Opinion ID: 72909
Heading Depth: 2
Heading Rank: 4

Heading: summary judgment on konstand’s shareholder

Text: DERIVATIVE CLAIM 5 Malick's argument that he has RICO standing because BGH shares BCI's economic fate and Malick is thus suing “double-derivatively” is creative but meritless. Assuming that such a double-derivative action exists, it rests upon the idea that the injury to plaintiffs’ corporation results from injuries to another corporation. That type of injury is too attenuated for RICO standing. 20 The district court granted summary judgment against Konstand on Count IV, the state law shareholder derivative claim, after concluding that Konstand lacked standing to bring a shareholder derivative suit because he was no longer a BCI shareholder after UCB foreclosed on Konstand’s stock pledge. BCI argues that Konstand pledged all of his stock to secure the UCB loan, and that UCB therefore gained control of all of Konstand’s stock when it foreclosed on its loan to BCI. Konstand responds that at the least a genuine issue of fact exists as to whether the agreement pledged all of Konstand’s BCI stock. The district court agreed with BCI, finding that the language of the loan agreement unambiguously indicated that Konstand intended to pledge all of his stock to secure the UCB loan. The pledge agreement by which Konstand pledged his BCI stock to secure the UCB loan provided, in pertinent part: Konstand, as security for the repayment of said note under the terms and provisions hereinafter set forth, will pledge all of his shares of stock which he presently owns in Biven’s [sic] in the amount of 58.07 shares of stock. . . . Both sides concede that the language of the agreement is inconsistent with the actual facts, because at the time Konstand signed the agreement in July 1973 he owned 59 shares, not 58.07. The district court dealt with this inconsistency by interpreting the numeral “58.07 as a “scrivener’s error” and concluding that Konstand actually had pledged all 59 shares of his BCI stock to UCB to secure the $200,000 loan. As a result, the district court found that when UCB foreclosed on the pledged shares, Konstand lost all 59 of his shares, instead of only 58.07 shares. Without any BCI stock, Konstand lacked the standing to bring a 21 derivative suit. Accordingly, the court concluded that summary judgment against Konstand on Count IV was proper. We are not prepared to say that the district court’s interpretation of the pledge agreement is an unreasonable one. The parties could have intended the pledge to extend to all of Konstand’s stock, could have screwed up the number somehow, and everyone could have overlooked the error before the agreement was signed (and apparently immediately thereafter, as well). That is possible. However, it is also possible that the parties intended the pledge of “58.07 shares of stock” to mean exactly that, which is why they put that number in the agreement, and the error was in the reference to “all of his shares.” From the language of the agreement alone we do not know why the parties would have wanted the pledge to cover such an odd number of shares. In one way the oddness of that number of shares weighs in favor of finding that the mistake is in the number, but it also weighs the other way. Surely, such an odd number would have stood out to the parties, just as it does to us, and would have caused them to double check to ensure that is what they intended, that it was the precise number of shares Konstand was pledging. We are left with the conclusion that there are two reasonable interpretations of the pledge agreement’s language, which is to say two reasonable explanations for which part of the agreement was not intended: the 58.07 number, or the “all of his shares” language. “Ambiguous” provisions are those susceptible of interpretation in opposite ways or reasonably or fairly susceptible to different constructions. Friedman v. Virginia Metal Prods. Corp., 56 So.2d 515, 517 (Fla.1952); see The Ins. Co. v. Neumann, 634 So.2d 726, 22 729 (Fla. Dist. Ct. App. 1994); Hancock v. Brumer, Cohen, Logan, Kandell & Kaufman, 580 So.2d 782, 784 (Fla. Dist. Ct. App. 1991). Because more than one reasonable interpretation of the pledge agreement exists, it is ambiguous with respect to the number of shares that Konstand pledged, whether it was 58.07 or all 59 shares. Konstand contends that if the agreement is ambiguous, then summary judgment against him is inappropriate because all ambiguities must be construed against the drafter of the agreement, see, e.g., McGregor v. Board of Comm'rs of Palm Beach County., 956 F.2d 1017, 1022 (11th Cir. 1992); State ex rel. Guardian Credit Indemnity Corp. v. Harrison, 74 So.2d 371, 378 (Fla. 1954), and UCB was the drafter. However, that is something of a fallback canon, and the foremost goal of contract construction is to give effect to the intent of the parties. See, e.g., Hurt v. Leatherby Ins. Co., 380 So.2d 432, 434 (Fla. 1980). Therefore, in order for summary judgment to have been proper, no genuine material issue of fact must exist with regard to the parties' intent. Whether the parties intended for Konstand to pledge all 59 of his shares of BCI stock is a question of fact. In this case, evidence exists to support both sides’ positions. Konstand points to the express mention of 58.07 shares in the agreement and to his own deposition testimony stating that he reached a bargained for agreement with UCB which would allow him to keep less than one share in order to remain a minority shareholder. Konstand notes that at the foreclosure sale in 1975, UCB could only claim to have bought 58.07 shares of BCI stock, not 59 as it now claims to own, because UCB alleges that at the time that the parties entered into the pledge agreement it believed Konstand owned only 58.07 shares of 23 stock. The conduct of the parties to an agreement is an excellent indicator of intent. See Hibiscus Assoc. v. Board of Trustees, 50 F.3d 909, 919 (11th Cir. 1995) (interpreting Florida contract law). Konstand also argues that UCB has continued to recognize Konstand as a minority shareholder in BCI for twenty years. He points out that the minutes of BCI stockholder meetings identify him as a minority shareholder and the defendants failed to deny in their answer to the complaint his allegation that he is a minority shareholder in BCI. Defendants, on the other hand, contend that there is a lack of additional evidence corroborating Konstand's story and that a letter written by Konstand contemporaneously with the loan agreement, in which Konstand agrees to pledge all his BCI stock to secure the loan, evidences that Konstand intended to pledge all of his stock. The net result is that a genuine issue of fact exists with respect to the parties’ intent in regard to the pledge agreement. The district court should not have decided whether the pledge of 58.07 shares of stock was a “scrivener's error,” because that is a question of fact to be decided by a jury. Therefore, the district court’s grant of summary judgment for the defendants on Konstand’s state law shareholder derivative claim is due to be reversed.