author: GILBERTSON, Chief Justice.

text:
    2002 SD 38
    Paul A. MUELLER and Mary Pat Mueller, Individually, and Paul A. Mueller and Mary Pat Mueller, by and on behalf of Cedar Shore Resort, Inc., Cedar Shore Development, Inc., and Al’s Oasis, Inc., Plaintiffs and Appellants, v. CEDAR SHORE RESORT, INC.; Cedar Shore Development, Inc.; Edward G. Geddes, Individually and in his capacity as director of Cedar Shore Resort, Inc., Cedar Shore Development, Inc., DeETTE GEDDES, Individually and in her capacity as director of Cedar Shore Resort, Inc., Cedar Shore Development, Inc. and officer of Al’s Oasis, Inc., Steven B. Mueller, Individually and in his capacity as director of Cedar Shore Resort, Inc., Cedar Shore Development, Inc., and officer of Al’s Oasis, Inc.; Mark J. Mueller, Individually and in his capacity as officer of Al’s Oasis, Inc.; Gopal Vyas, Individually and in his capacity as director of Cedar Shore Resort, Inc.; Steve Hansman, Individually and in his capacity as director of Cedar Shore Resort, Inc.; Marlene Billars, Individually and in her capacity as director of Cedar Shore Resort, Inc.; Darrel Viereck, Individually and in his capacity as director of Cedar Shore Resort, Inc.; AL’s Oasis, Inc., Defendants and Appellees.
    Nos. 21852, 21866.
    Supreme Court of South Dakota.
    Argued Nov. 15, 2001.
    Decided March 20, 2002.

      Michael P. Reynolds of Barker, Wilson, Reynolds & Burke, Rapid City, South Dakota, Attorneys for appellants.
    Thomas J. Welk, Jeffrey C. Clapper of Boyce, Murphy, McDowell, Sioux Falls, South Dakota, Attorneys for appellees, E. Geddes, D. Geddes, S. Mueller, M. Mueller, G. Vyas, S. Hansman, M. Billars, Cedar Shore Development, Inc.
    Clair R. Gerry of Stuart, Gerry & Schlimgen, Sioux Falls, South Dakota, Attorneys for appellee Cedar Shore Resort, Inc.
    John S. Theeler of Morgan, Theeler, Wheeler, Cogley & Petersen, Mitchell, South Dakota, Attorneys for appellee AL’S Oasis, Inc.
   GILBERTSON, Chief Justice.

[¶ 1.] Paul A. and Mary Pat Mueller brought this action against Al’s Oasis, Cedar Shore Resort, Inc. (CSR), and individually named directors and shareholders of the two companies. Plaintiffs appeal the trial court’s grant of Defendants’ motions for summary judgment on the issues of (1) minority shareholder oppression; (2) breach of fiduciary duty; (3) tortious interference with a business relationship or expectancy; (4) pro rata contribution on a promissory note; and (5) performance under a subscription agreement. Al’s Oasis, CSR and the individual defendant directors and shareholders appeal the trial court’s denial of Defendants’ motion for severance. We affirm in part, reverse in part, and remand for further proceedings.

FACTS AND PROCEDURE

[¶ 2.] Paul Mueller, son of Al and Veda Mueller, is a minority shareholder in Al’s Oasis, Inc. As with all of Al’s children, Paul Mueller worked for the family business beginning as early as age five and continuing after college. He often worked without pay or at minimum wage to support what was considered to be a “family business.” When Paul left the family business for law school, Paul’s older sister, DeEtte, and her husband, Ed Geddes, returned from California to fill in the positions that Paul and Mary Pat, Paul’s wife, had vacated. No promise was made to Paul or Mary Pat that jobs would be waiting for them when or if they returned. Paul did return to Oacoma after law school and established a small practice with a fellow classmate.

[¶ 3.] A1 Mueller repeatedly refused Paul’s demands for a formal employment contract in any area of the business, including its legal representation. A1 Mueller did not sign contracts with any of his employees and he was concerned that doing so with Paul would create resentment among the siblings. At this time, however, all of the children were gifted a substantial share of the corporation, given employment (aside from Paul), salaries, and benefits. Paul did receive a $75,000 salary as compensation for the legal work done for Al’s Oasis and for his service on the Board of Directors, but not for direct employment as was the case with his siblings.

[¶ 4.] In 1985, Governor William Jank-low appointed a tourism task force to determine how best to capitalize on the tourism trade in South Dakota. Dave Sweet, the developer that Paul had helped recruit to join with Al’s Oasis to build the Oasis Inn, and Paul’s brother, Steve, were both on the task force. When Sweet’s plan for a destination resort in the Missouri River Basin fell through, the Mueller family received encouragement from the Governor’s office to pursue the resort development concession. Paul spearheaded the effort by starting the Oasis Management Group (OMG) with Mary Pat, DeEtte and Ed Geddes, Steve Mueller, and Steve’s wife Jeannie. Each couple was one-third owner. Paul was unanimously elected President and OMG obtained the lease and concession to build Cedar Shore Resort on April 15,1992.

[¶ 5.] Project financing was the next logical step. Paul developed a detailed business plan, which enabled Norwest Bank to approve and grant OMG a $5.5 million loan. Outside investors, however, were still essential. Therefore, to keep the family’s control from being diluted, the six members of OMG formed a separate management company called Cedar Shore Development, Inc. (CSD). Paul was elected President of this corporation, as well. OMG merged with CSR and, by April 1, 1993, eight equity investors had brought $600,000 to the project. Four of the investors joined the CSR Board of Directors, bringing the total number of directors to seven, and Paul was again elected President.

[¶ 6.] Without any formal employment contract, Paul and Mary Pat both continued working full-time on the project, essentially without compensation. But in June 1994, Paul received word that his brother-in-law and fellow shareholder, Ed Geddes, was meeting secretly with other shareholders to have Paul removed as president of CSR. When confronted, Ed denied these allegations. The other shareholders’ concern over this family rivalry prompted them to propose that the Mueller family shareholders either buy them out or that they swap their 64 percent stock in CSR for the complaining shareholders’ 24 percent stock, thus wresting control of the project from the feuding family members. Paul and Mary Pat elected to buy out the three complaining investors’ shares, which resulted in more family animosity.

[¶ 7.] On August 22, 1994, at a special meeting of CSD called by DeEtte, Ed and Steve, Paul was removed as President and stripped of all involvement in the management company. Paul was, however, able to continue working on the project through CSR until January 10, 1995, when Paul was also removed as President of CSR. No reason was given for this action. As a result, Paul voluntarily resigned from CSR’s Board. Additionally, Mary Pat was removed as Corporate Secretary because the Board believed she would be unable to serve objectively after Paul’s removal. Thereafter, Ed Geddes assumed the role of President and the Board canceled the management contract between CSR and CSD.

[¶ 8.] When CSR turned to Al’s Oasis for a much-needed capital infusion of $1.5 million, Al and Veda Mueller agreed to the contribution but A1 demanded that Paul pay back all of the personal “loans” he had received from A1 in the past. Paul and Mary Pat had been allowed to charge groceries and clothes to Al’s Oasis over a period of years, which resulted in an unpaid balance of $140,000. A1 Mueller paid this debt. He also paid debts related to Paul’s law practice when it closed. Paul believed these loans had been repaid ten years earlier by his receipt of a smaller distribution of stock than that of his siblings. DeEtte and Ed, however, believed the lesser stock distribution was the result of Paul no longer working within the family business. They contacted a lawyer insisting that all of Paul’s distributions received since the 1960’s be applied toward “debt repayment.” Finally, on April 25, 1995, the Al’s Oasis Board of Directors terminated Paul’s “employment” for “nonperformance.” The family simply maintained that no management positions were available, that Paul was overqualified for all other positions, and that he was incapable of working due to his diabetes.

[¶ 9.] The trial court granted summary judgment to Defendants CSR, Al’s Oasis and the individually named directors and shareholders. Paul and Mary Pat raise the following issues for appeal:

1. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to Paul and Mary Pat’s claim of minority shareholder oppression by Al’s Oasis and CSR.
2. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to Paul and Mary Pat’s claim that the individually named majority shareholders breached the fiduciary duties owing to Paul and Mary Pat as minority shareholders in a close corporation.
3. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to Paul and Mary Pat’s claim that the individually named directors tor-tiously interfered with their business relationships or expectancies in Al’s Oasis and CSR.
4. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to the counterclaim by the defendant directors, Steven Mueller and Edward Geddes, for Paul and Mary Pat’s pro rata contribution on the marina promissory note.
5. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to CSR’s counterclaim for Paul and Mary Pat’s payment due pursuant to a stock subscription agreement.

