Luann Moraski v. Your M.D., S.C.

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
June 29, 2022
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Appeal No. 2021AP1149 Cir. Ct. No. 2020CV267
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II
LUANN MORASKI,
PLAINTIFF-APPELLANT,
V.
YOUR M.D., S.C. AND RICHARD LEWIS,
DEFENDANTS-RESPONDENTS.
APPEAL from a judgment of the circuit court for Ozaukee County:
SANDY A. WILLIAMS, Judge. Reversed and cause remanded with directions.
Before Gundrum, P.J., Neubauer and Grogan, JJ.
Per curiam opinions may not be cited in any court of this state as precedent
or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
No. 2021AP1149
¶1 PER CURIAM. LuAnn Moraski appeals from a judgment declaring
that she is not a shareholder of Your M.D., S.C. (the Practice) under the terms of
two agreements pertaining to her purchase of a share in the Practice and
dismissing her claims seeking an accounting and inspection of corporate records.
The circuit court concluded that Moraski could not become a shareholder under
the agreements until she had paid the full $125,000 purchase price for her share,
which she had not done. We conclude that the parties’ intent as derived from the
two agreements’ terms was for Moraski to acquire a share from the Practice on the
closing date, March 7, 2016, in exchange for an initial payment of $50,000 and an
obligation to pay the $75,000 balance of the purchase price over time. Therefore,
we reverse the judgment and remand this case to the circuit court to enter
declaratory judgment in Moraski’s favor and for further proceedings on Moraski’s
claims and on Richard Lewis’s counterclaim seeking to recover the outstanding
balance of the purchase price.
BACKGROUND
¶2 The following facts are taken from the affidavits and exhibits filed
by the parties in the circuit court. Moraski and Lewis are physicians licensed to
practice medicine in Wisconsin. Lewis incorporated the Practice in April 2015.
As of 2016, the Practice had issued two shares: a “treasury share” owned by the
Practice and a share owned by Lewis. In February 2016, Lewis and Moraski
discussed the possibility of Moraski acquiring a fifty percent interest in the
Practice for $125,000. They eventually agreed that Moraski would join the
Practice as an owner. On March 7, 2016, Moraski signed a one-paragraph
document prepared by Lewis entitled “Stock Redemption Agreement,” which
states as follows:
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The undersigned subscribes for One share of the no par
value Common Stock of Your M.D., S.C., a Wisconsin
service corporation (the “Corporation”), having an
authorized capital of Six shares, and agrees to pay
$125,000 for each share subscribed for by her in cash,
services or property as required by the Board of Directors
of the Corporation. Said shares shall be issued to the
undersigned upon such payment according to the
instructions of, the undersigned to the Secretary of the
Corporation. The share will be issued at closing on
March 7, 2016.
¶3 According to Lewis, Moraski asked for more time to pay the full
purchase price for her share, which prompted Lewis to prepare a second
document, also entitled “Stock Redemption Agreement,” which he and Moraski
signed. Lewis executed this agreement on behalf of the Practice in his capacity as
its President. We will refer to this second document as the “Second Agreement”
to avoid confusion.1 The Second Agreement states as follows:
THIS AGREEMENT, dated as of March 7, 2016, is
between Richard Lewis (the “seller”), currently sole owner
of YOUR M.D., S.C., a Wisconsin service corporation (the
“Company”) and LuAnn Moraski (the “buyer”[)].
A. The Seller currently owns 2 shares of the Company’s
Common Stock (the “Stock”).
B. The Stock constitutes all of the outstanding stock of the
Company owned by the Seller. The Seller desires to
sell to the Buyer, and the Buyer desires to purchase
from the Seller, 1 out of 2 shares of the Stock on the
terms and conditions set forth herein.
AGREEMENTS
In consideration of the recitals and mutual agreements
contained herein, the parties agree as follows:
1
Lewis’s signature on the Second Agreement is dated March 7, 2016. Moraski’s
signature is undated.
