Lauris N. Molbert, Plaintiff and Appellee
Karna E. Kornkven, Eric R. Molbert and Kristi E. Benz, Defendants and Appellants
from the District Court of Cass County, East Central Judicial
District, the Honorable Susan Lynne Bailey, Judge.
E. Zimmerman (argued) and Aubrey J. Fiebelkorn-Zuger (on
brief), Fargo, North Dakota, for plaintiff and appellee.
J. Anderson (argued), Minneapolis, Minnesota, and Christopher
M. McShane (appeared), West Fargo, North Dakota, for
defendants and appellants.
1] Karna Kornkven, Eric Molbert, and Kristi Benz
("Siblings") appeal after the district court
entered judgment in favor of their brother, Lauris Molbert.
The court concluded that under a stock purchase agreement,
Molbert had the right to purchase the Siblings' shares of
stock in a bank holding company at book value. We affirm.
2] According to the undisputed facts, the parties'
father, Ralph Molbert, owned the controlling interest in the
Bank of Steele and its holding company, H.O.M.E., Inc. Lauris
Molbert, the oldest child, became a director of the bank in
1983 and director of the holding company in 1986 and was
actively involved in the operations of both entities.
3] Ralph and Beverly Molbert intended for Lauris Molbert to
own and control the bank and holding company and pursued this
intention through their estate plan. In December 1992, Ralph
and Beverly Molbert gifted their children shares of H.O.M.E.
stock and recorded the gift for tax purposes in 1992. It was
understood that Ralph and Beverly Molbert intended to
restrict these gifted shares.
4] Following the gift of H.O.M.E. shares to the Molbert
children, H.O.M.E. board minutes signed by Ralph and Beverly
Molbert described the development of a shareholder agreement
to restrict the gifted shares. In July 1993, the parties
discussed the agreement while on a family vacation to
Whitefish, Montana. The parties executed the stock purchase
agreement following the Whitefish vacation. Ralph Molbert
signed the agreement as H.O.M.E. president. Share
certificates were issued after execution of the agreement
stating the gifted shares were restricted by the stock
5] The stock purchase agreement indicated a purpose of the
agreement was "to provide for the transition of
ownership of the Shares to Shareholder L. Molbert and to
accomplish these objectives [the Shareholders] have agreed to
the following restrictions and options concerning ownership
and purchase of the Shares." The agreement granted
Lauris Molbert the right to vote the Siblings' shares.
Paragraph Seven of the agreement also granted him the
irrevocable right to purchase the Siblings' shares at
7. Right to Call Shares. The Shareholders agree that
it is in the best interest of the Corporation and its
Shareholders if Shareholder L. Molbert has the irrevocable
right to purchase the Shares of one or all of the
Shareholders. Accordingly, notwithstanding anything to the
contrary contained in this Agreement, the Shareholders hereby
grant to Shareholder L. Molbert the irrevocable right and
option to require any one or more of the Shareholders to sell
to him all of his or her Shares at the Purchase Price under
paragraph 8 of this Agreement and on the terms as provided
under paragraph 9 of this Agreement at anytime during a Call
Period, as defined below. Shareholder L. Molbert may exercise
his right under this paragraph by providing written notice
given to the Shareholder whose Shares are to be purchased.
Upon written notice, the purchase of the Shares shall be
completed in accordance with paragraph 9 of this Agreement
within 30 days following the date of the written notice. For
purposes of this paragraph, the "Call Period" shall
be the first 60 days after the end of each fiscal year of the
Corporation. The right to call the Shares granted to
Shareholder L. Molbert under this paragraph shall expire if
not executed within 180 days following the death of Ralph N.
Molbert or Beverly J. Molbert, whichever should last occur.
the agreement, "'Purchase Price' shall consist
of the Book Value of the Shares to be sold, plus repayment of
any Net Shareholder Loans, if any." Paragraph Seven of
the agreement was amended in 1997 to extend the expiration of
the call right from 180 days to 360 days. All of the parties
executed the 1997 amended agreement.
6] After arranging for Lauris Molbert to control and
eventually own H.O.M.E. through the 1993 stock purchase
agreement, Ralph and Beverly Molbert took out a $500, 000
life insurance policy naming the Siblings as beneficiaries.
They also provided additional unrestricted stock shares and
benefits to the Siblings through their estate plan.
7] In February 2015, Lauris Molbert sent written notice to
the Siblings that he was exercising the call option set forth
in Paragraph Seven of the stock purchase agreement. The
Siblings refused to transfer their shares. Molbert sued the
Siblings for specific performance, seeking a judgment
requiring them to sell their shares to him in exchange for
the book value payment.
8] The Siblings counterclaimed, alleging the stock purchase
agreement was void because Lauris Molbert engaged in fraud by
failing to disclose that the agreement granted him a purchase
option at book value. The Siblings also alleged the agreement
lacked consideration and Molbert breached fiduciary duties
owed to them. The Siblings sought relief in the form of
cancellation of the agreement.
9] Both parties moved for summary judgment. The district
court dismissed the Siblings' counterclaims, concluding
the stock purchase agreement unambiguously allowed Lauris
Molbert to purchase the Siblings' stock shares at book
value. The court concluded the agreement was supported by
ample consideration. The court also concluded there was no
evidence Lauris Molbert committed fraud or breached fiduciary
duties. The court declared the stock purchase agreement fully