Alternatively, Defendants raise one issue for appeal:

6. Whether the trial court was clearly erroneous in denying Defendant CSR’s motion for severance on grounds that trying the cases of Al’s Oasis and CSR together would be unfairly prejudicial.

STANDARD OF REVIEW

[¶ 10.] In reviewing the trial court’s grant of a motion for summary judgment, we have repeatedly stated:

Summary judgment is authorized “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law.” We will affirm only when there are no genuine issues of material fact and the legal questions have been correctly decided. All reasonable inferences drawn from the facts must be viewed in favor of the non-moving party. The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law.

Hayes v. N. Hills General Hosp., 1999 SD 28, ¶ 12, 590 N.W.2d 243, 247 (quoting SDCL 15-6-56(c)) (internal citations and additional citations omitted). Thus, this Court has held that, not only does summary judgment require there be no material facts at issue, but also that there be no genuine issue on the inferences to be drawn from those facts.

[¶ 11.] “Whether conduct is oppressive is a legal conclusion.” Landstrom v. Shaver, 1997 SD 25, ¶ 37, 561 N.W.2d 1, 7 (citing Robblee v. Robblee, 68 Wash.App. 69, 841 P.2d 1289, 1293 (1992); Davis v. Sheerin, 754 S.W.2d 375, 380-81 (Tex.App.1998)). Likewise, “[t]he existence of a fiduciary duty and the scope of that duty are questions of law for the trial court.” Landstrom, 1997 SD 25 at ¶ 84, 561 N.W.2d at 18. We review conclusions of law de novo, giving no deference to the trial court. Id. at ¶ 37. The question of whether there has been a breach of that duty, however, is one of fact to be decided by the trial court. Hayes, 1999 SD 28 at ¶ 57, 590 N.W.2d at 253.

ANALYSIS AND DECISION

[¶ 12.] 1. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to Paul and Mary Pat’s claim of minority shareholder oppression by Al’s Oasis and CSR.

[¶ 13.] South Dakota has adopted the Model Business Corporations Act, which provides equitable relief for minority shareholders who have been oppressed, particularly in the context of a close corporation. See SDCL 47-7-34. The Code, however, does not define what constitutes oppression. We have resolved the question “by considering oppressive actions to refer to conduct that substantially defeats the ‘reasonable expectations’ held by minority shareholders in committing their capital to the particular enterprise.” Landstrom, 1997 SD 25 at ¶38, 561 N.W.2d at 8. See also Gimpel v. Bolstein, 125 Misc.2d 45, 477 N.Y.S.2d 1014, 1018 (N.Y.Sup.Ct.1984) (defining oppression in context of “reasonable expectations” of minority shareholder or “burdensome, harsh and wrongful conduct” by majority shareholders). If the minority shareholder’s expectations are held to be reasonable:

A court considering a petition alleging oppressive conduct must investigate what the majority shareholders knew, or should have known, to be the petitioner’s expectations in entering the particular enterprise. Majority conduct should not be deemed oppressive simply because the petitioner’s subjective hopes and desires in joining the venture are not fulfilled. Disappointment alone should not necessarily be equated with oppression.

Landstrom, 1997 SD 25 at ¶ 38, 561 N.W.2d at 8.

[¶ 14.] “Reasonable expectations are to be analyzed in light of the entire history of the parties’ relationship, and include expectations such as participation in management of corporate affairs.” Longwell v. Custom Benefit Programs Midwest, Inc., 2001 SD 60, ¶ 19, 627 N.W.2d 396, 399 (quoting Landstrom, 1997 SD 25 at ¶39, 561 N.W.2d at 8). The determination of whether a stockholder’s expectations are reasonable, however, must include a balancing test. The court weighs the minority shareholder’s expectations against the “corporation’s ability to exercise its business judgment and run its business efficiently.” Id. There is a presumption that directors will make decisions “on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the company.” Whalen v. Connelly, 593 N.W.2d 147, 154 (Iowa 1999) (quoting Spiegel v. Buntrock, 571 A.2d 767, 774 (Del.1990)). Even in the context of a close corporation, where the directors may have substantial 'personal interests, courts are loathe to second guess the business decisions of the directors. Robert W. Hamilton, Business Organizations: Unincorporated Businesses and Closely Held Corporations § 9.41 (1996). Oppression will only arise where the minority shareholder’s expectations were “both reasonable under the circumstances and were central to the decision to join the venture.” Longwell, 2001 SD 60 at ¶ 19, 627 N.W.2d at 399 (quoting Landstrom, 1997 SD 25 at ¶ 39, 561 N.W.2d at 8).

[¶ 15.] The four categories of conduct alleged by Paul and Mary Pat to be oppressive conduct by Al’s Oasis, CSR and the individually named directors or majority shareholders all amount to the deprivation of employment in a managerial capacity. “Typically, relief has been granted in non-fraud oppression cases where the majority has engaged in a freeze-out or squeeze-out conduct.” Landstrom, 1997 SD 25 at ¶46, 561 N.W.2d at 10. Freeze-out or squeeze-out conduct may occur when the controlling shareholders or directors:

refuse to declare dividends; they may drain off the corporation’s earnings in the form of exorbitant salaries, and bonuses to the majority shareholder-officers and perhaps to their relatives ...; they may deprive minority shareholders of corporate offices and of employment by the company; they may cause the corporation to sell its assets at an inadequate price to the majority shareholders.

Id. at ¶ 44 (emphasis added). Accordingly, we must determine whether the conduct in this case, with facts taken in a light most favorable to Paul and Mary Pat, amounted to the squeeze-out or freeze-out of Paul and Mary Pat’s interests.

[¶ 16.] We recognize that shareholders of a close corporation often expect to be actively involved in its management and operation. Balvik v. Sylvester, 411 N.W.2d 383, 386 (N.D.1987).

Unlike the typical shareholder in a publicly held corporation, who may be simply an investor or a speculator and does not desire to assume the responsibilities of management, the shareholder in a close corporation considers himself or herself as a coowner [sic] of the business and wants the privileges and powers that go with ownership. Employment by the corporation is often the shareholder’s principal or sole source of income. As a matter of fact, providing for employment may have been the principal reason why the shareholder participated in organizing the corporation.

Id. (citing 1 F. O’Neal and R. Thompson, O’Neal’s Close Corporations § 1.07 (3d ed 1987) (footnotes omitted)). A common method of effectuating this squeeze-out is to discharge the minority shareholder from the board of directors or from employment, while also withholding dividends, thns depriving the shareholder of his only source of income. Balvik, 411 N.W.2d at 387.

[¶ 17.] A. Al’s Oasis

[¶ 18.] “The term oppression is a comparative term that assumes a minority shareholder has a certain minimum economic return or right of participation ... [which] is usually judged, where applicable, by the terms on which the minority shareholder originally invested in the corporation or the promises which induced [him] to invest.” Hamilton, supra at § 8.25. See also Landstrom, 1997 SD 25 at ¶ 38, 561 N.W.2d at 8 (holding ‘reasonable expectations’ of minority shareholders to be judged in light of capital committed to the particular enterprise); Gimpel, 477 N.Y.S.2d at 1019 (defining oppression as “a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely”) (emphasis added). Thus, the standard is not the same where a shareholder received his shares by gift or inheritance. In those cases, the standard is somewhat lower, requiring only “ ‘decent’ conduct by controlling shareholders.” Hamilton, supra at § 8.25 n84.

[¶ 19.] In Gimpel, the court explained that the “reasonable expectations” test was not entirely appropriate where the corporation had been in existence for many years and the complaining shareholder had received his shares by gift or devise.

While the manner of [the present shareholders’] dealing with each other may in some respects resemble that of partners, it cannot fairly be said that they entered into the business with the same “reasonable expectations” as partners do. Since they all acquired their shares by bequest or gift from other parties, they in no sense chose each other as business associates.

Gimpel, 477 N.Y.S.2d at 1019. The court explained that only those original participants, parties that had committed capital and resources to the venture, were entitled to rely upon their “reasonable expectations.” Id. Any agreement between those parties is “personal in nature” and “will not ‘run with the shares.’ ” Id. Thus, the complaining gifted shareholder was required to demonstrate, under the alternative test, that the majority shareholders’ conduct was inherently oppressive. Id. Under that test, the court found the complaining shareholder’s discharge and subsequent exclusion from corporate management in the family-owned dairy farm were not oppressive.

