Court Opinion

ID: 9735832
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:32:17.886861+00
Date Added: 2024-06-11T18:27:00.727231
License: Public Domain

COYNE, Justice
(concurring in part and dissenting in part).
While I concur in the majority’s analysis of the instrument of March 21, 1984, I respectfully dissent from its holding that Winter’s shares áre not subject to the right of first refusal provided in the December 1977 agreement. Although, on the record before us, I might have found that the individual trustees concurred in the proposed 1977 agreement prior to its execution by the Bank, I agree that the trial court’s finding to the contrary is not clearly erroneous. Nevertheless, that the Boyer trust was not bound by the Bank’s execution of the document is not, in my opinion, the end of the matter.
As the trial court found, the purposes of the 1977 agreement were twofold:
(1) To bring about the reorganization of the Vikings and achieve equality of share ownership between Winter, the Skoglund interests and the Boyer trusts; and
(2) To require that any holder of voting stock offer such stock to the voting shareholders before selling it to another.
*794The court also found that neither purpose could be achieved unless all of the voting shareholders were bound. Notwithstanding the ineffective execution of the document by the Boyer trustees, the reorganization was achieved in the precise manner provided in the document. Winter and Sko-glund each transferred to Vikings II 350 Class B voting shares of Vikings I in exchange for only 200 Class B voting shares of Vikings II and assumption by the corporation of the indebtedness incurred in connection with their acquisition of the shares formerly owned by Northwest Publications. The 200 Class B voting shares of Vikings I held by the Boyer trusts were exchanged for 200 Class B voting shares of Vikings II and have since been retained by the Boyer trusts. Ever since 1978 the Boyer trusts have enjoyed the benefits of equal voting power conferred on the trusts by the exchange and by the contemporaneous performance by Winter and the Skoglunds of their agreement, while Winter and the Sko-glunds have enjoyed relief from a $3 million debt. The corporate reorganization was completed almost 10 years ago. With or without the prior concurrence of the individual Boyer trustees, the first purpose of the 1977 agreement has been fully achieved. The trial court’s finding is demonstrably wrong.
It must, of course, be conceded that without the prior concurrence of the individual trustees or written delegation of their authority, the Bank alone could not bind the Boyer trusts. But although a co-trustee cannot exercise a joint power individually, the invalidity of the action of a single trustee may be cured by ratification or acquiescence by the co-trustees. See e.g., In re Gibbons’ Estate, 132 Neb. 538, 272 N.W. 553 (1937); In re Towne’s Estate, 25 Pa.D. & C.Rep. 641 (1936). Ordinarily, receipt and retention by a principal of the benefits of his agent’s unauthorized transaction constitute an affirmance or ratification unless the principal promptly repudiates the act. Restatement (Second) of Agency §§ 98 and 99 (1958). Furthermore, acquiescence in the retention of the benefits of the transaction constitutes an affirmance of the entire transaction — the burdens as well as the benefits. Restatement (Second) of Agency § 96, comment a. Not only have the Boyer trusts retained the benefit of the 1977 agreement for the corporate reorganization, but the individual trustees have never repudiated the Bank’s action. Neither have the individual trustees ever rejected the burden placed on the shares by that agreement, though they must have known of the right of first refusal because Barbara Boyer Steele, a trust beneficiary, mentioned it during the discussions preceding the 1984 agreement. Were the Boyer trusts now attempting to escape the obligations imposed by the 1977 agreement, I have not the least doubt that the trustees would be held estopped to avoid the 1977 agreement. In fact, the Boyer trustees have asserted the December 1977 agreement as a defense and as a basis for their counterclaim in this declaratory action. These claims constitute a manifestation of affirmance which cannot be retracted. Whether they were intended as affirmance is immaterial. Restatement (Second) of Agency § 97 and comment a.
Affirmance of the 1977 agreement results not only in impressing the voting shares held by the Boyer trusts with the burden of a right of first refusal, but also in conferring on the Boyer trustees the benefit of a right of first refusal with respect to the voting shares held by Winter and Skoglund. Since, however, ratification of and acquiescence in the December 1977 agreement is raised only indirectly, it may be contended that that issue is beyond the scope of our inquiry and that we are limited to deciding whether Winter is bound by the 1977 agreement notwithstanding that its execution was ineffective to bind the Boyer trusts.1
Unlike the document signed on March 21, 1984, the agreement of December 1977 contains an express affirmation of the general rule that a party who signs and delivers an *795instrument is bound by the obligation therein assumed even though it is not executed by all the intended parties. Naylor v. Stene, 96 Minn. 57, 104 N.W. 685 (1905). Furthermore, that affirmation is set out in clear and unambiguous terms:
It is further understood and agreed that this agreement shall be binding upon and inure to the benefit of those parties who are signatory hereto, whether or not executed by all parties.
Despite this language, the trial court found that it was the mutual intent of the parties that unless all holders of voting stock were bound, none of them would be bound. If the evidence of the subjective intent of the parties can be said to support this finding, their express or manifest intent cannot.
The majority dismisses the plain language of the contract with the offhand comment in a footnote that “this clause is some evidence of intent” and then countenances the substitution of some hidden and unexpressed intention for the manifest intention unequivocally set out in the 1977 document on the ground that “[tjhis is not a case concerning only the interpretation of documentary evidence, but one in which there is significant oral evidence regarding intent.” It is, however, fundamental to the law of contracts that clear and unambiguous language may not be varied either by application of principles of construction or by parol. Kuhlmann v. Educational Publishers, Inc., 245 Minn. 171, 71 N.W.2d 889 (1955); Betlach v. Wayzata Condominium, 281 N.W.2d 328, 330 (Minn.1979). If the language of the contract is, as here, plain and unambiguous, there is nothing to interpret. The intention clearly expressed by that language controls, rather than whatever may now be claimed to have been the actual intention of the parties. Id. Accordingly, I would hold Winter bound by the December 1977 contract upon his execution and delivery of the agreement to Skoglund and the Bank.
