Koch Development Corporation and Daniel L. Koch v. Lori A. Koch, as Personal Representative of the Estate of William A. Koch, Jr. ( 2013 )

Oct 03 2013, 5:31 am
FOR PUBLICATION
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEE:
JAMES D. JOHNSON TERRY G. FARMER
ANGELA L. FREEL DANIEL R. ROBINSON, JR.
Rudolph, Fine, Porter & Johnson, LLP Bamberger, Foreman, Oswald & Hahn, LLP
Evansville, Indiana Evansville, Indiana
RICHARD SMIKLE
BRIAN PAUL
Ice Miller, LLP
Indianapolis, Indiana
KEVIN R. PATMORE
Santa Claus, Indiana
IN THE
COURT OF APPEALS OF INDIANA
KOCH DEVELOPMENT CORPORATION )
AND DANIEL L. KOCH, )
)
Appellants-Defendants, )
)
vs. ) No. 82A04-1212-PL-612
)
LORI A. KOCH, AS PERSONAL )
REPRESENTATIVE OF THE ESTATE )
OF WILLIAM A. KOCH, JR., DECEASED, )
)
Appellee-Plaintiff. )
APPEAL FROM THE VANDERBURGH CIRCUIT COURT
The Honorable Carl A. Heldt, Judge
Cause No. 82C01-1101-PL-5
October 3, 2013
OPINION – FOR PUBLICATION
MATHIAS, Judge
Daniel L. Koch (“Dan”) appeals the judgment of the Vanderburgh Circuit Court
declaring that Lori A. Koch (“Lori”), as Personal Representative of the Estate of William
A. Koch, Jr. (“Will”), was the owner of certain shares of Koch Development Corporation
(“KDC”) and did not have to sell the shares to KDC and Dan pursuant to a shareholders’
agreement. Dan appeals and argues: (1) that the trial court clearly erred in determining
that KDC and Dan materially breached the shareholders’ agreement and (2) that the trial
court erred in concluding that KDC and Dan’s actions excused the Estate from
performing under the shareholders’ agreement.
We affirm.
Facts and Procedural History
KDC owns and operates a theme park in Santa Claus, Indiana known as Holiday
World and Splashin’ Safari. Started in 1945 by Louis J. Koch (“Louis”), the park was
originally known as Santa Claus Land. Louis’s son, William Koch Sr. (“William”), later
took over operation of the family business, and all five of William’s children initially
owned stock in KDC. By 2002, however, Will, Dan, and their sister, Natalie, owned all
of the shares of KDC. In November 2002, KDC, Will, Dan, and Natalie entered into a
Share Purchase and Security Agreement (“the Agreement”), which controlled the
disposition of the outstanding shares of KDC.
Section 5 of the Agreement is titled “Mandatory Purchase on Death by
Corporation or Shareholders,” and provides in relevant part that:
2
5.1.1 Within a period commencing with the death of any
Shareholder . . . and ending upon the earlier of (i) 180 days
following the qualification of that Shareholder’s personal
representative, or (ii) 180 days following the death of such
Shareholder, the Corporation shall purchase and redeem all the
shares of Common Stock owned by the decedent Shareholder’s
[sic] on the date of death of such decedent Shareholder at the
price of $362.8184 per share.
5.1.2 The price to be utilized for purchase under this Section 5 shall
afterward be determined from time to time by the Shareholders.
Initially the price shall be that as set forth in [Section] 5.1.1. If the
Shareholders have not agreed in writing to a new stipulated price
within twenty-four (24) months of the date of this Agreement, and
every twenty-four (24) months thereafter, then, and in such event,
the purchase price shall be determined by reference to the formula
attached hereto as Exhibit 5.1.2.
5.2 If during said period the Corporation does not have sufficient
capital available to permit it lawfully to purchase any or all of such
shares of Common Stock, then within 30 days after the end of said
period, the remaining Shareholders who are then parties to this
Agreement shall purchase all of the decedent Shareholder’s shares of
Common Stock that the Corporation is legally unable to purchase at
the price per share provided in this Agreement on the following terms:
5.2.1 A down payment of twenty-five percent (25%) of such purchase
price shall be paid on the date on which the remaining Shareholders
purchase the shares; and
5.2.2 The balance of such purchase price shall be paid in thirty-six (36)
equal monthly installments, including interest at a fixed rate equal to
the lowest applicable federal rate (as such term [is] defined by §
1274(d) of the Internal Revenue Code of 1986, as amended
(“Code”)) for the month on the date that such shares of Common
Stock are purchased by the remaining Shareholders. Interest shall be
compounded annually. Notwithstanding the foregoing, in the event
the obligation is a “qualified debt instrument” (as such term is
defined in Code § 1274A), the interest rate on the note shall not
exceed nine percent (9%) per annum, compounded annually. Such
installment payments shall commence on the last day of the month
following the date on which the remaining Shareholders purchase
the shares of Common Stock, and equal payments shall be made on
the last day of each month thereafter until the purchase price is paid
in full, except that the final payment shall be in an amount equal to
the remaining amount due. All, or any part, of the unpaid balance of
3
the purchase price may be prepaid without penalty at any time. On
the date of the purchase of such shares, the purchasing Shareholder
or Shareholders of such shares shall deliver to the decedent
Shareholder (or such decedent Shareholder’s Legal Representative) a
promissory note evidencing the unpaid balance of the purchase price
containing the payment terms herein provided. Such promissory
note shall contain commercially reasonable terms, such as the right
to accelerate the balance in the event of default and the right to
reasonable attorney fees in the [event] that [sic] collection efforts are
commenced after default.
5.2.3 Such purchase shall be allocated among the Shareholders required to
purchase such shares of Common Stock in such proportion as such
Shareholders shall agree among themselves, or in the event that such
Shareholders are unable to agree, then in proportion to the number of
shares of Common Stock owned by such Shareholders on the date of
the decedent Shareholder’s death.
5.3 Nothing in this Section shall preclude the parties to the sale from
agreeing to transfer property (other than cash or promissory notes) as
partial or complete consideration for the payment of the purchase
price.
5.4 The Corporation may apply for a policy of insurance on the life of
each Shareholder to enable it to purchase the shares of Common
Stock of such Shareholder. Each Shareholder agrees to do
everything to cause a policy of life insurance to be issued pursuant to
such application. The Corporation shall be the owner of any policy
or policies of life insurance acquired pursuant to the terms of this
Agreement. . . .
Appellant’s App. pp. 132-33 (emphases added).