[¶ 20.] In this case, however, there are significant indications that Paul and Mary Pat’s family members did not satisfy even this good faith and fair dealing standard. Paul claims that he was excluded from all substantive discussions concerning the management and operations of Al’s Oasis. He was denied meaningful employment in the family corporation and he was excluded from discussions regarding the future development and management of Al’s Oasis. None of these, in and of themselves, rise to the level of inherent oppression. But the pattern of conduct, as well as the fact that it may have been done in retaliation for the problems occurring between the siblings at CSR, may be. See, e.g., Hendrick v. Hendrick, 755 A.2d 784, 791 (R.I.2000) (holding family members’ series of coercive and retaliatory acts manifested bad faith and amounted to oppression). Cf. Orloff v. Weinstein Enter,, Inc., 247 A.D.2d 63, 677 N.Y.S.2d 544, 545-46 (N.Y.App.Div.1998) (noting that expectations of family member minority shareholder who had inherited interest is not comparable to that of an investor and holding exclusion from decision making or employment was not retaliatory act constituting oppression); O’Farrell v. Steel City Piping Co., 266 Pa.Super. 219, 403 A.2d 1319, 1326 (1978) (holding no oppression where appellees terminated appellant “not in retaliation for her failure to sell her stock at a reduced price, but in the good faith belief that the 1967 buy-sell agreement” allowed such action).

[If 21.] Paul and Mary Pat were removed from their officer positions in CSR on January 10, 1995. On April 25, 1995, the Board of Directors of Al’s Oasis fired Paul for alleged non-performance. Construing all inferences of fact in favor of Paul and Mary Pat, the deposition testimony of Paul, Mary Pat, Ed and DeEtte all, at a minimum, raise genuine issues of material fact with regard to this possible retaliation. We do not hold that fair treatment means equal treatment. We simply maintain that majority shareholders’ conduct in a family-owned close corporation, because of the relative illiquidity, must maintain a certain level of decency. Therefore, Paul and Mary Pat should have the opportunity to prove that Defendants have not satisfied the decentness standard of good faith and fair dealing.

[¶ 22.] B. CSR

[¶ 23.] A somewhat different analysis is applied with regard to Paul and Mary Pat’s claim against CSR and its majority shareholders and directors. Under the reasonable expectations test, Paul and Mary Pat’s claim that they had been deprived of their right to perpetual employment in a managerial capacity at CSR does not constitute shareholder oppression. First, it is undisputed that there were no dividends paid to any shareholder, nor were any contemplated, even while Paul was President of CSR. Second, it is undisputed that Paul had been working without compensation and without any formal employment contract. See SDCL 60-4-4 (providing employment at-will may be terminated without cause). There is no provision in either the bylaws or the shareholder’s agreement to indicate either Paul or Mary Pat is entitled to perpetual employment or managerial control. See Enchanted World Doll Museum v. Buskohl, 398 N.W.2d 149 (S.D.1986) (holding writing between parties presumed to accurately reflect parties’ intent). Third, Paul and Mary Pat were both lawfully removed from their offices in compliance with the procedures set out in CSR’s bylaws. Paul was not removed from the Board entirely, but voluntarily resigned and both Paul and Mary Pat remain involved in the corporation by attending shareholder meetings. Finally, while Paul alleges secret meetings were conducted to have him removed as President, the only evidence he presents is an impression by a former shareholder that Ed, DeEtte, and Steve presented a united front. This, however, is not evidence of secret meetings. Paul must present more than bare allegations to survive a summary judgment.

[¶ 24.] As noted above, a minority shareholder’s expectations must be balanced against the corporation’s need to conduct its business in accordance with the business judgment rule. “It is not considered oppression when the controlling shareholders seek to control management and the affairs of their corporation.” Landstrom, 1997 SD 25 at ¶ 50, 561 N.W.2d at 11. Paul and Mary Pat have merely “established that [they were] outvoted and subjectively disappointed with corporate management.” Id. This conduct does not rise to the level of oppression.

[¶ 25.] 2. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to Paul and Mary Pat’s claim that the individually named majority shareholders breached the fiduciary duties owing to Paul and Mary Pat as minority shareholders in a close corporation.

[¶ 26.] Generally, corporation law states that, while directors owe a fiduciary duty to the corporation, shareholders do not owe a fiduciary duty to either the corporation or their fellow shareholders. Hamilton, supra at § 8.35. This standard is different, however, for close corporations. “[I]n almost every state, majority, dominant, or controlling shareholders, or a group of shareholders acting together to exercise effective control, are held to owe a fiduciary duty to minority shareholders.” Hayes, 1999 SD 28 at ¶ 52, 590 N.W.2d at 253 (quoting Moore v. Maine Indus. Services, Inc., 645 A.2d 626, 628 (Me.1994) (citation and internal quotation omitted) (emphasis in original)). This fiduciary duty is characterized by a high degree of diligence and due care, as well as the exercise of utmost good faith and fair dealing. See id.; Landstrom, 1997 SD 25 at ¶ 84, 561 N.W.2d at 18; Case v. Murdock, 488 N.W.2d 885, 889-90 (S.D.1992); Mobridge Cmty. Indus., Inc. v. Toure, Ltd., 273 N.W.2d 128, 133 (S.D.1978).

[¶ 27.] A. Al’s Oasis

[¶ 28.] Because of the potential for abuse, the scope of the fiduciary duty owed by a family-owned corporation that has gifted its shares to the shareholders is somewhat more limited than that duty owed in the context of a traditional close corporation. As explained above, where the shareholders receive their stock by gift and invest no capital, the shareholders’ minimum economic return and right of participation become limited. Hamilton, supra at § 8.25. We are not prepared to allow a shareholder to use the fiduciary duty concept to rewrite the original deal he or she made with the corporation, a modification that the original parties to the transaction almost certainly would not have chosen. To do so would significantly undermine a primary method of tax planning and wealth sharing by holding family business owners hostage, subject to the demands of every gifted shareholder, whether reasonable or not. Therefore, the question is whether Paul and Mary Pat have identified in the record sufficient evidence to demonstrate that the conduct of the individually named directors, under these circumstances, amounted to something below the “decentness” standard set forth above.

[¶ 29.] Paul and Mary Pat must show evidence of bad faith or a breach of the duty of loyalty. Hallmark behavior of such a breach includes the failure to disclose information, director or shareholder self-dealing, making fraudulent misrepresentations regarding past or future events, and surreptitious conduct or communications. Hayes, 1999 SD 28 at ¶ 57, 590 N.W.2d at 253; Landstrom, 1997 SD 25 at ¶¶ 84-85, 561 N.W.2d at 18; Balvik, 411 N.W.2d at 387; Toure, 273 N.W.2d at 133; Schurr v. Weaver, 74 S.D. 378, 384, 53 N.W.2d 290, 293 (S.D.1952).

[¶ 30.] Our conclusion above, as to Paul and Mary Pat’s claim of oppression, establishes a prima facie case for breach of fiduciary duty. See Hendrick, 755 A.2d at 791-92; Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 328 N.E.2d 505, 515 (1975); Hayes v. Olmsted & Assoc., Inc., 173 Or.App. 259, 21 P.3d 178, 181 (2001) (citations omitted). Due to the facts of this case, these two claims are inextricably intertwined. Therefore, as with the oppression claim, we remand for a determination of whether Al’s Oasis and its directors breached their fiduciary duty to Paul and Mary Pat.

[¶ 31.] B. CSR

[¶ 32.] Paul and Mary Pat claim that the trial court erred in granting summary judgment on their breach of fiduciary duty claim. The defendant directors contend that this claim was dismissed pursuant to.the trial court’s Order Granting Motion to Dismiss Cedar Shore Resort, Inc., As To All Derivative Claims on July 15, 1999, and has not been appealed. We agree.

[¶ 33.] The July 15 Order states “the court dismisses with prejudice all of Counts II, IV and V of the Complaint and those portions of Counts I and III which are derivative • or specifically identified within this Order.” This dismissal includes the claim against CSR and its individual directors for a breach of fiduciary duty. Paul and Mary Pat’s notice of appeal, however, does not include the trial court’s July 15 Order of dismissal. Thus, the breach of fiduciary duty by CSR and its individual directors is not before this Court. See SDCL 15-26A-4.

[¶ 34.] . 3. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to Paul and Mary Pat’s claim that the individually named directors tortiously interfered with their business relationships or expectancies in Al’s Oasis and CSR.

