The Estate of Brustuen H. Lien a/k/a Bruce Lien and Deanna B. Lien v. Peter Lien & Sons, Inc.

[1.] This case involves the continuing conflict between Bruce Lien (Bruce) and Deanna Lien (Deanna) and Pete Lien & Sons, Inc. (PLS or corporation). We previously decided Lien v. Lien, 2004 SD 8, 674 NW2d 816 (Lien I), in which Bruce brought an action against PLS and its directors alleging minority shareholder oppression, breach of fiduciary duty, and tortious interference with prospective business relations or expectancy and also sought dissolution based on shareholder deadlock. We held that dissolution and liquidation of the corporation's assets was not warranted and that Bruce had not established minority shareholder oppression or tortious interference. In this appeal, the trial court granted summary judgment in favor of Bruce finding that PLS breached a severance agreement with Bruce and a lease and option to purchase with Bruce and Deanna. PLS appeals. We reverse and remand.

FACTS AND PROCEDURE

[2.] The history of PLS is outlined in Lien I. PLS was founded in 1944 as a partnership with Bruce, his brother, Charles Lien (Chuck), and their father, Pete Lien, Sr., as the co-equal partners.1 The business engages in the production of limestone aggregates, lime, sand and gravel, ready mix concrete, masonry block and steel fabrication, reinforcement and warehousing in the Rapid City, South Dakota area and several other states. It was incorporated in 1952 as a South Dakota corporation with the three partners as equal shareholders. Since inception the corporation has restricted the right of a shareholder to freely sell or transfer shares other than to another shareholder. Over the years, Pete Lien Sr. gifted and sold his stock to Bruce and Chuck. When their father died in 1969, Bruce and Chuck inherited the remainder of his stock and each became fifty percent shareholders of the corporation.

[3.] Following our decision in Lien I, Bruce's relationship with his brother, Chuck, and PLS remained contentious. In August 2005 PLS became aware that Bruce's wife, Deanna, had been appointed Bruce's guardian and conservator. Until that time, Bruce had been paid as an employee of PLS, despite the fact that for several years he had not had any functions or duties associated with PLS. PLS claims that it was concerned about the possible liability of continuing Bruce's employment with PLS after he had been judicially declared incapable of handling his own affairs. The decision was made to terminate Bruce's employment. The PLS directors decided to provide Bruce a severance package which would continue his salary, bonuses and corporate perquisites until August 15, 2006.2 This action was unilaterally taken by the Board and Bruce concedes in his brief that he accepted it without objection. According to an affidavit from Chuck, the directors were particularly concerned about their fiduciary duties to Bruce as a shareholder, especially in light of Lien I, and did not want to deprive Bruce of a return on his shares in PLS. According to Chuck, it was intended that before August 15, 2006, the newly appointed PLS dividend committee would adopt criteria for the directors' declaration of dividends as a substitute for the salary, bonuses, and perquisites that had been provided to Bruce and Chuck over the years as a means of providing them with returns on their stock holdings.

[4.] By a hand-delivered letter dated February 1, 2006, Deanna gave notice of her intent to sell all of the shares of PLS stock that she and Bruce owned3 to Oldcastle Materials, Inc. (Oldcastle). The notice was provided pursuant to Article VI of the PLS Amended Articles of Incorporation. The notice stated in part:

In my individual capacity and as guardian and conservator for Bruce H. Lien, I have entered into a Stock Purchase Agreement with Oldcastle Materials, Inc., dated as of January 31, 2006, a copy of which is attached for your reference. The purchase price for the Shares is $35,250,000, subject to the terms and conditions set forth in the Stock Purchase Agreement. The full amount of the purchase price consideration has been paid into an escrow account pursuant to the terms of the Agreement and the enclosed Escrow Agreement.

(emphasis added). According to the Articles of Incorporation, the Board of Directors of PLS had ten days in which to exercise the option to purchase the shares for the corporation or on behalf of any shareholders.4

[5.] The Stock Purchase Agreement provided that Oldcastle would pay the aggregate amount of $35,250,000 on the closing date, with the amount of $5,000,000 withheld from the Seller in an Escrow Account.

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