The minutes of the shareholders’ meetings held in July 2008 and July 2009 (“the
Minutes”), provide, “[f]or purposes of the buy/sell agreement, KDC was valued at
$653.07307 per share for each of the three shareholders as of January 1, 2009.”
Appellant’s App. pp. 140, 141. In July 2009, Dan sold 536 shares of KDC to Will at the
price of $653.07307 per share. Then, four months later, in November 2009, Natalie sold
her one-third interest in KDC to Will and Dan at the same price of $653.07307 per share.
4
At the conclusion of these transactions, Will owned 49,611.6 shares (sixty percent) and
Dan owned 33,074.4 shares (forty percent) of KDC stock.
Tragically, on June 13, 2010, Will died unexpectedly. Will’s widow, Lori, was
appointed as personal representative of Will’s estate (“the Estate”). Following Will’s
death, Dan, who had been an attorney in Florida, came to Indiana and became the
President of KDC. Initially, both Dan and the Estate sought ways to avoid the financial
impact of complying with the Agreement. During this time, Dan asked the Estate to
waive the buy/sell provisions of the Agreement because he was concerned that he and
KDC would not be able to afford the purchase, and the Estate’s lawyer sent Dan a letter
informing him that Lori did not want to sell Will’s shares.
During the summer of 2010, Dan began to work with KDC’s accountant to plan an
increase in his salary as KDC president to over $1,000,000, which was approximately
four times his previous salary.1 Dan did so, at least in part, to divert corporate profits
from dividends, which would otherwise be shared with the Estate,2 to himself. Dan also
wanted to more quickly pay off his debt to Natalie from his purchase of a portion of
Natalie’s shares. It is important to note that Dan was not behind in his payments; he
simply desired to pay the debt off more quickly.
Thereafter, the Estate objected to the dramatic increase in Dan’s salary and
requested that Lori be added to the Board of Directors as the personal representative of
the largest shareholder, and Dan had a change of heart regarding waiving the buy/sell
1
Dan had also received loans and bonuses from KDC in the amount of $875,000, which the Estate
approved of at the time.
2
The beneficiaries of the Estate were Lori and Lori and Will’s children.
5
provision of the Agreement. Through an email exchange on which he had inadvertently
copied Lori, Dan indicated his desire to purchase Will’s shares from the Estate pursuant
to the Agreement.
On November 30, 2010, Dan asked Matt Eckert (“Eckert”), who was KDC’s
accountant and de facto financial officer, if KDC could afford to pay $5,000,000 to
purchase Will’s shares. Importantly, he did not ask how much KDC could legally afford
to pay, as required by the Agreement. Eckert determined that KDC could afford to pay
$5,000,000 toward the purchase of Will’s shares without affecting its ability to pay
extensive dividends and invest in a new ride. On December 3, 2010, Lori’s counsel sent
a letter to KDC and Dan’s counsel indicating that “Lori and her children do not want to
sell their stock in the corporation, even with the possibility of being able to repurchase it
on some undefined basis at some undefined distant point in the future.” Ex. Vol.,
Plaintiff’s Ex. Q-3. This letter also informed KDC and Dan that, if they insisted on the
purchase of the shares:
First and foremost is the issue of price. Our review of the records of the
corporation indicate that on July 7, 2009, the shareholders stipulated a
stock purchase price for purposes of the Share Purchase and Security
Agreement in the amount of $653.07307 per share. By our calculation,
this results in a purchase price for our clients’ stock in the amount of
$32,108,729.33. I am aware that a figure of $26,595,000.00 has been used
in previous discussions. This apparently was done without taking into
account the previous stipulation which, under the terms of the Share
Purchase and Security Agreement, is controlling as to price.
The next issue is the appropriate purchaser. Under the terms of the Share
Purchase and Security Agreement, the corporation is obligated to purchase
the stock of my clients. This must be accomplished within 180 days of
Will’s death, which I calculate to be December 10, 2010. The amount to
be purchased by the corporation is the full amount of stock less any portion
for which the “corporation does not have sufficient capital available to
6
permit it to lawfully purchase” the shares. Accordingly, an analysis must
be made of the amount the corporation must purchase before we determine
the portion that will be purchased by [Dan] through the use of Natalie’s
loan and the 36 monthly installment payments that would have to be made
thereafter.
The only limitation on a distribution to shareholders (such as this
redemption) appears in I.C. 23-1-28-3. It provides in relevant part: “A
distribution may not be made if, after giving it effect:
(1) The corporation would not be able to pay its debts as they become
due in the usual course of business; or
(2) The corporation’s total assets would less than the sum of its total
liabilities plus (unless the articles of incorporation permit
otherwise) the amount that would be needed, if the corporation
were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution.”
Based on our examination of the most recent financial information that we
have in our file from the company, it is very clear that the amount that
must be purchased by the corporation under the terms of the
agreement is substantially in excess of the $5,000,000 proposed in your
letter. In fact, based on the analysis performed by the company’s
lender of the December 31, 2008 financial statements, it may actually
be the full amount. However, we are in the process of analyzing more
recent financial information and attempting to make a judgment as to what
the appropriate amount is. However, in light of the park’s successful track
record, available line of credit, and large cash position, I suggest that you
begin to plan for a much larger payment.
***
Kathy Ettensohn has inquired as to whether or not my clients are willing to
extend the deadline for performance under the terms of the Share Purchase
and Security Agreement. My clients decline to extend those deadlines.
Recognizing that time is rapidly approaching for the corporation to make its
purchase, we will endeavor to get you our proposal for the purchase amount
to be paid by the corporation as early next week as we can once we have
completed our analysis. However, inasmuch as we believed we were
negotiating a new arrangement which would have included the cancellation
or modification of the agreement, you can understand that we have not
done substantial work to determine this amount and some further time to do
this will be required.
Let me also reiterate our clients’ willingness to both you and the
corporation of the obligation to make the purchase under the Share
7
Purchase and Security Agreement as previously discussed. To the extent
your position on buyout was motivated by a belief that our clients were
going to require strict performance, please recognize that this is not the
case unless you and the corporation intend to go through with the
purchase. In that event, we will require strict compliance with the
terms of the agreement.
Id. (emphases added).
