mont. 217, 223, 

661 P. 2d 451, 454. Defendants did not assert nor prove that the 

sale of goodwill of a business or the dissolution of a partnership 

occurred. Therefore, neither of the statutory exceptions--§§ 28- 

2-704 or -705, MCA--apply. 

This Court must next apply the three part test to determine 

whether the covenant is reasonable. The first essential criterion 

that the defendants must demonstrate is that the covenant is 

limited in operation either as to time or place. Defendants assert 

that paragraph sixteen of the TD & H share purchase agreement 

26 
satisfies the time criterion. Paragraph sixteen states that: 

A shareholder who voluntarily or 

involuntarily terminates employment except for 

purposes of retirement, death, or disability, 

shall be paid for his shares at the fair value 

at the time of termination on a pro rata basis 

between the audits prior to and after 

termination. Payment will be made one hundred 

twenty (120) days after the audit following 

date of termination, but in no case sooner 

than two hundred forty (240) days after the 

date of termination. 

While paragraph seventeen specifies how much a terminated 

shareholder will be paid under certain conditions, paragraph 

sixteen specifies when the payment will be made. The agreement 

must be read as a whole. Section 28-3-202, MCA; St. Paul Fire and 

Marine Ins. Co. v. Cumiskey (1983), 204 Mont. 350, 363, 665 P.2d 

223, 229. Upon reading the agreement, the restrictive covenant is 

definitely limited as to time. 

The second criterion that the defendants must demonstrate is 

that the restrictive covenant is based upon some good 

consideration. The consideration flowing to Daniels under this 

covenant was his access to confidential information concerning the 

corporate business. The corporation's consideration under this 

covenant was requiring the corporation to pay only seventy-five 

percent (75%) of the fair market value of the shareholder's stock. 

Defendants therefore demonstrated that the restrictive covenant was 

based upon some good consideration. 

The third and last criterion that the defendants must 

demonstrate is that the covenant affords reasonable protection for 

and not impose an unreasbnable burden upon the employer, the 
employee, or the public. The covenant affords the corporation 

reasonable protection by deterring, but not prohibiting, 

competition with them for a period not to exceed two hundred forty 

(240) days. Deterring competition for this amount of time or 

requiring the terminated shareholder to take only seventy-five 

percent (75%) of the stock's fair market value does not impose an 

unreasonable burden on the corporation, the terminated shareholder, 

or the public. 

On cross-appeal, Daniels raises the issue of whether the 

District Court erred by not awarding Daniels his attorney's fees. 

However, in light of our holdings in this case, we do not need to 

address this issue. 

Reversed and remanded for proceedings consistent with this 

opinion. 

We concur: 

Justices 
Justice John C. Sheehy, dissenting: 

The majority opinion is completely out of focus with the case 

which was tried in the Cascade County District Court, and on which 

the District Court entered judgment. 

For example, an essential element of the District Courtls 

findings is that on April 16, 1986, at a meeting between Thomas, 

as president of T & D Properties, and Daniels, Thomas agreed that 

T & D Properties would purchase Daniels1 stock (3% shares) in T & 

D Properties at fair market value. The majority opinion sets that 

finding aside. The majority opinion relies in part portion 

of Thomasls testimony, without any reference to the other testimony 

in the record which supports the District Court finding. 

In setting aside the District Courtls finding that Thomas had 

agreed to buy the T & D Properties stock from Daniels, no reference 

mention is made by the majority opinion of a second finding made 

by the District Court that on May 13, 1986, the parties met, and 

asain asreed on the method to be used to determine the value of the 

T & D Properties stock. The District Court found: 