[¶ 35.] This Court recognized the claim of tortious interference with business relations or expectancy in the case of Tibke v. McDougall, 479 N.W.2d 898 (S.D.1992). The essential elements of the claim include:

(1) the existence of a valid business relationship or expectancy;
(2) knowledge by the interferer of the relationship or expectancy;
(3) an intentional and unjustified act of interference on the part of the interferer;
(4) proof that the interference caused the harm sustained; and
(5) damage to the party whose relationship or expectancy was disrupted.

Id. at 908 (citations omitted). In Nelson v. WEB Water Dev. Ass’n, 507 N.W.2d 691 (S.D.1993), we limited this recognition by refusing to hold a corporate director or officer personally liable in a claim of tor-tious interference for discharging an employee, an act fully within the scope of his or her authority. Paul and Mary Pat now ask us to consider whether the officer or director may be held personally liable in a tortious interference claim where the director or officer acted in bad faith or outside the scope of employment. We decline to recognize such a claim.

[¶ 36.] “In Tibke, we held that to establish a Valid business relationship or expectancy,’ there had to be a showing of a ‘contract or business relationship’ between the plaintiff and an identifiable third party.” Landstrom, 1997 SD 25 at ¶ 75, 561 N.W.2d at 16 (quoting Tibke, 479 N.W.2d at 908-09). The fact that no contract existed in this case is undisputed. In fact, Paul and Mary Pat do not even attempt to argue the existence of an implied employment contract. If they were to do so, they would eliminate any distinction between the corporation and its directors for the purpose of proving the existence of the necessary third party. See Nelson, 507 N.W.2d at 700. Thus, Paul and Mary Pat urge us to focus upon whether they had a valid business relationship with Al’s Oasis or CSR, which was distinct from their dealings with the individual directors.

[¶ 37.] The actions of directors are often indistinguishable from those of the corporations. It is for this reason that the overwhelming majority of jurisdictions refuse to hold corporate directors personally liable in tortious interference claims.

[T]hey (defendants) had the right while acting as corporate officers and agents to counsel and advise with the defendant corporation as to the management of its affairs in all matters with which the corporation was concerned without the risk of rendering themselves personally liable to third parties for their acts in that regard if they should err. “Any other rule would make it impossible for corporate business to be carried on at all except at the peril that every agent who advised concerning corporate action would be suable under some such allegations as are made in this complaint.”

Nelson, 507 N.W.2d at 700 (quoting Bossuyt v. Osage Farmers Nat’l Bank, 360 N.W.2d 769, 779 (Iowa 1985)). This is also the very rationale that spawned limited liability for corporations and the protection of the business judgment rule for directors.

[¶38.] The same problem exists here. In order for Paul and Mary Pat to prevail, “there must be a ‘triangle’ — & plaintiff, an identifiable third party who wished to deal with the plaintiff, and the defendant who interfered with the plaintiff and third party.” Landstrom, 1997 SD 25 at ¶ 75, 561 N.W.2d at 16. No such triangle existed here. The actions of the individually named directors, which Paul and Mary Pat have claimed tortiously interfered with their business relationships or expectancies, include: (1) denial of a management role in Al’s Oasis; (2) denial of a management role in CSR by removing Paul as President; (3) denial of a development role by dissolving the management contract between CSR and CSD; (4) denial of meaningful employment in either of the two corporations; and (5) denial of meaningful participation in either of the two corporations by not disclosing information. These actions, however, were all done in the individual defendants’ capacities as directors. Therefore, we affirm the trial court’s summary judgment.

[¶ 39.] 4. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to the counterclaim by the defendant directors, Steven Mueller and Edward Geddes, for Paul and Mary Pat’s pro rata contribution on the marina promissory note.

[¶ 40.] It is undisputed that Paul executed a promissory note to Norwest Bank in the amount of $25,015, along with Ed Geddes and Steve Mueller, to pay for CSR’s marina construction. Paul now contends that he does not owe on the promissory note because all three parties expressly agreed to pay the note out of CSD’s earnings from the management contract with CSR. According to Paul, CSD’s Board, of which Ed and Steve were members, commercially frustrated his ability to pay the note when they dissolved the management contract with CSR and removed Paul from the project. We do not agree.

[¶ 41.] While Paul and Mary Pat correctly quote the Restatement (Second) of Contracts .definition of commercial frustration, the record fails to support their claim by containing evidence of its elements. The contract doctrine of commercial frustration requires proof of three elements: (1) the purpose that is frustrated must have been a principle purpose of that party in making the contract; (2) the frustration must be substantial; and (3) the non-occurrence of the frustrating event must have been a basic assumption on which the contract was made. Groseth Int’l, Inc. v. Tenneco, Inc., 410 N.W.2d 159, 165 (S.D.1987) (citing Restatement (Second) of Contracts § 265 (1981)). The absence of any of these elements causes the claim to fail.

[¶ 42.J First, Paul and Mary Pat have neglected to identify evidence which demonstrates how CSD’s management contract with CSR was the principal purpose for signing the promissory note with Norwest Bank. “It is not enough that [they] had in mind some specific object without which [they] would not have made the contract. The object must be so completely the basis of the contract that, as both parties understand, without it the transaction would make little sense.” Groseth, 410 N.W.2d at 165 (quoting Restatement (Second) of Contracts § 265, cmt a (1981)). It is conceivable that the parties, as shareholders and directors of CSR, may have executed the promissory note to benefit their corporation by facilitating the construction of its marina. Paul and Mary Pat have not alleged that the promissory note would not have been executed but for the management contract; they have only alleged that they were relying upon the management contract’s earnings to repay their portion. This is not enough to satisfy the first element.

[¶43.] Second, Paul and Mary-Pat have not demonstrated that the frustration caused them anything more than a net loss. “The fact that performance has become economically burdensome or unattractive is not sufficient to excuse performance.” Groseth, 410 N.W.2d at 165 (citations omitted). “The frustration must be so severe that it is not fairly to be regarded as within the risks that [they] assumed under the contract.” Id. It was surely a foreseeable possibility that CSD’s earnings on the management contract would not be sufficient to pay the note when it came due. “If the event was foreseeable when the contract was made, then the party will be presumed to have assumed the risk of its occurrence.” Id. (citing 18 Williston, Contracts § 1954 (1978); 17A CJS Contracts §§ 468(2), 464 (1963)). Thus, Paul and Mary Pat are presumed to have assumed the risk that they would have to pay their portion of the note through other means. The trial court’s summary judgment for the defendant directors, Ed Ged-des and Steve Mueller, on the promissory note is affirmed.

[¶ 44.] 5. Whether the trial court was correct in determining no genuine issue of material fact existed with respect to CSR’s counterclaim for Paul and Mary Pat’s payment due pursuant to a stock subscription agreement.

[¶45.] The minutes of CSR’s December 7, 1994, Board meeting reflect that “all shareholders and Directors present agreed to come up with their pro rata share of the ... subscription agreements that will be signed today.” CSR asserts that the subscription agreement described in the minutes essentially involved one capital call of $500,000 that would be paid by the shareholders in two separate installments. Paul and Mary Pat, however, contend that the second installment was part of a separate contract, one they did not sign or agree upon. Therefore, we must determine whether the-parties came to a meeting of the minds, with a mutual consent to contract, as to the entire sum. See Jacobson v. Gulbransen, 2001 SD 33, ¶ 22, 623 N.W.2d 84, 90 (citations omitted).

[¶46.] A contract is formed when all essential elements are met: (1) the parties are capable of contracting; (2) they consent to the subject of the contract; (3) the object of the contract is lawful; and (4) there was sufficient cause or consideration. See SDCL 53-1-2. As long as these elements are satisfied, and there is no statutory requirement that the contract be in writing, an oral contract is formed. See SDCL 53-8-1. Paul and Mary Pat do not argue that the elements of a contract were not met; they argue only that the written memorialization of the agreement was missing material terms, and therefore no meeting of the minds was achieved. It is unnecessary, however, to even consider the written agreement. Because the terms of the agreement were to be performed within one year, it is inconsequential that the subscription agreement was not signed by Paul or Mary Pat. See SDCL 53-8-2. The oral contract is binding.