The majority permits Winter to avoid the contract on the ground that Winter and Skoglund were mutually mistaken in their belief that the Bank’s signature had bound the Boyer trust. The mistake seems to have been tripartite, for the Bank appears to have labored justifiably under the same misapprehension. Regardless whether the mistake be considered one of fact or of law, it seems to me that it is not the kind of mistake that would render the contract voidable by either Winter or Skoglund.
One basic assumption on which any contract rests is the assumption that the parties to the contract are bound by their agreement. A lack of capacity to contract may make the contract voidable by that party. A typical instance of a voidable contract is the contract of a minor child. The child is not bound and may disavow the contract. The adult with whom the child contracts is, however, bound by the terms of the agreement, mistaken though the adult’s assumption with respect to the child’s capacity may have been. 2 Williston, Contracts § 245 (3d ed. 1959). The defect in execution on behalf of the Boyer trust may be less typical, but the Bank’s inability to exercise a joint power without the joinder of one of the individual trustees comes to the same thing. The Boyer trustees may elect on behalf of the trusts to avoid the contract or, by ratification of the contract, to extinguish the power of avoidance. Until that election has been exercised, the contract has its usual legal consequences. One of the usual legal consequences is, of course, that Winter and Skoglund is each under an enforceable duty to offer his voting shares to the voting shareholders before selling them to another. Another is that until the Boyer trustees disaffirm the contract, the mistake has no effect on the agreed exchange of performances. Matter of Estate of Rothko, 43 N.Y.2d 305, 324, 372 N.E.2d 291, 299, 401 N.Y.S.2d 449, 457 (1977).
Even if the misapprehension regarding the Bank’s capacity to act alone on behalf of the Boyer trusts constitutes the kind of mistake contemplated by Restatement (Second) of Contracts § 152 (1981), the condition necessary to permit avoidance is not present.2 Certainly, if the Bank had not *796executed the agreement before Winter and Skoglund, Winter could not now assert that he mistakenly assumed that the Boyer trusts were already obligated under the contract, but the fact that the Bank was the first party to act does not relieve the other parties of a risk expressly allocated to them by their agreement. Restatement, (Second) of Contracts § 154.3 The 1977 agreement specifically provides that the agreement “shall be binding upon and inure to the benefit of those parties who are signatory thereto, whether or not executed by all parties.” I see no reason to ignore that undertaking.
Furthermore, avoidance of a contract ordinarily contemplates restitution. While restitution may not be appropriate here, it may be observed that there has been no suggestion that avoidance should be accompanied by reversal of the exchange of the shares of Vikings I and II and assumption by the corporation of a substantial personal debt.
Winter contends, however, that even if the 1977 agreement was binding on him and Skoglund when executed, it was subsequently abandoned. Although rights under a contract may be lost by waiver or abandonment, abandonment must be proved by clear and convincing evidence. Republic Nat’l Life Ins. Co. v. Marquette Bank & Trust Co., 295 N.W.2d 89, 93 (Minn.1980). Acts indicating waiver or abandonment must be clear, unequivocal, and inconsistent with the existence of the contract. Desnick v. Mast, 311 Minn. 356, 365, 249 N.W.2d 878, 884 (1976); Buresh v. Mullen, 296 Minn. 150, 153, 207 N.W.2d 279, 281 (1973). Acquiescence in a transfer of shares in derogation of a right of first refusal, failure to exercise the right, and a prior course of conduct or dealings by the person seeking to enforce the agreement directly inconsistent with the continued viability of the agreement are all events from which waiver or abandonment may be implied. See Stenehjem v. Sette, 240 N.W.2d 596, 601 (N.D.1976); Thompson v. Anderson, 209 Kan. 547, 555-56, 498 P.2d 1, 7-8 (1972). There is no evidence of such conduct by any of the parties to this agreement. From December 1977 to October 12, 1985, there had been no sale or attempted sale of voting shares. Hence, there had been no opportunity to exercise the right of first refusal or to acquiesce in a transfer violative of the agreement. While the parties ignored the requirement that notice of the right be placed as a legend on the stock certificate, there was in 1977 no statutory requirement that shareholder agreements restricting transfer be noted on the stock certificate. And although no mention of the restriction was made in response to inquiries regarding the purchase of shares, until October 12, 1985, all inquiries were rebuffed by the answer that there were no shares available for sale. Thus, while it can be said that over the years the parties paid little attention to the 1977 agreement, it must be recognized that there had been no occasion to look to the right of first refusal embodied in the agreement. Conduct which is equally consistent with the continuance of a contract and with abandonment or waiver simply does not rise to proof by clear and convincing evidence that the parties have abandoned their agreement.
*797Accordingly, I would reverse the decision of the trial court and hold Winter’s shares subject to the right of first refusal provided in the December 1977 agreement.

. It might also be argued that the 1977 agreement is severable and that acquiescence in the reorganization is not an affirmance of the right of first refusal. Cf. E. Edelman & Co. v. Queen Stove Works, Inc., 205 Minn. 7, 284 N.W. 838 (1939).

. Restatement (Second) of Contracts § 152 (1981) provides as follows:
*796§ 152. When Mistake of Both Parties Makes a Contract Voidable
(1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154.
(2) In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relief by way of reformation, restitution, or otherwise.

. Restatement (Second) of Contracts § 154 provides as follows:
§ 154. When a Party Bears the Risk of a Mistake
A party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.