23. On May 13, 1986, Daniels and his accountant, Dan 

Eigenman, met with Thomas and his accountants, Dale 

Grabofsky and Curt Ammundson, at the offices of Hamilton 

and Misfeldt in Great Falls. The only disagreement with 

regard to the termination agreement was the value of the 

T & D stock. The dispute centered around the value of 

certain real property including the land known as Western 

Properties and the Great Falls office building. There 

was no major disagreement about the value of the other 

assets of T & D. Both parties agreed to use the method 

of determining the assets less liabilities, with a net 

asset value to be divided by the total issued shares of 

T & D and that figure multiplied by Daniels1 three and 

4 shares. 
On April 16, 1986 (the District Court stated the date to be 

April 17, 1986) Thomas and Daniels met in Great Falls and there 

entered into a mutual agreement for Daniels to terminate his 

employment. In that meeting, they mutually concluded what would 

happen with respect with the T D & H stock owned by Daniels, and 

also the T & D Properties stock which he owned. The evidence with 

respect to that conversation from Daniels is: 

Q. Well, let's tell the court then what Mr. Thomas said 

to you with regard to your leaving the employment. 

A. Well, one of my concerns, you know, was that my 

training and everything was in engineering, my education 

and all my experience, and I mentioned, you know, how are 

we going to resolve the issues, you know, that needed to 

be resolved. And, Tom offered first of all, you know, 

as far as T D & H stock, he would waive the clause that 

requires I only get 75% of the stock. And, he said, you 

know, you have been a good employee for a long time. We 

have had a good relationship. He said we can close this 

out, you know, we can get any information we need from 

you on jobs that are ongoing. If you cooperate, you 

know, and take care of those loose ends, we will waive 

that clause. 

Q. All right. What did he say? 

A. We discussed very briefly the T & D Property, we also 

touched on retirement plans. T & D Properties said we 

will pay full fair market value for that. We will turn 

the pension plans over to you whatever you wish to do. 

I think we mentioned insurance that I would have an 

option to pick that up on my own. (Emphasis added.) 

The majority opinion recites that there was no offer and no 

acceptance but the testimony is contrariwise. Mr. Thomas 

testified: 

Q. (By Mr. Lynch) Now, Mr. Daniels, you agreed to leave 

an employment with the firm of Thomas, Dean & Hoskins, 

did you not? 

A. Based on the conditions that were discussed on the 

16th of April. (Emphasis added.) 
Following the April 16, 1986 meeting, Thomas met with his 

attorney for the purpose of making up a formal written agreement 

that related to that meeting. However in that agreement, instead 

of providing for fair market value for the T & D Properties stock, 

Thomas inserted a figure of $20,428. That had not been agreed upon 

by the parties at the April 16 meeting. In connection with that, 

Daniels testified: 

Q. Did Mr. Thomas, before sending you this check, ever 

consult with you or talk with you about the results of 

the stock? 

A. It was discussed on the 16th of April. 

Q. And what was your impression at that time? 

Q. That I would be paid a fair market value for the 

stock. 

The majority opinion to the contrary notwithstanding, there 

was adequate, substantial and competent evidence to support the 

findings of the District Court that agreement had been reached that 

Daniels would receive fair market value for the T & D Properties 

stock. 

The ~istrict Court also determined that that agreement 

included: I1Determining the fair market value of the T & D 

Properties stock contemplated the use of an appraiser to value the 

assets (real property) of T & D.I1 Thomas refused to get an 

appraiser, to pay for an appraiser, and told Daniels that if an 

appraiser was obtained, he would not regard it or rely on it. Thus 

Thomas led Daniels to believe at the April 16 meeting that he would 

receive fair value for his T & D Properties stock, as a part of the 
termination agreement, but later refused to perform that part of 

the agreement by any reference to a fair appraisal of what the 

market value of the T & D stock should be. 

When I say that the majority opinion is out of focus with the 

case that was tried in ~istrict Court, I mean that the opinion as 

promulgated has no relation to the situation faced by the District 

Court upon which it made a judgment. For that reason, I will 

discuss what the District Court found, and the implications that 

arise from the legal relationships that the court found. 