[¶ 47.] In determining the proper interpretation of a contract, a court is to seek to ascertain and give effect to the intention of the parties. Hisgen v. Hisgen, 1996 SD 122, ¶ 4, 554 N.W.2d 494, 496 (citing Chord v. Pacer Corp., 326 N.W.2d 224 (S.D.1982) (other citations omitted)). While they did not sign the written subscription agreement later prepared by CSR’s corporate attorney, Paul and Mary Pat attended the meeting, participated in the vote, and agreed to the stock subscription amount of $500,000. They even began performance by paying the first installment on the agreement. Furthermore, Paul, as President of the Board, prepared a letter to all shareholders describing the subscription agreement and method of payment, complete with a chart outlining the details:

The call for capital is in the sum of $500,000. A chart showing the pro rata equity contribution for shareholders is enclosed with this memorandum. This chart shows the total required contribution to capital in the column entitled Total Anticipated. The next column entitled December 10 sets forth equity contribution required immediately .... The third column entitled January 10 sets forth the pro rata balance of the remaining equity.

(emphasis in original). Paul’s own language indicates that he clearly understood and agreed to the terms set forth in the Board’s minutes. Therefore, we affirm the trial court’s summary judgment for CSR on the remaining installment of $59,400.

[¶48.] 6. Whether the trial court was clearly erroneous in denying Defendant CSR’s motion for severance on grounds that trying the cases of Al’s Oasis and CSR together would be unfairly prejudicial.

[¶ 49.] Because we affirm the trial court’s summary judgment on all issues appealed by Paul and Mary Pat, with regard to CSR, there is no need to determine whether the trial court was correct in denying Defendants’ motion to sever.

[¶ 50.] SABERS, AMUNDSON, and KONENKAMP, Justices, and BASTIAN, Circuit Judge, concur.

[¶ 51.] BASTIAN, Circuit Judge, sitting for GORS, Acting Justice, disqualified.

      . Mary Pat was paid $11 per hour for her administrative work at CSR, which amounted to $24,000 for work performed between September 1993 and January 1995.

      . Paul and Mary Pat allege that the question of reasonable expectations, because it is made on a case by case basis, "is a question of fact which cannot be resolved on a motion for summary judgment.” Meiselman v. Meiselman, 309 N.C. 279, 307 S.E.2d 551, 563 (N.C.1983) (citing Pierce v. Ford Motor Co., 190 F.2d 910, 915 (4thCir.) (holding summary judgment not appropriate unless "it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law.”), cert, de

        nied., 342 U.S. 887, 72 S.Ct. 178, 96 L.Ed. 666 (1951)). This Court, however, has made it clear that whether conduct amounts to oppression, including the determination of reasonable expectations, is a question of law. Landstrom, 1997 SD 25 at ¶ 37, 561 N.W.2d at 7. We do not choose to adopt the position of the authority cited by Paul and Mary Pat.

      . The court noted that "[e]ven if an original participant had had a reasonable expectation of personal employment, after his death the surviving shareholders would not be bound to employ any dolt who happened to inherit his stock.” Gimpel, 477 N.Y.S.2d at 1019 n6.

      . Paul and Mary Pat's claim that they had been deprived of their right to perpetual employment in a managerial capacity at Al’s Oasis would not, alone, constitute shareholder oppression. In Willis v. Bydalek, the court stated that discharging a minority shareholder from employment, even if the discharge is wrongful, is “simply not the sort of 'burdensome, harsh or wrongful conduct,' or ‘visible departure from the standards of fair dealing' that may constitute shareholder oppression.” 997 S.W.2d 798, 802-03 (Tex.App.1999). The court held, in an at-will employment state, and in light of the broad discretion given under the business judgment rule, any expectation of continued employment without an employment contract cannot be "objectively reasonable.” Id. at 803. South Dakota is also an employment at-will state. SDCL 60-4-4. Therefore, the same holds true here.

      . Neither Paul nor Mary Pat cite, nor could we find, any authority that requires all shareholders to be treated identically, particularly in a family-owned close corporation. See State v. Pellegrino, 1998 SD 39, ¶ 22, 577 N.W.2d 590, 599 (failure to cite supporting authority violates SDCL 15-26A-60(6) and issue is thereby waived) (additional citations omitted).

      . We do not go so far as to say that this illiquidity justifies a higher standard of care. While it is true that the minority shareholder who has received his shares by gift or devise "never had the opportunity to negotiate for any sort of protection,” neither was he required to expose himself to any risk. See Meiselman, 307 S.E.2d at 558-59.

      . These documents were drafted while Paul was President, discussed in shareholder meetings, and reviewed by Paul before he signed them.

      . Removal of an officer requires a majority vote of the seven directors. Because only three of the seven Board seats are controlled by Mueller family members, it seems unlikely and unreasonable that either Paul or Mary Pat could expect to remain officers indefinitely.

      . In Setliff v. Akins, 2000 SD 124, ¶ 35, 616 N.W.2d 878, 889, we recognized that a valid business relationship need not be cemented by contract. At-will employment relationships may be valid business relationships for the purpose of establishing a cause of action for tortious interference. Id. at n6.


source: Caselaw Access Project

author: STREIT, Justice.

license: Public Domain

text:
    Ricky L. GROVIJOHN, Appellant, v. VIRJON, INC., d/b/a J.D.'s Circle Inn, Appellee.
    No. 00-0345.
    Supreme Court of Iowa.
    Feb. 27, 2002.

      William R. Hughes, Jr., and Kristopher K. Madsen of Stuart, Tinley, Peters, Thorn, Hughes, Faust & Madsen, Council Bluffs, for appellant.
    Jeff W. Wright of Heidman, Redmond, Fredregill, Patterson, Plaza, Dykstra & Prahl, L.L.P., Sioux City, for appellee.
   STREIT, Justice.

Ricky Grovijohn and Julie Douglas were drinking at J.D.’s Circle Inn (Virjon, Inc.). They left the bar together with Douglas driving Grovijohn’s car. Douglas drove the car into another car, injuring Grovi-john. Thirteen months later, Grovijohn notified the bar of his intent to file suit under the Iowa dram shop act. The action was filed in June of 1999. The district court granted Virjon’s motion for summary judgment because Grovijohn failed to notify the dramshop of his claim within six months as required by Iowa Code section 123.93 (1997) and he failed to produce any evidence that he qualified for any of the exceptions to the notice requirement under this section. Grovijohn appeals contending the notice provision violates his right to equal protection and there were genuine issues of material fact preventing the granting of the motion for summary judgment. Because we find the six-month notice requirement does not violate his right to equal protection and the court properly granted the motion for summary judgment, we affirm.

I. Facts

On December 22, 1997, Ricky Grovijohn and Julie Douglas went to J.D.’s Circle Inn (Virjon, Inc.) to have a few drinks. After downing several drinks at this bar, Grovi-john and Douglas left together in Grovi-john’s car. Later, Douglas drove Grovi-john’s car into a collision with another car, injuring Grovijohn.

Grovijohn did not contact his lawyer regarding this accident until January 1999. At that time, his lawyer told him of the possibility of a dramshop action against Virjon. Grovijohn notified Virjon on January 22, 1999, of his intention to sue under the Iowa dram shop act. The action was filed in June of 1999.

Virjon filed a motion for summary judgment based on Grovijohn’s failure to comply with the six-month notice provision of Iowa Code section 123.93 (1997). The district court granted Virjon’s motion concluding Grovijohn’s notice was untimely and he failed to establish any of the exceptions to the six-month notice requirement under the statute. Iowa Code § 123.93. Grovijohn appeals.

On appeal, Grovijohn argues Iowa Code section 123.93 violates his state and federal rights to equal protection of the laws. He also contends the district court erred in granting the motion for summary judgment because there were genuine issues of material fact as to whether Grovijohn qualified for any of the exceptions to the notice provision.

II. Scope of Review

The scope of review on a motion for summary judgment is for correction of errors at law. Kolbe v. State, 625 N.W.2d 721, 725 (Iowa 2001) (citing Knudson v. City of Decorah, 622 N.W.2d 42, 48 (Iowa 2000)). Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 237(c). We review the record in the light most favorable to the party opposing the motion for summary judgment. Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d 637, 641 (Iowa 2000). On appeal, we determine whether a genuine issue of material fact exists and whether the district court correctly applied the law. Id. (citing Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524, 528 (Iowa 1995)).

Our review of constitutional claims is de novo. We recently summarized the appropriate scope of review for a constitutional challenge of a statute.

Statutes are cloaked with a strong presumption of constitutionality and, thus, a party challenging a statute carries a heavy burden of rebutting this presumption. A person challenging a statute must negate every reasonable basis upon which the statute could be upheld as constitutional.

Channon v. United Parcel Serv., Inc., 629 N.W.2d 835, 852 (Iowa 2001) (quoting In re Morrow, 616 N.W.2d 544, 547 (Iowa 2000)).

