Opinion ID: 2601808
Heading Depth: 4
Heading Rank: 2

Heading: It was error to grant summary judgment on the issue of breach of fiduciary duty.

Text: At the time it denied CRC's motion for summary judgment, the superior court sua sponte granted summary judgment to the Hobbses on the broader question whether equitable rescission could be an appropriate remedy in the case under any theory. In doing so, the superior court decided CRC's second claim for equitable rescission, which was based on a theory of breach of fiduciary duty. CRC's second amended complaint included allegations that Cucullu and Tiplady under duress were offered ... to have their interest in HIAK purchased and that the Hobbses breached their fiduciary duties. The complaint further alleged that the buyout agreement was unenforceable because of coercion in the inducement and concealment of pertinent facts as to the company assets and the dealings of the company. After the superior court granted summary judgment to the Hobbses, CRC filed a motion for reconsideration arguing that factual questions remained as to whether the buyout agreement was based on full disclosure of relevant information and executed in good faith. [22] CRC pointed to evidence and documents filed in support of its motion, including testimony from both Cucullu and Tiplady that significant relevant information was withheld from their use throughout their stock ownership in HIAK, including at the time of the buyout agreement. CRC noted that the court has received the transcribed testimony of Randy Hobbs admitting to bad faith conduct involving the sale of assets offered to secure the buyout agreement without returning any of the monies from such sale to the minority shareholders. For these reasons, CRC argued that the superior court's sua sponte decision to grant summary judgment in favor of the Hobbses was improper. The superior court denied CRC's motion with a brief explanation that did not address the breach of fiduciary duty claim itself. [23] On appeal, CRC renews its complaint that the superior court erred by granting summary judgment to the Hobbses without ever addressing the breach of fiduciary duty claim. CRC maintains that the evidence it presented to the superior court raises a question of fact concerning whether the Hobbs Industries defendants have acted in good faith [or] in breach of their fiduciary duty. The Hobbses respond that any claims of non-disclosure ... were released in the 1996 settlement agreement and cannot be a basis for rescission of that agreement. The Hobbses also argue that CRC's sale of assets claim is not for breach of fiduciary duty because after the buyout agreement was signed, the Hobbs[es] were no longer in a fiduciary relationship with Cucullu and Tiplady. CRC's initial motion for summary judgment, the Hobbses' opposition, and CRC's reply did not focus on CRC's breach of fiduciary duty claim. Instead, the parties primarily briefed and argued the question of failure of consideration. But CRC's motion for summary judgment also based its claim for rescission of the agreement on a breach of fiduciary duty, specifically alleging that the Hobbses never had any intent to fulfill the buyout agreement and that [t]heir sole aim was to obtain the outstanding shares to control the corporation as they saw fit without providing any remuneration to Cucullu or Tiplady. The superior court failed to address the merits of either party's arguments regarding the breach of fiduciary duty claim. [24] We have held that shareholders in a closely held corporation are fiduciaries to one another. [25] Where a fiduciary induces a contract by unfair persuasion, he or she breaches this fiduciary duty, and under some circumstances, that contract is voidable by the victim of the breach. [26] Because the superior court failed to consider the question whether CRC was entitled to equitable rescission based on its claim of breach of fiduciary duty, we remand for consideration of that issue.