Thomas, as president and director of T & D Properties, owed 

Daniels, a minority stockholder, a fiduciary obligation. At all 

times at trial, Thomas recognized he was a fiduciary. There was 

no argument on that subject. Out of the fiduciary relationship, 

the ~istrict Court concluded that Thomas, as fiduciary, was bound 

to act in the "highest good faith towards his beneficiary and not 

to obtain any advantage therein over Daniels by the slightest 

misrepresentation, concealment, threat or adverse pressure of any 

kind." Skierka v. Skierka Brothers, Inc. (1981), 192 Mont. 505, 

629 P.2d 214; Section 72-20-201, MCA (Repealed, 1989). The 

fiduciary was bound not to have or acquire an interest which would 

be adverse to the interests of his beneficiary without immediately 

informing him of it and removing himself if requested. The 

fiduciary had an affirmative duty to make sure that the beneficiary 

retained a position of equity; and the fiduciary was obligated in 

all transactions with his beneficiary to refrain from any unfair 

persuasion for the purpose of obtaining an advantage over his 
beneficiary. 

The majority state that the trustee statutes are not 

applicable to a fiduciary when a relationship between two close 

corporation shareholders does not involve an executor of an estate 

of the beneficiaries. That is entirely an incorrect statement of 

law. When a fiduciary relationship exists, the laws applicable to 

the fiduciary are those relating to constructive fraud. Bradbury 

v. Nagelhus (1957), 132 Mont. 417, 319 P.2d 503. The statute 

states that constructive fraud involves Ifany breach of duty which, 

without an actually fraudulent intent, gains an advantage to the 

person at fault or anyone claiming under him by misleading another 

to his prejudice. Section 28-2-406 (1) , MCA. Thus, a constructive 

trust arises under operation of law and is valid. Section 72-33- 

208(3), MCA; B 72-33-220, MCA. When the majority state that the 

fiduciary duty between stockholders of a close corporation is one 

of the Ifutmost good faith and loyaltyIf1 the majority in reality are 

stating the duties of a trustee in a constructive trust. There can 

be no argument in this case that a fiduciary relationship exists 

between Thomas, the corporation, and the minority shareholder. The 

proposed findings of fact submitted by Thomas in this case accepted 

the premise that Thomas was a fiduciary. No issue of any kind was 

raised in the case that his status was any less than a fiduciary. 

The parties agreed a fiduciary relationship existed. 

When the majority then insert the Ifbusiness judgmentff rule, 

they erroneously mix two incongruent concepts. The 'fbusiness 

judgmentff rule applies to the acts of directors and officers to 
hold them free from liability for honest errors, for mistakes of 

judgment, when they act without corrupt motive and in good faith, 

that is for mistakes that may properly be classified under the head 

of honest mistakes. Ski Roundtop, Inc. v. Hall (1983), 202 Mont. 

260, 658 P.2d 1071, 1078 (1983). The ttbusiness judgmentt1 rule 

applies to officers and directors acting in a corporate capacity, 

when no fiduciary relationship is involved. When a fiduciary 

status is established, the actions of officers and directors are 

examined, not under the Itbusiness judgment rulef1 but rather whether 

the fiduciary exercised the utmost good faith and loyalty, in this 

case towards all of the shareholders of T & D Properties. 

The majority resort to a "balancing test,It contending that 

Thomas1 duty was to protect the other shareholders by not paying 

Daniels a price for his shares that the corporation could not 

afford so as not to harm the other shareholders of the corporation. 

There is absolutely no proof of this in the record. In any event, 

there could not be any such proof because a fair market value of 

Danielst stock would likewise be a fair market value of all of the 

other shareholders' stock. The majority talk about balance; it is 

a see-saw, tipped on one end against Daniels. 

Thomas breached the duties of a fiduciary. The court 

concluded he had violated his duty by inducing Daniels to leave his 

employment through representations that Daniels would be paid 100 

percent of the value of his stock in the T D & H corporation, and 

the "fair valueI1 of his stock for the T & D Properties corporation. 