III. The Merits

Many states have passed legislation known as dramshop acts. These statutes are designed to give parties injured by an intoxicated person a right of action against the persons who sold and served the intoxicating liquors. Slager v. HWA Corp., 435 N.W.2d 349, 351 (Iowa 1989) (citing 48A C.J.S. Intoxicating Liquors § 429, at 136 (1981)). In Iowa, the dram-shop statute has been in existence since 1862. See 1862 Iowa Acts ch. 47, § 2. Iowa Code section 123.92 provides in part:

Any person who is injured ... by an intoxicated person or resulting from the intoxication of a person, has a right of action for all damages actually sustained, severally or jointly, against any licensee or permittee ... who sold and served any beer, wine, or intoxicating liquor to the intoxicated person when the licensee or permittee knew or should have known the person was intoxicated, or who sold to and served the person to a point where the licensee or permittee knew or should have known the person would become intoxicated. If the injury was caused by an intoxicated person, a permittee or licensee may establish as an affirmative defense that the intoxication did not contribute to the injurious action of the person.

Iowa Code § 123.92 (1997). The first step in making such a claim requires the injured party to notify the dramshop of his or her intent to sue under the Iowa dram-shop statute. Specifically, our dramshop statute further provides,

within six months of the occurrence of an injury, the injured person shall give written notice to the licensee or permit-tee or such licensee’s or permittee’s insurance carrier of the person’s intention to bring an action under this section, indicating the time, place and circumstances causing the injury.

Id. We have held the Iowa dramshop statute provides the exclusive remedy against a licensee or permittee for selling intoxicating beverages to an intoxicated person. Slager, 435 N.W.2d at 352 (citing Snyder v. Davenport, 323 N.W.2d 225, 227 (Iowa 1982)).

A distinguishing feature of the Iowa dram shop act is that it created liability where none existed at common law. Slager, 435 N.W.2d at 354. It provides the exclusive remedy against a liquor licensee or permittee for violation of the statute. Id. Since the legislature created this cause of action, it follows the legislature may affix the conditions under which it is to be enforced. Arnold v. Lang, 259 N.W.2d 749, 751 (Iowa 1977) (quoting Boyle v. Burt, 179 N.W.2d 513, 515 (Iowa 1970)). We will not question the legislature’s policy determinations made in an area involving neither a suspect class nor a fundamental right. See City of New Orleans v. Dukes, 427 U.S. 297, 303, 96 S.Ct. 2513, 2517, 49 L.Ed.2d 511, 517 (1976).

A. Iowa Dram Shop Act Notice Provision

Grovijohn contends the notice provision of Iowa Code section 123.93 is unconstitutional as a violation of his right to equal protection of the laws. Within this context, he asserts the adoption of comparative fault in Iowa also requires us to strike down Iowa Code section 123.93 as unconstitutional. We first address the issue of comparative fault and then we turn to Grovijohn’s equal protection claim.

Grovijohn asserts the principles of comparative fault require us to find the Iowa dramshop notice requirement is unconstitutional as a violation of equal protection. Though Grovijohn does not articulate why the advent of comparative fault mandates such a conclusion, we will briefly speak to this issue. We have previously addressed whether the legislature intended comparative fault chapter 668 coverage to include dramshop actions. Slager, 435 N.W.2d at 350. In Slager, we concluded the legislature did not intend chapter 668 to apply to dramshop actions. Id. at 353. More specifically, we held comparative fault is not a defense to a dramshop action. Id. at 358. We reasoned if the legislature intended chapter 668 to cover dramshop actions, the legislature could easily have done so. Id. The same reasoning is applicable to the case before us. There is nothing in chapter 668 to indicate the legislature intended comparative fault to nullify the procedural requirements of Iowa Code section 123.93. Having concluded comparative fault does not play a role in a dramshop action, that change alone does not affect the validity of the notice requirement of the Iowa dram shop act.

We now turn to Grovijohn’s claim the notice requirement violates his right to equal protection of the laws. The constitutional protection of equal protection of the laws means similarly situated persons must receive similar treatment under the law. Kuta v. Newberg, 600 N.W.2d 280, 288 (Iowa 1999) (citing Norland v. Grinnell Mut. Reins. Co., 578 N.W.2d 239, 241 (Iowa), cert. denied, 525 U.S. 932, 119 S.Ct. 342, 142 L.Ed.2d 282 (1998)). If the claimed dissimilar treatment does not involve a suspect class or a fundamental right, any classification made by the statute need only have a rational basis. State v. Cronkhite, 613 N.W.2d 664, 668 (Iowa 2000) (citing In re C.P., 569 N.W.2d 810, 812-13 (Iowa 1997)).

The first step of an equal protection claim is to identify the classes of similarly situated plaintiffs singled out for differential treatment. Grovijohn does not articulate the class of similarly situated plaintiffs who are allegedly treated differently under our dramshop statute. Dram-shop plaintiffs are a class of plaintiffs uniquely created by the legislature and, as such, are different from personal injury claimants generally. It is significant all dramshop plaintiffs, as a unique class, are treated alike amongst themselves. All such plaintiffs are subject to the same requirements of the dramshop statute. Because Grovijohn has not satisfied the first step of an equal protection analysis, we do not address whether the dramshop statute has a rational relationship to a legitimate government interest. Grovijohn failed to prove the dramshop statute is unconstitutional.

We conclude all dramshop plaintiffs are subject to the same requirements of the dramshop statute, including the six-month notice requirement. When a statute supplies a specific notice requirement as a condition precedent to suit, any claims under that statute are barred when notice has not been timely given. Since Grovi-john failed to give notice to Virjon within six months from the date of the accident, we find the court properly granted Virjon’s motion for summary judgment. We affirm.

B. Exceptions to the Notice Requirement

Iowa Code section 123.93 contains three exceptions to the six-month notice requirement. The notice period shall be extended if: (1) the injured party is incapacitated at the end of the six-month period; (2) the injured party is unable, through reasonable diligence, to discover the name of the potential dramshop defendant; or (3) the injured party, through reasonable diligence, is unable to discover the identity of the person causing the injury. Iowa Code § 123.93. Grovijohn contends the district court erred in granting summary judgment. He argues there were genuine issues of material fact regarding whether he qualified for any of the three exceptions to the notice requirement.

Grovijohn did not present any evidence to the court in his resistance to Virjon’s motion for summary judgment relevant to any of the exceptions. Grovijohn merely asserted he was incapacitated after the accident. He did not articulate the nature or scope of his incapacity, nor did he claim he was incapacitated at the end of the six-month period. Grovijohn did not argue he was unable, through reasonable diligence, to discover the name of the potential dramshop defendant. Finally, he does not present any evidence to support the third exception that he, through reasonable diligence, was unable to discover the identity of the person causing the injury. We disagree with Grovijohn’s suggestion the terms reasonable diligence and incapacity are ambiguous. However, even if we were to accept his argument, this does not change Grovijohn’s presenting no evidence to the court to support the existence of a material issue regarding any of the three exceptions to the notice requirement. We conclude the district court properly granted Virjon’s motion for summary judgment as there were no genuine issues of material fact. We affirm.

AFFIRMED.

      . Though we have not previously addressed the constitutionality of the notice provision since the adoption of comparative fault, we have twice examined generally whether the Iowa dram shop act violates equal protection. Both cases involved a challenge to the limitation of liability our dramshop statute imposes. We first held limiting liability to those who sell and serve alcohol on their premises does not violate equal protection. Kelly v. Sinclair Oil Corp., 476 N.W.2d 341, 348 (Iowa 1991). One year later we held there is no violation of equal protection where the Iowa dram shop act imposes liability on those who serve and sell alcohol but not on those who are only involved in the sale of alcohol. Eddy v. Casey's Gen. Store, Inc., 485 N.W.2d 633, 635 (Iowa 1992).


author: CARTER, Justice.

text:
    CITY OF MARION, Iowa, Appellant, v. IOWA DEPARTMENT OF REVENUE AND FINANCE, Appellee.
    No. 00-1309.
    Supreme Court of Iowa.
    April 3, 2002.
    Rehearing Denied April 26, 2002.
    Donald C. Hoskins, Marion, for appellant.
    Thomas J. Miller, Attorney General, Harry M. Griger, Special Assistant Attorney General, and James D. Miller, Assistant Attorney General, for appellee.
   CARTER, Justice.