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1. Redemption of Stock. Subject to the terms and
conditions contained in this Agreement, at the Closing
(as defined below) the Seller shall sell and the Buyer
shall purchase 1 share [of] Stock for $125,000 (the
“Purchase Price”). The initial $50,000 of the Purchase
Price shall be payable to Seller via check at Closing.
The remaining $75,000 will be loaned to the Buyer with
the following terms:
 The payback will begin on the 6th month after
closing, September 7, 2016.
 The loan will be paid back to the Seller, interest-
free for the first 2-3/4 years, beginning from the
date of closing, March 7, 2016.
 In the event that the loan is not paid in full by
December 31, 2018, the Buyer agrees to pay the
Seller a penalty no less than $25,000. Also,
whatever funds are still owed to the Seller by
the Buyer wi[ll] begin accruing interest at 4%
until the loan is paid in full.
¶4 Moraski paid $50,000 of the purchase price on the closing date,
March 7, 2016, via check. It is undisputed that $50,000 in profit sharing
distributions owed to Moraski were used to pay down the outstanding balance and
that Moraski has not paid the remaining $25,000 of the $125,000 in cash.2
PROCEDURAL HISTORY
¶5 In September 2020, Moraski commenced this action invoking her
rights as a shareholder to: (1) an inspection of the Practice’s accounting records
under WIS. STAT. § 180.1604 (2019-20)3; and (2) an “accounting of all corporate
financial affairs including but not limited to information related to her monthly
2
According to Lewis, a penalty of $25,000 was added to the outstanding balance at the
end of 2018, which Moraski owes along with interest under the Second Agreement.
3
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.
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No. 2021AP1149
profit-sharing distribution.” Lewis filed an answer denying that Moraski was a
shareholder and asserting counterclaims for: (1) breach of contract; and (2) a
declaration that Moraski is not a shareholder “or alternatively is a shareholder
without voting rights until she has fully paid for her shares.” The circuit court
ordered a limited stay of proceedings and allowed the parties to conduct discovery
on the issue of whether Moraski was a shareholder.4
¶6 Lewis subsequently filed a motion for declaratory judgment, which
the circuit court heard on April 22, 2021. At the hearing, Moraski argued that the
Stock Redemption Agreement and the Second Agreement memorialized a
transaction in which Moraski purchased a share from the Practice for $125,000 by
paying $50,000 at closing and financing the remaining $75,000 via a loan from
Lewis. She argued that the parties’ behavior after the closing date confirmed that
she had become a shareholder on the closing date. Lewis disputed Moraski’s
characterization of the Second Agreement as “a loan document when in fact when
you read it it’s another clear description of a purchase agreement” and argued that
Moraski was not a shareholder because she had not finished paying the full
purchase price for her share.
¶7 The circuit court agreed with Lewis:
And that’s how the Court sees it as well. I don’t see it
as a loan. And I think there’s some stretching going on by
the plaintiff. There isn’t a loan by Dr. Lewis to
Dr. Moraski. And I think [the Stock Redemption
Agreement] and [the Second Agreement] can be reconciled
together. And I think it’s unfortunate that plaintiff never
completed what she was supposed to [do] to become a
shareholder. And if she had, she would have had
4
Moraski’s claims against the Practice were stayed until the circuit court resolved
Moraski’s status as a shareholder.
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No. 2021AP1149
absolutely every right to have access to the records. That’s
a benefit of being a shareholder, you get to see the records.
She’s not a shareholder. She never completed what she
needed to do to be a shareholder and defense is entitled to
declaratory judgment in that respect based on the record
that has been established here and in terms of the briefs that
the Court has considered. And based on all of that, the
Court will grant defense declaratory judgment.
The court subsequently entered a judgment declaring that Moraski “is not a
shareholder of the Practice[,]” dismissing her complaint with prejudice, and
dismissing Lewis’s counterclaim for breach of contract as moot. Moraski appeals.