Thomas intended to force Daniels to accept an unfair price for his 
T & D Properties stock in order for ~aniels to receive the full 

value of the T D & H stock. (Thomas had written that the T D & H 

stock anti-competition clause would be waived if Daniels would 

accept Thomas1 valuation of the T & D properties stock.) Although 

Thomas had authority from his board of directors to offer $35,000 

for the T & D Properties stock to Daniels, he never transmitted 

that offer to Daniels and adamantly stayed on the $25,000 figure. 

Thomas stood to benefit from his dealings with Daniels, because he 

owned 39 percent of the stock in T & D properties. For a fiduciary 

to gain any advantage through breach of a duty constitutes 

constructive fraud. Deist v. Wachholz (1984), 208 Mont. 207, 678 

P.2d 188, 193; Ryckman v. Wildwood (1982), 197 Mont. 154, 641 P.2d 

467, 472. 

The District Court found that at the April 16, 1986 meeting, 

Thomas had agreed to waive the anti-competition provision of the 

share-purchase agreement that applied to the T D & H stock. 

The District Court further found that Daniels, relying upon 

the statements made by Thomas concerning the waiver, began an 

engineering business in Belgrade on July 1, 1986. Thereafter 

Thomas would not authorize a waiver of the anti-competition clause 

unless Daniels agreed to accept the valuation of the T & D 

Properties stock provided by Thomas. Indeed, by letter dated 

September 17, 1986, Thomas informed Daniels that the full payment 

of the value of Daniels1 T D & H stock was contingent on his 

accepting Thomas1 value of Daniels' T & D Properties stock. From 

all of the problems facing Daniels, the District Court found that 
he was stranded in a closely-held situation which was hostile and 

adverse to him as a minority shareholder. The District Court found 

that T & D properties and Thomas agreed to pay fair market value 

to Daniels for Daniels1 shares of stock in the corporation, but 

that Thomas1 refusal until the time of trial to use an appraiser 

or recognize one was oppressive and in violation of Thomas' 

fiduciary duty. It was on that premise that the ~istrict Court 

found that the only remedy proper was to order the corporation to 

purchase Daniels1 stock at fair market value. Such a purchase 

would not result in any disruption of the corporate business nor 

any injury to the public, and would promote the best interest of 

T & D Properties. 

The majority opinion intimates that neither the District Court 

nor this Court can grant an equitable remedy to a minority 

shareholder in a close corporation unless the minority shareholder 

has asked for liquidation. That intimation is an unnecessary 

extension of corporate law and has no basis in the case which the 

majority cited in support. For example, in Maddox v. Norman 

(1983), 206 Mont. 1, 669 P.2d 230, the minority shareholder 

petitioned for liquidation, but the District Court found and this 

Court agreed that the equities did not support his contention that 

liquidation is a proper remedy. Instead, this Court stated that 

the equitable powers of district courts in disputes among 

shareholders of close corporations allowed the court to fashion 

reasonable equitable remedies. This Court said: 

Our prior decisions have recognizedthe general equitable 

powers of district courts over disputes arising among 

36 
shareholders of close corporations (citing authority). 

In ~histed, we recognized that power to choose from a 

broad range of equitable remedies is necessary to resolve 

disputes of this nature: "[bly [their] very nature, 

intracorporate problems arising in a close corporation 

demand the unusual and extraordinary remedies available 

only in a court of equity1' 147 Mont. 14, 409 P.2d at 820. 

Accordingly, a court sitting in equity is empowered to 

determine the questions involved in a case 'land do 

complete justice.'' (Citing authority.) This includes 

the power to fashion an equitable result. Rase v. Castle 

Mountain Ranch, Inc. (1981) , - Mont. , 631 P.2d 680, 

687, 38 St.Rep. 992, 1000. 