On December 7, 2010, KDC and Dan offered to purchase Will’s shares from the
Estate for a total of $26,886,014.39, based on a value of $541.93 per share.3 With that
offer, KDC tendered to the Estate a check for $5,000,000. In addition to this check, KDC
also claimed a setoff to its Agreement obligations in the amount of $2,672,231.12, the
balance Will owed on a promissory note to KDC dated November 13, 2009, despite the
fact that the note had not yet matured, did not contain an acceleration clause, did not
make Will’s death an event of default, and the Estate was current on its payments on the
note. KDC therefore believed that the true value of its tender was $7,672,231.12. Dan
personally tendered to the Estate a check for $4,730,826.98 and an unsecured promissory
note in the amount of $14,192,480.94 to make up the balance of the $26,886,014.39 total.
In a letter dated December 13, 2010, the Estate rejected these offers, stating its
position that the shareholders had already come to an agreement that the shares of KDC
were worth $653.07307 per share, and that the Estate’s shares were therefore worth a
total of $32,108,729.33.4 The Estate also objected to the setoff of the amount of the
promissory note, and repeated the Estate’s assertion that KDC could afford much more
3
At the time, both parties were mistaken about the total number of shares Will owned at the time of his
death.
4
Again, this was based on a mistake regarding the total number of shares owned by Will. With the
correct amount of shares, the total would have been $32,399,999.92.
8
than $5,000,000 to purchase its portion of Will’s shares. Lastly, the Estate’s letter
complained that Dan’s note was not secured by a pledge of the stock purchased. The
Estate gave KDC and Dan until December 31, 2010, to correct these deficiencies.
Although KDC and Dan proposed settlement offers and corrected their tender to account
for the correct number of shares owned by Will at the time of his death, neither KDC nor
Dan otherwise altered their initial tender.5
On January 7, 2011, the Estate filed an action for declaratory judgment requesting
that the trial court hold that that the Estate had the right to keep the KDC shares and not
sell them to KDC and/or Dan pursuant to the Agreement. KDC and Dan filed a counter-
claim seeking specific performance of the Agreement.
A bench trial began on October 31, 2012 and ended on November 2, 2012. On
December 3, 2012, the trial court entered findings and conclusions in favor of the Estate,
determining that KDC and Dan had materially breached the Agreement, thereby excusing
the Estate from performance under the Agreement. The trial court’s findings and
conclusions provided in relevant part:
8. As admitted by the defendants in their Answer and as stated in
Section 9 of the Shareholders’ Agreement, time was of the essence to
the Shareholders’ Agreement and a material part of that agreement.
9. Pursuant to Section 5.1.2 of the Shareholders’ Agreement, the
parties were entitled to stipulate as to the purchase price on a per share
basis applicable to the buyout of stock upon the death of a shareholder and
such a stipulation would be in effect for 24 months following the date of the
stipulation.
5
KDC subsequently filed a claim against the Estate in Spencer Circuit Court in the amount of Will’s
promissory note. KDC acknowledged that there were no setoffs against this note. On April 11, 2011, the
Estate filed a conditional allowance of this claim. But at no point thereafter did KDC alter its tender to
remove the amount it had set off based upon Will’s note.
9
10. In accordance with Section 5.1.2, the parties to the Shareholders’
Agreement agreed and stipulated to a per share price of $653.07307
(the “price stipulation”), which was evidenced by the June 19, 2008
Shareholders’ Meeting Minutes; the July 7, 2009 Shareholders’ Meeting
Minutes; the share transaction in July 2009 (but dated effective June 30,
2010) between William A. Koch, Jr. and Daniel L. Koch for the purchase
of 536 shares of stock in KDC from Daniel L. Koch which used the price of
$653.07307 per share, as well as the share transaction on November 13,
2009, in which Natalie Koch’s shares in KDC were purchased by William
A. Koch, Jr. and Daniel L. Koch which used the price of $653.07307 per
share.
11. The price stipulation was in effect as of the date of death of
William A. Koch, Jr., and controlled the attempted purchases of shares
owned by the Estate in KDC in this matter.
12. On August 4, 2010, subsequent to the death of William A. Koch, Jr.,
Daniel L. Koch and Natalie C. Koch were elected as directors of KDC.
Thereafter, acting as directors of KDC, Daniel L. Koch and Natalie C.
Koch appointed Daniel L. Koch as president of the KDC.
13. At no time was Lori Koch an officer or director of KDC.
14. On December 7, 2010, KDC and Daniel L. Koch attempted to
purchase the Estate’s stock in KDC for a total consideration of Twenty-Six
Million Eight Hundred Eighty-Six Thousand Fourteen Dollars and Thirty-
nine Cents ($26,886,014.39), representing a per share price of Five
Hundred Forty-one Dollars and Ninety-three Cents ($541.93).
***
15. At all relevant times, the Estate was ready, willing, and able to
perform under the Shareholders’ Agreement.
16. Based upon the testimony and evidence in this case, there were a
number of material defaults under the Shareholders’ Agreement by KDC
and Daniel L. Koch.
17. Pursuant to the price stipulation of $653.07307 per share, the
purchase price for the Estate’s 49,611.6 shares of KDC . . . should have
been Thirty-two Million Three Hundred Ninety-Nine Thousand Nine
Hundred Ninety-nine Dollars and Ninety-two Cents (32,399,999.92). The
value of the tender by KDC and Daniel L. Koch of Twenty-Six Million
Eight Hundred Eighty-six Thousand ($26,886,014.39) for the purchase of
the Estate’s shares on December 7, 2010, was materially lower than the
purchase price due under the price stipulation.
18. Even if the formula contained in Exhibit 5.1.2 was controlling in this
case, which it is not, KDC and Daniel L. Koch materially breached their
10
obligations under the Shareholder’s Agreement by failing to tender the
formula price as specified in Exhibit 5.1.2 of that agreement[.]
***
19. Irrespective of whether the correct calculation of the purchase price is
determined by stipulation or the formula, the tender by KDC and Daniel
L. Koch was additionally and materially less than whatever the actual
purchase price would have been by $2,672,232,12. This is due to the
claimed set-off on December 7, 2010 of a promissory note owned by the
Estate to KDC which could not, as a matter of law, be set-off at the
time. The set-off was improper at the time inasmuch as the promissory
note had not matured, was current on its payments, did not contain an
acceleration clause, and did not make the death of the payor an event
of default.
20. After claiming the set-off, on December 17, 2010, KDC filed a claim
against the Estate in Spencer Circuit Court representing a balance due and
owning of Two Million Six Hundred Seventy-two Thousand Two Hundred
Thirty-two Dollars and Twelve Cents ($2,672,232.12). KDC’s
representative stated under oath that there are no set-offs against the same.