The City of Marion (the city) challenges the imposition of a sales tax on its municipal swimming pool admission fees. The city contends Iowa Code section 422.45(20) (1997) exempts admission fees paid for entrance to the city pool from the collection of sales tax. After reviewing the record and considering the arguments, we conclude municipal swimming pool admission fees are not exempt from the collection of sales tax under section 422.45(20). Consequently, we affirm the decision of the district court.

The facts of this case are essentially undisputed. The city owns and operates the Marion municipal swimming pool. The Iowa Department of Revenue and Finance (the department) conducted an audit of the pool’s gross receipts for admission fees irom January 1, 1993, through December 31, 1997. After completion of the audit, it was determined that the city owed $23,140.90 in sales tax, penalties, and interest.

The department issued a notice of assessment. Although the city paid the assessment, it did so under protest and subsequently requested a refund of the tax that it had paid. A contested-case hearing was held, and the denial of the tax refund was sustained by an administrative law judge. The city appealed that decision to the department director, who upheld the denial of its claim for refund. That decision was affirmed by the district court on a petition for judicial review.

The exemptions for the collection of sales tax are set forth in Iowa Code section 422.45, which states in relevant part:

There are hereby specifically exempted from the provisions of this division and from the computation of the amount of tax imposed by it, the following:
20. The gross receipts from sales or services rendered, furnished, or performed by a county or city. This exemption ... does not apply to fees paid to cities and counties for the privilege of participating in any athletic sports.

(Emphasis added.) The exception from the exemption with regard to “participating in any athletic sports” was added to section 422.45(20) by a 1985 amendment. 1985 Iowa Acts ch. 32, § 84.

Following this amendment, the department revised Iowa Administrative Code rule 701-18.39 to accommodate the legislative changes. Pursuant to the procedures set forth in Iowa Code section 17A.4, the department received written comments and held a public hearing on the proposed rule changes. After review of the proposed rule by the legislative rules review committee, rule 701-18.39 was amended to read, in relevant part:

Sales or services rendered, furnished, or performed by a county or city.... On and after July 1, 1985, the gross receipts from fees paid to cities and counties for the privilege of participating in any athletic sports are also subject to tax....
A “sport” is any activity or experience which involves some movement of the human body and gives enjoyment or recreation. An “athletic” sport is any sport which requires physical strength, skill, speed, or training in its performance. The following activities are nonexclusive examples of athletic sports: Baseball, football, basketball, softball, volleyball, golf, tennis, racquetball, swimming, wrestling, and foot racing.
The following is a list of various fees which would be considered fees paid to a city or county for the privilege of participating in any athletic sport, and thus subject to tax under this rule. The list is not exhaustive.
1. Fees paid for the privilege of using any facility specifically designed for use by those playing an athletic sport: fees for use of golf course, ball diamond, tennis court, swimming pool, or ice skating rink are subject to tax. These fees are subject to tax whether they allow use of the facility for a brief or extended period of time, e.g., a daily fee or season ticket for use of a swimming pool or golf course would be subject to tax....

Iowa Admin. Code r. 701-18.39 (emphasis added).

Rule 701-18.39 represents the department’s interpretation of section 422.45(20). Although the court gives weight to the department’s interpretation, the meaning of a statute is always a matter of law to be determined by the court. Sorg v. Iowa Dep’t of Revenue, 269 N.W.2d 129, 131 (Iowa 1978). The deference that should be accorded to the view of the agency in this case is prescribed in Iowa Code section 17A.19(11) (2001). That statute provides that the court

[s]hall not give any deference to the view of the agency with respect to whether particular matters have been vested by a provision of law in the discretion of the agency.

Iowa Code § 17A.19(ll)(a). The court should, however, give appropriate deference to the view of the agency

with respect to particular matters that have been vested by a provision of law in the discretion of the agency.

Iowa Code § 17A.19(ll)(c).

There is a statutory directive, which states:

The director shall have the power and authority to prescribe all rules not inconsistent with the provisions of this chapter, necessary and advisable for its detailed administration and to effectuate its purposes.

Iowa Code § 422.68(1). We conclude from this statute that the matter under consideration has been vested in the discretion of the agency. Consequently, the agency’s interpretation of the statute is entitled to the deference accorded by section 17A.19(ll)(c).

The city seeks to show that the agency’s interpretation of the rule is not within the meaning of the statute by resort to dictionary definitions. Relying on Webster’s New Twentieth Century Dictionary [date not provided], it sets forth a definition of “sport” that includes “any activity or experience that gives enjoyment or recreation; pastime; diversion.” The city recognizes that recreational swimming is a sport but urges that it is not an “athletic” sport. In support of that claim, they refer to the same dictionary that defines “athletic” as “of, like or proper to athletes or athletics,” and defines “athlete” as “one trained to engage or compete in exercises, games, and contests requiring physical strength, endurance, agility, speed, etc.”

It is the city’s contention that the exception to the tax exemption only relates to competitive athletics. In a Louisiana sales tax case, City of Lake Charles v. Dave’s Swedish Spa Resort, 441 So.2d 50 (La.Ct.App.1983), the court rejected a similar contention, stating:

Facilities which increase one’s athletic abilities are athletic facilities, whether or not one chooses to use his increased athletic abilities competitively. These facilities are designed to, and presumably do, increase one’s strength and stamina, cause loss of excess weight, and in general, improve one’s physical fitness.

City of Lake Charles, 441 So.2d at 53.

We recognized in Davenport Community School District v. Iowa Civil Rights Commission, 277 N.W.2d 907 (Iowa 1979):

We thus conclude that when a “rational” agency could conclude that a rule is within its delegated authority a reviewing court should not reach a contrary conclusion. This, of course, would not allow an administrative body to act beyond or in contravention of the language of its enabling act, or contrary to legislative intent.

Davenport Cmty. Sch. Dist., 277 N.W.2d at 910. Giving deference to the view of the agency as required by subpart (c) of section 17A.19(11), we are satisfied that in deciding this issue a rational agency could conclude that the challenged rule is within the statutory mandate.

Our views as to the meaning of the statute are strengthened by the fact that the agency rule has existed for nearly seventeen years. It was vigorously challenged by the Iowa League of Municipalities at the time it was proposed but was not curtailed by the legislative rules review committee. The legislature has exhibited no interest in changing it during the ensuing years. We have recognized that if the meaning of the statute that is subject to administrative implementation is subject to doubt and has been made the object of a rule of long-standing, we should give weight to the administrative interpretation. Clarion Ready Mixed Concrete Co. v. Iowa State Tax Comm’n, 252 Iowa 500, 507, 107 N.W.2d 553, 558 (1961); N.W. States Portland Cement Co. v. Bd. of Review, 244 Iowa 720, 733, 58 N.W.2d 15, 23 (1953). The district court was correct in upholding the agency’s rule.

Because the city has not prevailed in this litigation, we need not determine the issue involving its right to recover attorney fees from the agency. We have considered all other issues presented and conclude that the judgment of the district court should be affirmed.

AFFIRMED.


author: VOGEL, P.J.

text:
    In re C.G.B., Minor Child, C.G.B, Minor Child, Appellant.
    No. 01-0610.
    Court of Appeals of Iowa.
    Feb. 20, 2002.
    David N. Nadler, Cedar Rapids, for appellant.
    Thomas J. Miller, Attorney General, Tabitha Gardner, Assistant Attorney General, and Rebecca Belcher, Assistant County Attorney, for appellee.
    Considered by VOGEL, P.J., and MILLER and EISENHAUER, JJ.
   VOGEL, P.J.

C.G.B. (Cassie), born January 18, 1984, appeals a modification of a disposition order transferring her custody and guardianship to the Iowa Department of Human Services (IDHS) for purposes of placement in the Iowa State Training School for Girls. Because we conclude the State did not prove the statutory requisites for placement at the school, we reverse and remand.

Scope of Review. We review juvenile matters de novo. In re N.W.E., 564 N.W.2d 451, 458 (Iowa Ct.App.1997). The present case, however, requires our construction of statutory language. In considering statutory questions our review is to correct errors of law. In re G.J.A., 547 N.W.2d 8, 5 (Iowa 1996).

Procedural Background. In March of 1999, the State filed a delinquency petition alleging Cassie had committed the delinquent act of first-degree criminal mischief in violation of Iowa Code sections 716.1 and 716.3 (1997). Cassie never admitted her participation in the alleged act. In April of 1999, a consent decree was entered placing Cassie on supervised probation and requiring her to pay restitution. The decree ordered the pending delinquency petition be “continued indefinitely” pending an application to reset the hearing. No further hearing was held on the matter.

