Opinion ID: 1193798
Heading Depth: 1
Heading Rank: 5

Heading: Reserve Account

Text: Although Elmer was awarded $60,198.90 in damages, Fremont challenges only the $50,000 awarded under the reserve account provision of the contract. We are again required to answer two questions: (1) was the $150,000 reserve account established, and (2) if so, is Elmer entitled to one-third ($50,000) of the account without a vote to that effect? The portions of the contract relevant to this discussion provide: 2(d) Reserve fund. A reserve fund shall be established by retaining net profit in the corporation which is allocated to sales and income from the Rock Springs, Wyoming office and which shall be used as a reserve of cash proceeds for business operations.    3(b)(i) After establishing and maintaining a $150,000 cash reserve, all of which shall come out of the net profits from the sale of units at the Rock Springs location, Elmer shall be entitled to thirty-three and one-third percent (331/3%) of any additional net profits. The distribution of net profits after establishing the $150,000 reserve account shall be made on a annual payment schedule.    3(b)(ii) Elmer shall be entitled to a distribution of thirty-three and one-third percent (331/3%) of the initial $150,000 cash reserve account equal to that taken by S.J. Stanbury or Doug Stanbury, but only upon the vote of two of the three of Doug Stanbury, S.J. Stanbury and Elmer being in favor of a withdrawal from the base $150,000 reserve account. There is no representation or guarantee when any distribution will be made available to Elmer or either of the Stanburys, out of the first $150,000 reserve account. Elmer's vested one-third of the $150,000 initial reserve account is to be limited to one-third of that amount which is actually accumulated and retained during each and every separate year that it takes to accumulate the $150,000. By way of explanation, the following is to be used as a guideline: First Year. Elmer is employed all year and a total of $85,000.00 is retained in the initial reserve account. He therefore is vested in one-third of $85,000.00. Second Year. Elmer is employed only seven months of that year and a total retained for that year is $95,000.00. Since Elmer was employed only part of the second year, he still is vested in one-third of the first year's $85,000.00 but none of the second year's $95,000.00. Fremont challenges the district court's finding that the $150,000 cash reserve account had been established. The factual findings of a judge are not entitled to the limited review afforded a jury verdict. Springer v. Blue Cross & Blue Shield of Wyoming, 944 P.2d 1173, 1176 (Wyo.1997) ( citing Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531, 538 (Wyo.1993)). While the findings are presumptively correct, the appellate court may examine all of the properly admissible evidence in the record. Id. Due regard is given to the opportunity of the trial judge to assess the credibility of the witnesses, and our review does not entail reweighing disputed evidence. Id. Findings of fact will not be set aside unless they are clearly erroneous. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. Id. The evidence presented at trial is adequate to support the district court's determination that the $150,000 reserve account had been established and maintained. The profits accrued by the Rock Springs sales lot were deposited into a checking account. Over the performance year for which Elmer sought payment, April 1, 1995, to March 31, 1996, the account shows a high balance of $264,628.18. In February of 1996, $100,000 was withdrawn from the account to purchase a certificate of deposit. On March 31, 1996, the account held $53,991.25. Combining this amount with the $100,000 certificate of deposit, the district court found that at least $153,991.25 existed in the reserve account at the end of Elmer's performance year. Fremont argues that the district court's determination must be incorrect because its net profits for the performance year did not reach $150,000. This argument is not supported by the record. Testimony from Elmer's accountant and an exhibit detailing her calculations substantiate the district court's finding that Fremont's net profits for the performance year, even excluding rebates received after March 31, 1996, totaled $181,877.32. Fremont contends now, as it did at trial, that its net profits should not include amounts potentially payable to Elmer. However, we agree with the district court that, although these deductions may have been appropriate for tax purposes, the contract does not contemplate that Fremont's net profits be calculated in this fashion. The contract clearly states that payments to Elmer are to be paid out of net profits, and nowhere does the contract indicate that Elmer's share of the net profits should be deducted when calculating net profits. We find it somewhat disingenuous that Fremont challenges the district court's findings, yet does not dispute the award of $9,156 under paragraph 3(b)(i) of the contract. Before Elmer left to open his own business, Fremont had paid him $37,043.98 under paragraph 3(b)(i). The award of $9,156 represents an additional amount owed to Elmer under this paragraph. Elmer was entitled to payment from profits under this paragraph only after the $150,000 reserve account was established and maintained. By its own actions, Fremont appears to acknowledge that the reserve account had been established and maintained at over $150,000. We agree with the district court's determination that the $150,000 reserve account had been established and maintained. The next question is whether Elmer is entitled to distribution from the reserve account without a vote on the subject. On this point, the district court wrote: [Fremont] had a fiduciary obligation under Paragraph 3.b.(ii) to hold the reserve account intact for Elmer, S.J. Stanbury and Doug Stanbury. [Fremont] has not done so and has permitted the cash reserve to be dissipated. S.J. Stanbury and Doug Stanbury, as sole shareholders, directors, and officers of Fremont Homes have either directly or indirectly received the benefit of their share of the cash reserve. [Elmer's] share of the reserve account became vested on March 31, 1996. This issue presents a question of contract interpretation, whether a vote is required for Elmer to receive his vested one-third share of the reserve account. Looking at the language of paragraph 3(b)(ii), especially the illustrative examples, the parties clearly intended that Elmer be vested in one-third of any funds in the reserve account at the end of any performance year that Elmer completed. Fremont does not dispute that Elmer worked for one full performance year, April 1, 1995 through March 31, 1996. Under the terms of the contract, Elmer was thus vested in one-third of any amounts (up to $150,000) in the reserve account at the end of the performance year. Fremont argues that Elmer's right to his share of the reserve account is conditioned upon the vote of two of the three of the Stanburys and Elmer. However, the voting provision only addresses when, not if, Elmer is entitled to a distribution: There is no representation or guarantee when any distribution will be made available to Elmer or either of the Stanburys. (emphasis supplied). In reality, Fremont is contending that the voting provision allows it to deprive Elmer of vested benefits. This, the contract does not permit Fremont to do. We agree with the district court's determination that Elmer's share of the reserve account became vested at the end of the performance year, and that, under the circumstances, no vote was required for a distribution. Finally, Fremont contends that the equitable doctrine of unclean hands prevents Elmer from realizing his vested share of the reserve account. One of the basic tenets of equity is that equitable remedies depend upon a showing by the claimant of clean hands: He who comes into equity must come with clean hands. Dutch Maid Bakeries, Inc. v. Schleicher, 58 Wyo. 374, 131 P.2d 630, 634 (Wyo.1942); Harsha v. Anastos, 693 P.2d 760, 762 (Wyo.1985); Lewis v. State Bd. of Control, 699 P.2d 822, 827 (Wyo.1985); 30A C.J.S. Equity § 102 (Unclean hands may be invoked only to prevent affirmative equitable relief). Here, Elmer did not seek equitable relief. Instead, he sought a remedy at law (damages) based on his claim for breach of the employment contract. Had Elmer sought an equitable remedy such as specific performance, Fremont's unclean hands assertion may have had some appeal. See Dutch Maid Bakeries, 131 P.2d at 634; Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 356 (Wyo.1942). However, the unclean hands doctrine does not apply to the legal remedy sought by Elmer.