Upon filing the claim, the Estate filed a conditional allowance of claim with
the Spencer Circuit Court. Upon filing of this allowance, the trial date was
vacated. This position, contrary to the position now taken in subsequent
proceedings, also estops the Estate from now claiming the set-off on
December 7, 2010.
21. Based on the testimony and evidence, KDC should have lawfully
and immediately tendered between Ten Million Dollars ($10,000,000)
to Nineteen Million Two Hundred Thousand Dollars ($19,200,000) at
the time of purchase. The tender of only Five Million Dollars
($5,000,000) by KDC was a material breach of the Shareholders’
Agreement.
22. KDC and Daniel L. Koch were advised that the tender was deficient
by letter dated December 13, 2010. The Estate agreed to an extension of
time from the contractually required performance date of December 10,
2010 (180 days after the death of William A. Koch, Jr. per Section 5.1.1) to
December 31, 2010 in order to allow the defendants to correct the
deficiencies in their tender of December 7, 2010. Such an extension was
not a waiver by the Estate of time being of the essence to the Shareholders’
Agreement.
23. KDC and Daniel L. Koch failed to correct these deficiencies either
prior to the extended closing deadline of December 31, 2010, or at any
reasonable time thereafter.
11
24. Prior to November 30, 2010, KDC and Daniel Koch made no
effort to comply with the Shareholders’ Agreement; rather, to the
contrary, the defendants repeatedly advised the Estate of their
willingness to set aside the agreement and/or waive the purchase
requirement. In addition, Daniel Koch (individually and on behalf of
KDC) and Natalie Koch (on behalf of KDC) never approved the note set-
off in connection with the promissory note from William A. Koch, Jr. used
as partial consideration for KDC’s tender; never provided the Estate of an
analysis of the $5,000,000.00 payment calculation prior to discovery; and
were developing a plan whereby the Estate would not be paid
Subchapter S distributions in order to allow Daniel Koch to pay
himself a salary of between $875,000.00 to $1,160,000.00, all after
Daniel Koch took out loans and bonuses totaling $875,000.00 in
September and October of 2010.
25. The filing of this declaratory judgment action by the Estate did not
prevent or excuse KDC or Daniel L. Koch’s performance under the
Shareholders’ Agreement.
26. The foregoing material breaches of the Shareholders’
Agreement by KDC and Daniel L. Koch permanently excuse
performance by the Estate and relieves it of any obligation or duty to
transfer its stock in KDC to KDC or Daniel L. Koch pursuant to the
Shareholders’ Agreement.
***
28. The Estate is entitled to judgment against the defendants on the
Estate’s complaint and is further entitled to judgment against the defendants
on their counter-claim.
THEREFORE, IT IS ORDERED, ADJUDGED, AND DECREED by
the Court that judgment is rendered in favor of the plaintiff on its
complaint and that the Estate is permanently excused from any
obligation or duty to sell its shares of KDC to the defendant, KDC, or
to the defendant, Daniel Koch.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED by the
Court that the defendants and counter-claimants take nothing by way of
their counter-claim.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED by the
Court that the plaintiff is the owner of 49,611.6 shares of KDC’s stock
and KDC is ordered to issue to the Estate certificates evidencing such
stock ownership.
12
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED by the
Court that the judgments contained herein shall be entered as final
judgments. . . .
Appellant’s App. pp. 21-29 (emphases added). Daniel now appeals.6
Standard of Review
When a trial court enters findings and conclusions, we apply a two-tiered standard
of review: we first determine whether the evidence supports the findings; we then
determine whether the findings support the judgment. Anderson v. Ivy, 955 N.E.2d 795,
800 (Ind. Ct. App. 2011), trans. denied. “In deference to the trial court’s proximity to the
issues, we disturb the judgment only where there is no evidence supporting the findings
or the findings fail to support the judgment.” Id. (quoting Smith v. Smith, 938 N.E.2d
857, 860 (Ind. Ct. App. 2010)). We do not reweigh the evidence, and we consider only
the evidence favorable to the trial court’s judgment. Id. We also will not reassess
witness credibility. Best v. Best, 941 N.E.2d 499, 502 (Ind. 2011). The party appealing
the trial court’s judgment must establish that the findings are clearly erroneous.
Anderson, 955 N.E.2d at 800. “Findings are clearly erroneous when a review of the
record leaves us firmly convinced that a mistake has been made.” Id. (quoting Smith,
938 N.E.2d at 860). We do not defer to conclusions of law, which are evaluated de novo.
Id.
6
KDC has filed notice with this court that it has declined to participate in this appeal. However, because
it was a party below, KDC is a nominal party to this appeal. See Ind. Appellate Rule 17(A).
13
I. Breach
Dan claims that the trial court clearly erred when it found that he had materially
breached the terms of the Agreement. However, there was evidence from which the trial
court could readily find that Dan and KDC breached the terms of the Agreement in
several different ways.
A. Share Price
The first and foremost breach of the Agreement’s terms was the fact that the
tenders by Dan and KDC to buy Will’s shares from the Estate did not comport with the
price structure set forth in the Agreement. The Agreement called for the share price to be
“determined from time to time by the Shareholders.” Appellant’s App. p. 132. If the
Shareholders did not agree “in writing to a new stipulated price within twenty-four
months of the Date of the Agreement, and every twenty-four months thereafter,” then the
price was to be based on the formula set forth in Exhibit 5.1.2 of the Agreement. Id. The
trial court accepted the Estate’s position that the parties had indeed agreed to a stipulated
price of $653.07307. The trial court based this finding on the Minutes of the July 7, 2009
shareholders’ meeting, which explicitly state: “For purposes of the buy/sell agreement,
KDC was valued at $653.07307 per share for each of the three shareholders as of January
1, 2009.” Appellant’s App. p. 140. This clearly meets the requirements of the
Agreement that the shareholders agree in writing to a per-share price, and the Minutes
were signed by Dan as chairman of the board and Natalie as secretary.
Dan claims that he and Natalie signed the Minutes in their capacity as chairman
and secretary respectively, and not individually. However, although the Agreement
14
expressly states that the agreed per-share price must be in writing, it does not require that
the writing be signed by the individual shareholders. Moreover, the price of $653.07307
was listed in the Minutes of the June 19, 2008 shareholders’ meeting, and at the
beginning of the July 7, 2009 meeting, “[t]he minutes of the previous shareholders’
meeting were read by Daniel L. Koch, Chairman of the Board. Natalie Koch moved to
accept the reading of the minutes which was seconded by Will Koch and unanimously
approved.” Appellant’s App. pp. 140 (emphasis added).7 This obviously supports a
finding that the parties agreed in writing to a per share price of $653.07307 for purposes
of the buy/sell portion of the Agreement.8 See Hardy v. S. Bend Sash & Door Co., 603
N.E.2d 895, 899 n.3 (Ind. Ct. App. 1992) (rejecting complaining shareholder’s claim that
shareholders failed to make a redetermination of stock price where the shareholders
recorded the change in the price of stock in shareholder minutes and complaining
shareholder did not object to this price redetermination, and in fact participated in it).