On August 31, 2000, Cassie was adjudicated to have committed the offense of solicitation to commit a felony in violation of Iowa Code section 705.1 (1999). The juvenile court transferred Cassie’s custody to IDHS for placement in a residential treatment facility. In March of 2000 Cassie was unsuccessfully returned home. This was followed by a series of failed placements including detention, a day treatment program, and another residential treatment program. In April of 2001, the court ordered Cassie be placed at the Iowa State Training School for Girls until her eighteenth birthday.

Modification of Placement. Iowa Code section 232.54(5) (2001) allows the juvenile court, upon presentation of clear and convincing evidence, to modify a dispo-sitional order by imposing a more restrictive placement. In this case, after considering Cassie’s previous failed placements, the seriousness of her delinquent act, her continued' violations of the terms and conditions of formal probation, and the need for protection of the community, the court ordered Cassie to a more restrictive placement at the state training school. Cassie contends the dispositional modification was without statutory authority.

Under Iowa Code section 232.52(2)(e), the court may order placement at a state training school if any three of the following conditions are met:

(1) The child is at least fifteen years of age and the court finds the placement to be in the best interests of the child or necessary to the protection of the public.
(2) The chüd has committed an act which is a crime against a person and which would be an aggravated misdemeanor or a felony if the act were committed by an adult.
(3) The child has previously been found to have committed a delinquent act.
(4) The child has previously been placed in a treatment facility outside the child’s home or in a supervised community treatment program established pursuant to section 232.191, subsection 4, as a result of a prior delinquency adjudication.

Cassie challenges the juvenile court’s findings with regard to each of the above elements. In addition, she contends the court erroneously concluded placement at the state training school was the least restrictive alternative. Although the State asserts Cassie failed to preserve error on her arguments, we believe Cassie’s direct appeal was sufficient to preserve her claims for our review. See In re N.W.E., 564 N.W.2d 451, 455 (Iowa Ct.App.1997) (holding a direct appeal sufficiently preserves a challenge to delinquency disposi-tional orders).

Although Cassie raises a number of issues challenging her placement, we find subsections (1) and (2) of section 232.52(2)(e) are unquestionably satisfied and therefore limit our discussion to determining whether subsections (3) and (4) are met. Subsection (4) requires that a child has previously been placed in a treatment facility or program as a result of a prior delinquency adjudication. Cassie has been adjudicated delinquent on only one occasion. See In re J.N., 619 N.W.2d 403, 406 (Iowa 2000). The State concedes, and we conclude, she therefore does not meet the requirement of a “prior delinquency” under subsection (4). Id.

Subsection (3) requires that “the child has previously been found to have committed a delinquent act.” Iowa Code § 232.52(2)(e)(3). The State argues that although Cassie has only one adjudication, the prior consent decree for first-degree criminal mischief constitutes the necessary previous delinquency finding. The issue therefore becomes whether entry of this consent decree, without a finding of delinquency, fulfills the statutory intent manifested by the word “found,” as used in this subsection.

Iowa Code section 232.46 allows for a consent decree to be entered prior to an order of adjudication. The decree may be in force and effect for six months, if not extended, and the child may be required to comply with various terms of supervision. Iowa Code § 232.46(1), (4). If a child fails to comply with the terms of the consent decree, she may be held accountable for the underlying delinquent act. Id. § 232.46(5). However, if at the end of the six-month period the child has complied with the terms and conditions, the original delinquency petition may not be reinstated and the State cannot proceed against the child for the delinquent act. Id. § 232.46(6).

There is nothing in this record indicating Cassie’s original delinquency petition was reinstated and therefore nothing to indicate she was ever found to have committed the delinquent act contained within the consent decree. See In re Rousselow, 341 N.W.2d 760, 762 (Iowa 1983) (“The result of a successful probation under a consent decree would be that the case be dismissed without an adjudication of delinquency against the child.”). The State argues the requirement of section 232.52(2)(e)(3) is nevertheless met, based on Cassie’s entry into the plea agreement, forming the basis of the consent decree, and agreement to pay restitution. We, however, are not willing to read those inferences into the statute.

When the statutory language is plain and its meaning is clear, we should not reach for meaning beyond the statute’s express terms or resort to rules of statutory construction. Meier v. Sac & Fox Indian Tribe, 476 N.W.2d 61, 63-64 (Iowa 1991). The plain language of section 232.52(2)(e)(3) requires a delinquency finding, which implies a need for an adjudicatory determination. See Iowa Code § 232.47(1) (requiring an adjudicatory hearing before a delinquency finding can be made as to a child denying petition allegations); id. § 232.47(10) (hinging a delinquency finding upon proof beyond a reasonable doubt the child engaged in the delinquent behavior). See also In re G.J.A., 547 N.W.2d 3, 6 (Iowa 1996). A consent decree not only precedes a court adjudication, but can be entered even absent an admission of wrongdoing on the part of the child. See generally Iowa Code § 232.46. We therefore hold this consent decree entered into pursuant to section 232.46, which did not contain an admission or finding, does not satisfy the requirement under section 232.52(2)(e)(3) that a child is found to have committed a delinquent act.

Accordingly, Cassie was not previously found to have committed the delinquent act of criminal mischief. Absent this finding, the State cannot prove three of the four conditions under section 232.52(2)(e) exist, and Cassie’s placement at the state training school must fail. We therefore reverse and remand this matter to the juvenile court, for further proceedings consistent with this opinion.

REVERSED AND REMANDED.

      . We acknowledge Cassie has turned eighteen during the pendency of this appeal. Nonetheless, we choose to address the question because it is a matter of public importance and is likely to recur. Shannon v. Hansen, 469 N.W.2d 412, 414 (Iowa 1991).

      . We take no position on whether an expired consent decree, even with a finding of delinquency, would satisfy the requirement that the child is found to have committed a delinquent act.


author: Paul H. Anderson Associate Justice

text:
    In re Petition for DISCIPLINARY ACTION AGAINST Loren M. BARTA, an Attorney at Law of the State of Minnesota.
    No. C5-89-149.
    Supreme Court of Minnesota.
    May 9, 2002.
   ORDER

The Director of the Office of Lawyers Professional Responsibility and respondent Loren M. Barta have entered into a stipulation providing for the transfer of respondent to disability inactive status under Rule 28, Rules on Lawyers Professional Responsibility (RLPR). The parties have represented that respondent suffers from a mental condition that prevents him from competently representing clients at this time, and is unable to cooperate or assist in the investigation of the pending ethics complaints.

Based upon all the files, record and proceedings herein,

IT IS HEREBY ORDERED THAT:

(1) Respondent Loren M. Barta is immediately transferred to disability inactive status.

(2) During the disability inactive status respondent shall not engage in the practice of law, including rendering legal advice or discussing legal matters with clients.

(3) All disciplinary investigations shall be held in abeyance until such time as respondent petitions for reinstatement to active status.

(4) Respondent shall comply with the requirements of Rule 26, RLPR, for closing down his legal practice.

(5) With respect to any reinstatement petition that respondent may file, the provisions of Rules 18 and 28(d), RLPR, shall apply.

BY THE COURT:

Paul H. Anderson Associate Justice


author: PAUL H. ANDERSON Associate Justice

text:
    In re Petition for DISCIPLINARY ACTION AGAINST Roland C. AMUNDSON, an Attorney at Law of the State of Minnesota.
    No. C2-02-655.
    Supreme Court of Minnesota.
    May 9, 2002.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for disciplinary action against respondent Roland C. Amundson alleging that between 1995 and 2000, while serving as trustee respondent misappropriated more than $414,000 from a trust established for the benefit of a disabled woman, that respondent has pleaded guilty to five felony counts of theft by swindle for the misappropriation, and that respondent has violated Minn. R. Prof. Conduct 8.4(b), (c) and (d).

Respondent has waived his right to answer the petition and therefore the allegations in the petition are deemed admitted under Rule 13(b), Rules on Lawyers Professional Responsibility (RLPR), for purposes of this proceeding only.

Respondent has waived his right to a hearing under Rule 14, RLPR, and he and the Director jointly recommend that the appropriate discipline is disbarment from the practice of law under Rule 15, RLPR, and payment of $900 in costs under Rule 24, RLPR.

This court has independently reviewed the file and approves the jointly recommended disposition.

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that respondent Roland C. Amundson is disbarred from the practice of law effective immediately. Respondent shall pay $900 in costs under Rule 24, RLPR.

GILBERT, J., took no part in the consideration or decision of this matter.

BY THE COURT:

PAUL H. ANDERSON Associate Justice