206 Mont. at 14, 669 P.2d at 237. 

Thus the right of the minority shareholder to get equitable 

relief from oppressive conduct by controlling shareholders is not 

dependent on a request for liquidation, but whether equity is 

necessary to fashion a just resolution. The view of this Court 

expressed in Maddox, Skierka, and other cases, is in tune with the 

Montana Close Corporation Act, adopted in 1987 (3 35-9-101 et 

seq.). That Act provides, in 3 35-9-501, MCA, that a shareholder 

in a statutory close corporation could petition the district court 

for a corporate purchase of his shares if the directors who control 

the corporation have acted in a manner that was "illegal, 

oppressive, fraudulent, or unfairly prejudicial to the petitioner. 

See Bahls and Quist, The ABA Model Statutory Close Corporation Act: 

A New Opportunitv for "Made in Montana1I Corporations, Mont . Law 

~eview, page 66, et seq. 

I would therefore affirm the District Court's holding that 

Daniels is entitled to have his shares purchased at fair market 

value and that the fair market value is that found by the District 

Court. I would make the judgment effective against T. H. Thomas 
individually and T & D Properties, and not against the other 

corporation, would find error in awarding Daniels 

his appraisal fees. I would deny Daniels' cross-appeal for 

attorneys fees. 

Next comes the question of how Daniels ought to be paid for 

his T D & H stock (a separate corporation). The majority opinion 

finds that the restrictive agreement in the share-purchase 

agreement adopted by T D & H does not violate the anti-competitive 

provisions of Montana law. That portion of the majority opinion 

is clearly wrong. 

We repeat the pertinent provision of the shareholder 

agreement: 

Inasmuch as a shareholder has access to confidential 

information concerning the corporate business, it is 

mutually agreed that the compensation for a terminated 

shareholder who obtains employment with a competitive 

firm or enters any form of business in competition with 

the corporation shall be paid for his stock at the rate 

of 75% (seventy-five percent) of the fair value. 

Under Montana law (5 28-2-703, MCA) any contract by which 

anyone is restrained from exercising a lawful profession, trade or 

business of any kind is to that extent void, subject to certain 

exceptions not pertinent here. The provision above quoted of the 

share-purchase agreement restrains Daniels from his lawful 

profession as an engineer by penalizing him up to 25% of the value 

of his T D & H stock. The District Court found that "there is no 

limitation in the anti-competition provision therein as to the 

duration of its prohibition or the territorial scope of his 

prohibition. The provision, read literally, prohibits the 
plaintiff from competing with the defendants anywhere in the world 

and until the end of time." Clearly, the District Court understood 

what it read in the provision. 

The majority opinion contends that the anti-competition 

provision is limited as to time because another provision of the 

share-purchase agreement provides that payment for stock shall be 

made to a shareholder 120 days after the audit following the date 

of termination, but in no case sooner than 240 days after the date 

of termination. Obviously, as the District Court found, that 

provision relates to when payment is to be made and not to the 

duration of the anti-competition provision. Two things militate 

against the majority opinion's position: (1) At the time of the 

trial, more than 240 days following the termination, Thomas was not 

willing to waive the anti-competition petition provision, and pay 

Daniels 100 percent of the value of his stock; and (2) if the 

anti-competition provision is valid, as the majority opinion 

contends, it could be specifically enforced even after payment for 

the stock that had been made under the other provision of the 

share-purchase agreement. We should declare the anti-competition 

provision of the share-purchase agreement void. Dobbins, DeGuire 

& Tucker v. Rutherford, MacDonald and Olson (1985), 218 Mont. 392, 

708 P.2d 577; J T Miller Company v. Made1 (1978), 176 Mont. 49, 575 

P.2d 1321. 

At the outset, I stated that the majority opinion was out of 

focus. The majority have set aside the District Court's findings 

of fact without finding them clearly erroneous; and, they have 
found valid a clearly anti-competitive provision of the sharepurchase agreement. On these points the majority have diverged 

from rather than converged on previous decisions and statutory law, 

and made vague and blurry for future cases the position of this 

Court on these points. 

Justice 

I concur in the foregoing dissent of Justice John C. Sheehy. 

Justice