Undaunted by this trail of documentation, Dan next claims that the trial court erred
in excluding testimony from him and Natalie that would have established that they did
not agree to the price mentioned in the Minutes. The trial court excluded this testimony
under Indiana Code section 34-45-2-4, part of Indiana’s “Dead Man’s Statutes.” This
statute provides that “a person (1) who is a necessary party to the issue or record; and (2)
7
This also refutes Dan’s argument that the per share price was not properly agreed to pursuant to Roberts
Rules of Order. Moreover, the Agreement does not mention the precise methods by which an agreed
price must be derived. It is not dispositive whether the price was agreed to pursuant to any particular
rules of order.
8
We also find it telling that, in the share transactions that occurred prior to Will’s death, the parties used
the per-share price of $653.07307—precisely the price agreed to in the Minutes.
15
whose interest is adverse to the estate; is not a competent witness as to matters against the
estate.” I.C. § 34-45-2-4(d). The Dead Man’s statutes establish as a matter of legislative
policy that claimants to an estate of a deceased person should not be permitted to present
a court with their version of their dealings with the decedent. In re Estate of Rickert, 934
N.E.2d 726, 731 (Ind. 2010). “‘The dead man’s statute guards against false testimony by
requiring that, when the lips of one party to a transaction are closed by death, the lips of
the other party are closed by law.’” Id. (quoting In re Estate of Neu, 588 N.E.2d 567, 569
(Ind. Ct. App. 1992)).
We first note that it is clear that Dan is both a party to the current suit and his
interests were and are clearly adverse to those of the Estate. Thus, the trial court properly
excluded his testimony regarding what he, Natalie, and Will agreed to (or did not agree
to) in the shareholders’ meeting. With regard to Natalie, Dan argues that she was not a
“necessary party” and her interests were not “contrary to the Estate.”9 Dan notes that
Natalie had already sold her shares of KDC and later resigned her position working for
KDC; he therefore claims that Natalie was not a necessary party to the case, nor were her
interests aligned with Dan or KDC.
A “party” for purposes of Indiana Code section 34-45-2-4 means that “the witness
must be a party to the issue, or if merely a party to the record then to be incompetent the
witness must have an interest in the issue in favor of the party calling him and adverse to
9
Dan also briefly claims that the minutes of KDC’s shareholders’ meeting were a statutorily-mandated
public record and that he and Natalie should therefore have been permitted to testify regarding what
occurred during the meeting. However, the public-record exception to the hearsay rule is inapposite to
the applicability of, and reason for, the Dead Man’s Statutes. See Kalwitz v. Estates of Kalwitz, 759
N.E.2d 228, 232 (Ind. Ct. App. 2001) (noting that Dead Man’s Statute does not exclude evidence, but
prevents a particular class of witnesses from testifying as to claims against the estate).
16
the estate.” Satterthwaite v. Estate of Satterthwaite, 420 N.E.2d 287, 290 (Ind. Ct. App.
1981). “A party to the issue means the parties between whom there is a controversy
submitted to the court for trial, the parties who are litigating the particular issue against
whom or for whom the court will render judgment.” Id. Merely having an interest in the
result does not automatically render a witness a party to the issue. Id. If the witness is
merely a party of record, it must appear that he has an interest in the suit in common with
the party calling him. Id.
Here, several facts show that the trial court properly concluded that Natalie was a
sufficiently interested party with interests adverse to those of the Estate. First, Natalie
was a party to the agreement and a shareholder at the time the Agreement was entered
into. She also held one-third of KDC’s shares at the time of the shareholder meeting
where the per-share price was agreed to. Indeed, she signed the Minutes of the
shareholder meeting as secretary of KDC. Natalie was also a director of KDC and its
secretary. She further received a salary as an officer and director of KDC, and only
resigned her position shortly before the trial in this matter. Moreover, Natalie testified at
the hearing on the admissibility of her testimony that she was concerned that, if Dan lost
control of KDC, he might not be able to repay her over $10,000,000 he owed as part of
the transaction in which he bought Natalie’s shares of KDC. From this, the trial court
properly concluded that, even if Natalie was not a party to the issue, she was a party to
the record and incompetent to testify because she had an interest in favor of Dan and
adverse to the Estate.
17
This is unlike Satterthwaite, where the witness at issue had been an heir to the
estate, but had parted with her interest in the estate, and therefore had no interest which
would render her incompetent. Id. Here, Natalie was, until shortly before trial, an officer
of KDC and, even at the time of the trial, clearly had a financial interest in the
continuation of Dan’s control of KDC. Accordingly, the trial court did not err in
excluding Natalie’s testimony.10
B. The Other Deficiencies in KDC’s Tender
In addition to the breach through the insufficiency of the share price offered,
KDC’s tender was deficient in other ways. First, KDC’s tender included a setoff in the
amount of $2,672,231.12 against a promissory note from Will to KDC dated November
13, 2009. KDC did so even though Will’s note had not yet matured, was current on its
payments, did not contain an acceleration clause, and did not make Will’s death an event
of default. Although Dan now argues that including the setoff would have benefitted the
Estate by saving it a considerable amount of interest, the Agreement did not permit such a
setoff, nor did the terms of Will’s note itself. Thus, a substantial portion of KDC’s tender
was based on this improper set off.
10
We also reject Dan’s claim that the Estate waived the application of the Dean Man’s Statutes by
introducing the Minutes into evidence. Dan claims that the Minutes constituted “testimony” by Will. In
Rickert, our supreme court held that, “[i]n order to waive objection to the competence of a witness under
the Dead Man’s Statute by taking advantage of a deposition of a person who is adverse to a decedent's
estate, the estate must use the deposition by offering it into evidence at trial or pretrial hearing, or citing it
to the court as, for example, by designating it in support of or opposition to a summary judgment motion.”
934 N.E.2d at 732 (emphasis added); see also J.M. Corp. v. Roberson, 749 N.E.2d 567, 571 (Ind. Ct. App.
2001) (noting that when a party uses a deposition of the decedent in court, then the party who offered the
deposition has waived the applicability of the Dead Man’s Statutes). Here, the Minutes are not the
equivalent of deposition testimony by Will.
18
The evidence favorable to the trial court’s judgment also shows that KDC did not
attempt to purchase as many of Will’s shares as it was legally able to purchase, the
standard for its performance under the Agreement. Instead, Dan asked KDC’s financial
officer if KDC could afford to purchase $5,000,000 of Will’s shares without otherwise
interrupting KDC’s plan to make capital expenditures on the park or interrupting Dan’s
plans to pay extensive dividends. The Estate presented testimony that KDC could have
afforded to purchase between $10,000,000 and $19,000,000 worth of Will’s shares, and
the trial court considered that testimony to be credible. Thus, KDC was able to spend
from two to four times as much as it offered to the Estate. This was a clear breach of the
terms of the Agreement.11
C. The Untimeliness of the Tender and Lack of Attempts to Cure the Deficiencies
Another factor to consider is that even after being notified by the Estate that their
offer was insufficient, neither Dan nor KDC made any effort to correct their initial tender
within the time period called for in the Agreement.12 Dan contends, however, that time
was not of the essence of the Agreement. This contention is without merit. Section 9 of
the Agreement specifically states, “Time is of the essence of this Agreement.”
Appellant’s App. p. 134. Dan argues on appeal that this provision was merely
“boilerplate” language and that there is no particular reason that the parties needed to
perform within 180 days of Will’s death. However, Dan admitted in his answer that,
11
Dan’s reference to the business judgment rule is inapposite to an analysis of KDC’s performance under
the Agreement
12
That is, other than to make adjustments based on the correct number of shares, which both parties had
initially miscalculated.
19
under the terms of the Agreement, time was of the essence. Appellant’s App. p. 51. He
cannot now be heard to argue otherwise. See TWH, Inc. v. Binford, 898 N.E.2d 451, 454
(Ind. Ct. App. 2008) (observing that an admission in a current pleading is a judicial
admission that is conclusive on the party making it).
This admission notwithstanding, we reject Dan’s claim that the time-is-of-the-
essence provision of the Agreement was merely “boilerplate” language. First, Dan does
not explain why we should ignore the explicit terms of the Agreement, even if it were
“boilerplate.” Additionally, there is good reason to require the parties to perform within a
relatively short period of time without unduly delaying the purchase of the decedent
stockholder’s shares. Without a quick resolution of this matter, the decedent’s estate
must be kept open. Also, the value of the KDC shares could fluctuate significantly if the
transaction was not closed within a relatively short period of time.
To summarize, both KDC’s and Dan’s tenders were based on a per-share price that
was significantly lower than the price agreed to by the parties, a price which was actually
used by each of the shareholders in the year preceding Will’s untimely death.
Furthermore, KDC failed to offer to purchase as many shares as it could legally purchase,
in violation of the clear terms of the Agreement, and reduced its tender by a clearly
improper setoff against Will’s promissory note, the latter an easily corrected defect which
never was. Finally, neither KDC nor Dan made any attempt to cure their defective
tenders within the time limit called for in the Agreement or within the extension granted
by the Estate. Under these facts and circumstances, the trial court properly concluded
that both Dan and KDC breached the terms of the agreement.
20
II. Materiality of Breach
Dan next argues that the trial court failed to apply the proper analysis to ascertain
whether these breaches were material. In support of his argument, Dan refers to Section
241 of the Restatement (Second) of Contracts, which provides:
In determining whether a failure to render or to offer performance is
material, the following circumstances are significant:
(a) the extent to which the injured party will be deprived of the benefit
which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for
the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform
will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will
cure his failure, taking account of all the circumstances including any
reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to
offer to perform comports with standards of good faith and fair dealing.
Restatement (Second) of Contracts § 241 (1981); see also Frazier v. Mellowitz, 804
N.E.2d 796, 804 Ind. Ct. App. (2004) (applying the Restatement factors).13 Dan claims
that, under the facts of the present case, these circumstances do not support a finding of a
material breach. We disagree, and, as we consider each of the listed circumstances as an
indicator of potential materiality, we reiterate that we are bound by our standard of
review to consider only the evidence that is favorable to the trial court’s judgment, along
with any reasonable inferences that may be drawn from this evidence; nor are we
13
To the extent that Dan relies upon Frazier in support of his claims on appeal, we would note that the
issue in Frazier was whether the trial court properly granted summary judgment in a breach-of-contract
claim. We held that there were genuine issues of material fact regarding the Restatement factors and that
summary judgment was therefore inappropriate. Id. at 806. In contrast, here, Dan appeals after a bench
trial and an adverse judgment, and Frazier is inapplicable.
21
permitted to reweigh the evidence or judge the credibility of witnesses. See Best, 941
N.E.2d at 502.
A. Reasonably-Expected Benefit
With regard to the first circumstance, Dan claims that the only benefit the Estate
could have reasonably expected was monetary. That is, Dan argues that the Estate could
never have reasonably expected to keep any of Will’s shares under the Agreement. This
is true, but only so long as KDC and Dan performed their obligations under the
Agreement in good faith, an issue discussed at greater length below. Indeed, the parties
initially sought ways of waiving or modifying the buy/sell provision of the Agreement
because Lori wanted her children and her to retain Will’s shares of KDC, and Dan and
KDC wanted to avoid spending tens of millions of dollars to repurchase Will’s shares.
Still, under the terms of the Agreement, KDC and Dan were obligated to purchase Will’s
shares, and at least initially, the only benefit the Estate could reasonably expect under the
Agreement was monetary compensation for Will’s shares.
B. Adequate Compensation
The next circumstance to consider is the extent to which the Estate could be
adequately compensated for that part of the benefit of which it was deprived. Again, Dan
claims that the Estate could be adequately compensated by an award of monetary
damages, plus interest. However, as we have already discussed, time was of the essence
to the Agreement, and the delay in the sale of Will’s shares caused by Dan and KDC’s
inadequate tender necessarily delayed the closing of the Estate and opened the possibility
22
of a substantial diminution in the value of the shares. Thus, it is not entirely true that the
Estate could be adequately compensated by simple monetary damages.
C. Forfeiture
Dan spends a significant portion of his argument on the third circumstance listed
in Section 241, alleging that he will suffer a “forfeiture” if the Estate is allowed to keep
Will’s shares. Dan correctly notes that the purpose of the Agreement was to keep the
shares of KDC in the Koch family, and then seeks to extend that purpose to include his
alleged right to run his family’s business.
However, the Agreement does not bestow any right to run the family business on
Dan alone. Instead, it allows any surviving shareholder to purchase the shares of a
deceased shareholder. Natalie’s decision to sell her shares to Will prior to his death
allowed Will to become the majority shareholder of KDC and put Dan in the position of
being a minority shareholder if he was unable to purchase Will’s shares. While Dan
would like to characterize this situation as one subjecting him to forfeiture, at most, Dan
had only an opportunity or expectation that he might become majority shareholder in the
event of his brother’s death; there was no true forfeiture. See Myers v. Leedy, 915
N.E.2d 133, 137 n.3 (Ind. 2009) (“[F]orfeiture is defined as ‘[t]he divestiture of property
without compensation[.]’”) (quoting Black’s Law Dictionary 677 (8th ed. 2004)). Dan
will remain a minority shareholder owning tens of millions of dollars of stock in KDC.
Thus, there was no forfeiture, and this circumstance does not weigh in favor of Dan.
23
D. Likelihood of Cure
The next circumstance listed in Section 241 is the likelihood that Dan and KDC,
as the parties failing to perform or to offer to perform, would cure their failure, taking
into account of all the circumstances including any reasonable assurances.
Here, the evidence clearly shows that KDC and Dan had no intention of curing
their failure. Neither KDC nor Dan ever made a subsequent tender that corrected any of
the clear deficiencies of their initial tender. Even after KDC acknowledged the
impropriety of the setoff for Dan’s note, it never adjusted its tender to account for this
discrepancy. Dan never adjusted his personal tender to comply with the previously-
agreed to purchase price of $653.07307. Neither Dan nor KDC made an offer of
judgment under Indiana Trial Rule 68. Although Dan claims he had insufficient time to
make any cure, the filing of the declaratory action did not prevent him from offering to
perform or otherwise attempting to cure. Instead of making any effort to perform or cure,
Dan and KDC stubbornly stood by their initial, low-ball offers. Thus, there was
sufficient evidence for the trial court to find that Dan and KDC would not cure their
failure.14
14
Dan notes that his counsel sent a letter to counsel for the Estate stating, “I have been authorized to
offer . . . the total sum of $29,336,690.67” for the Estate’s shares. Appellant’s App. p. 167. This amounts
to $591.33 per share, which is more than the “backup” formula price. We first note that this letter was an
offer to settle and should have been excluded from evidence pursuant to Indiana Evidence Rule 408.
Regardless, when this letter was introduced into evidence, Dan’s counsel stated that it was “not offered to
prove liability for the amounts owed, in fact we do not believe that we are obligated[.]” Tr. p. 370.
Furthermore, this amount is still substantially less than the price of $653.07307 per share which was
agreed to by the shareholders in the Minutes.
24
E. Good Faith
The last circumstance listed in Section 241 is the extent to which Dan and KDC’s
behavior comported with standards of good faith and fair dealing. Of course, what
constitutes good faith and fair dealing is a question of fact to be determined by the trial
court sitting as the trier of fact. See Hamlin v. Steward, 622 N.E.2d 535, 540 (Ind. Ct.
App. 1993). And here, there was ample evidence from which a reasonable trier of fact
could have concluded that Dan and KDC did not act in good faith.
First, Dan planned to increase his salary in an effort to lessen dividends that would
have benefitted Lori and her children as beneficiaries of the Estate, and he took loans and
bonuses from KDC in an effort to pay the money loaned to him by Natalie. Dan did not
make any financial preparations to purchase the Estate’s shares until November 30, 2010,
hardly a week before the 180-day deadline for doing so, and he only made the Estate
aware of his intention to purchase the shares under the Agreement rather than to waive its
terms when he accidentally copied Lori on an email. Dan asked KDC’s financial officer
if KDC could afford to commit $5,000,000 to re-purchase some of Will’s shares, rather
than to determine what the Agreement required, namely, the amount of capital available
to KDC that could permit it to lawfully purchase Will’s shares. The Estate presented
credible evidence that, according to the terms of the Agreement, KDC could have
afforded to pay between $10,000,000 and $19,000,000 to purchase Will’s shares.
KDC improperly set off the amount of Will’s promissory note despite the fact that
the note had not matured, was current, contained no acceleration clause, and was not in
default. Even after KDC acknowledged this error, it made no effort to adjust its tender.
25
And, as discussed above, Dan never made any offer to perform or cure his tender.15
These facts and circumstances would permit a reasonable trier of fact to conclude that
Dan and KDC did not act in good faith.
Viewing all of the facts and circumstances in this case through the lens of Section
241 of the Restatement (Second) of Contracts leads us to conclude that the trial court did
not clearly err in determining that Dan and KCD materially breached the terms of the
Agreement.
III. Relieving the Estate of its Duty to Perform
Dan finally argues that the trial court erred when it concluded that the Estate was
permanently excused from any obligation to perform under the Agreement, i.e. that the
Estate was entitled to keep Will’s shares and not required to sell them to KDC and Dan.
However, as discussed above, Dan’s and KDC’s actions were material breaches that
could operate to excuse the Estate of its obligation, as a matter of law. Indeed, it is well-
established Indiana law that “where a party is in material breach of a contract, he may not
maintain an action against the other party or seek to enforce the contract against the other
party.” Wilson v. Lincoln Fed. Sav. Bank, 790 N.E.2d 1042, 1048 (Ind. Ct. App. 2003).
Thus, Dan and KDC, as the parties who first materially breached the Agreement, cannot
now seek to enforce the Agreement against the Estate.
15
With regard to the letter sent by Dan’s counsel referred to in footnote 14, supra, even that amount was
substantially less than the price agreed to in the minutes, and the trial court was under no obligation to
consider this as a show of good faith. And again, we consider only the evidence favorable to the trial
court’s judgment. Best, 941 N.E.2d at 502.
26
Still, Dan urges us to again look to the Restatement (Second) of Contracts to
determine whether the Estate should be excused from performing under the Agreement.
Specifically, Dan claims that Section 242 of this Restatement supports his position that,
despite both his own and KDC’s material breaches and bad faith, the Estate should still
have been required to sell its shares under the Agreement. This section provides:
In determining the time after which a party’s uncured material failure to
render or to offer performance discharges the other party’s remaining duties
to render performance under the rules stated in §§ 237 and 238, the
following circumstances are significant:
(a) those stated in § 241;
(b) the extent to which it reasonably appears to the injured party that delay
may prevent or hinder him in making reasonable substitute
arrangements;
(c) the extent to which the agreement provides for performance without
delay, but a material failure to perform or to offer to perform on a stated
day does not of itself discharge the other party’s remaining duties unless
the circumstances, including the language of the agreement, indicate
that performance or an offer to perform by that day is important.
Restatement (Second) of Contracts § 242 (1981).
Subsection (a) of this section refers us back to Section 241 of the Restatement
(Second) of Contracts, and we need not repeat that discussion. The second circumstance
listed in Section 242—whether the injured party can make reasonable substitute
arrangements—appears to be inapplicable here. KDC is a closely-held company whose
shares are not readily exchanged on any market, and Lori expressed her desire to keep the
shares.
The third factor is the extent to which the agreement provides for performance
without delay. As noted above, the Agreement calls for performance within 180 days of
the death of a shareholder. Section 242(c) notes that failure to perform on a stated day
27
does not, of itself, discharge the other party’s remaining duties unless the circumstances,
including the language of the agreement, indicate that performance by that day is
important.
Thus, the fact that the Agreement calls for performance within 180 days of a
decedent shareholder’s death does not ipso facto mean that failure to perform by that date
discharges the Estate’s duties. But other circumstances, including the language of the
Agreement, show that performance by that date was indeed important. Not only did the
Agreement call for performance within 180 days; it explicitly provided (and Dan
admitted) that time was of the essence. We therefore conclude that, even under an
analysis of this section of the Restatement, timely performance was important and that
KDC and Dan’s failure to timely perform was a material breach that excused any
obligation on the part of the Estate to sell Will’s shares.
Dan complains that relieving the Estate of any obligation to sell under the
Agreement effectively turns KDC and his duty to sell at the agreed-to price into a
condition precedent. Dan notes that conditions precedent are generally disfavored and
should be stated explicitly within the contract. See Scott-Reitz Ltd. v. Rein Warsaw
Assocs., 658 N.E.2d 98, 103 (Ind. Ct. App. 1995). Dan claims that the Agreement does
not say that the Estate must sell its shares if KDC and the remaining shareholders tender a
specific price.
In response, the Estate notes that the Agreement does not expressly put any
obligation on the part of the Estate. Instead, the obligation under the Agreement is on
KDC and the surviving shareholder(s) to purchase the decedent shareholder’s shares
28
under the terms set forth in the Agreement. See Appellant’s App. p. 131 (“the
Corporation shall purchase and redeem all the shares of Common Stock owned by the
decedent Shareholder[] on the date of such decedent Shareholder’s death[.]”);
Appellant’s App. p. 132 (“the remaining Shareholders . . . shall purchase all of the
decedent Shareholder’s shares of Common Stock that the Corporation is legally unable to
purchase[.]”). There is simply no corresponding obligation on the part of the decedent
shareholder’s estate to sell the shares expressed by the Agreement. Thus, to the extent
the Agreement puts any obligation on the Estate, it is only as a negative implication; i.e.,
KDC and the surviving shareholder(s) would be unable to fulfill their contractual
obligation if the estate of the surviving shareholder was unwilling to sell the shares.
In support of his argument, Dan cites Krukemeier v. Krukemeier Mach. & Tool
Co., Inc., 551 N.E.2d 885 (Ind. Ct. App. 1990). In that case, a shareholders’ agreement
gave the remaining shareholders a right of first refusal when any other shareholder
desired to sell stock. The agreement also required the remaining shareholders to purchase
their pro rata shares of a deceased shareholder’s stock. The agreement also stated that
the shareholders would maintain life insurance policies during the duration of the
agreement, to facilitate the immediate availability of cash for a post-mortem transfer.
However, the shareholders, all three brothers, allowed their insurance policies to lapse.
When one of the brothers attempted to sell his shares, a dispute arose over the proper
share price. The trial court ordered specific performance of the agreement, requiring the
complaining brother to sell his shares at “book value,” as called for in the agreement. On
appeal, this brother argued that the shareholders’ agreement created “a condition
29
precedent that the life insurance be maintained for the Agreement to be binding.” Id. at
889. We rejected this claim, noting that there was no “express language making the duty
to abide by the Agreement conditional.” Id. Thus, despite the parties’ failure to maintain
life insurance policies as demanded by the agreement, the obligation to sell shares at
book value as set forth in the agreement was still binding on the selling party. Id.
We find Krukemeier to be readily distinguishable on its facts and on the face of
the agreement it interpreted. There, the maintenance of life insurance coverage was
ancillary to the main issue in dispute: the proper share price. Here, the “condition” Dan
complains of is the main issue: the proper share price. Dan’s position, taken to the
extreme, would result in an absurdity. Under Dan’s position, he could have offered to
purchase Will’s shares for $1 per share and the Estate would still be obliged to sell, with
its only remedy being a suit for damages plus interest.
Simply said, Dan’s position would make it possible for a party who has materially
breached the agreement to avoid the consequences of its behavior by requiring the non-
breaching party to still perform under the contract. This is in direct contradiction to well-
established Indiana law that a party in material breach of a contract cannot seek to
enforce the contract against the non-breaching party. See Wilson, 790 N.E.2d at 1048.
This is precisely what happened here, and Dan, as the breaching party, cannot now
attempt to force the Estate, the non-breaching party, to sell its shares.16
16
Dan also claims that, because of a “simple” dispute about the share price he has not only been deprived
of his alleged right to control his family business, but that the entire purpose of the Agreement has been
frustrated. Dan argues that the purpose of the Agreement was to keep control of KDC within the Koch
family. Although the Agreement does not directly state this, the fact that all of the then-existing
shareholders and parties to the Agreement were siblings, does support this position. Still, we note that the
30
Conclusion
While we regret seeing a family divide itself over an internal business dispute, our
role is to determine whether the trial court’s findings were supported by sufficient
evidence and whether these findings support the trial court’s judgment. Here, the
evidence favorable to the trial court’s decision supports the trial court’s conclusion that
Dan and KDC materially breached the terms of the Agreement and that this material
breach excused the Estate of its obligation to perform under the Agreement. We
therefore affirm the judgment of the trial court.
Affirmed.
BAKER, J., and NAJAM, J., concur.
Agreement did not directly prohibit the sale of shares to those who were not current shareholders, and
therefore not members of the Koch family. Instead, the Agreement simply gave the existing shareholders
the right of first refusal if a shareholder attempted to sell shares to someone other than an existing
shareholder. Moreover, the trial court’s order does not undercut the purpose of the Agreement, as the
beneficiaries of the Estate included not only Lori, but Lori and Will’s children, who are also members of
the Koch family.
31