DISCUSSION
¶8 Because the declaratory judgment in this case resulted in the
dismissal of Moraski’s claims, it “had the effect of a summary judgment.” Young
v. West Bend Mut. Ins. Co., 2008 WI App 147, ¶6, 314 Wis. 2d 246, 758 N.W.2d
196. We therefore treat the declaratory judgment as an award of summary
judgment in favor of Lewis. See id. We review the circuit court’s decision “de
novo, applying the same methodology as the circuit court.” Id. Summary
judgment is appropriate if the pleadings and evidentiary submissions of the parties
“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.” WIS. STAT. § 802.08(2).
¶9 The dispositive issue here is whether Moraski is a shareholder of the
Practice. To answer that question, we look to the terms of the Stock Redemption
Agreement and the Second Agreement. In construing those agreements, our goal
is to ascertain and give effect to the parties’ intent. State ex rel. Journal/Sentinel,
Inc. v. Pleva, 155 Wis. 2d 704, 711, 456 N.W.2d 359 (1990). “The best indication
of the parties’ intent is the language of the contract itself, for that is the language
the parties saw fit to use.” Riley v. Extendicare Health Facilities, Inc., 2013 WI
6No. 2021AP1149
App 9, ¶13, 345 Wis. 2d 804, 826 N.W.2d 398. “We construe the contract
language according to its plain or ordinary meaning.” Town Bank v. City Real
Estate Dev., LLC, 2010 WI 134, ¶33, 330 Wis. 2d 340, 793 N.W.2d 476.
¶10 “Where the terms of a contract are clear and unambiguous, we
construe the contract according to its literal terms.” Tufail v. Midwest Hosp.,
LLC, 2013 WI 62, ¶26, 348 Wis. 2d 631, 833 N.W.2d 586. However, if contract
terms are ambiguous—that is, if they are fairly susceptible to more than one
interpretation—then extrinsic evidence may be used to determine the parties’
intent. Id., ¶27. Additionally, “ambiguous contracts are interpreted against the
drafter.” Seitzinger v. Community Health Network, 2004 WI 28, ¶22, 270
Wis. 2d 1, 676 N.W.2d 426. Whether a contract is ambiguous is a question of law
that we review de novo. Spencer v. Spencer, 140 Wis. 2d 447, 450, 410 N.W.2d
629 (Ct. App. 1987).
¶11 Contracts are read as a whole “to avoid the potential for ambiguity
that can result if a small part of the agreement is read out of context.” State ex rel.
Massman v. City of Prescott, 2020 WI App 3, ¶15, 390 Wis. 2d 378, 938 N.W.2d
602 (citation omitted). “If we determine that the contract contains contradictory
statements, we must attempt to harmonize them, but if it is impossible to give
meaning to both parts, we must determine which part is to be given effect.” Id.¶12 Before addressing the parties’ arguments, we pause to clarify our
treatment of the Second Agreement. At the hearing on Lewis’s declaratory
judgment motion, Moraski’s counsel declined to take an “official position” on
whether the Second Agreement is authentic and enforceable because Moraski
“[didn’t] recall signing that document.” Counsel stated that Moraski “ha[d]
questions about its authenticity” that required further discovery. However,
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Moraski argued both in her brief opposing Lewis’s motion and at the motion
hearing that the terms of the Second Agreement supported her position.
Moreover, in her brief to this court, Moraski acknowledges that “the terms set
forth [in the Second Agreement] are generally consistent with [her] understanding
of the financed transaction.” She also repeatedly invokes the Second Agreement
in support of her contention that she became a shareholder on March 7, 2016.
Given Lewis’s reliance on the Second Agreement, and Moraski’s statements about
the Second Agreement and reliance upon it, we will assume that the Second
Agreement sets forth the terms of an enforceable contract.
¶13 We also note that, as Lewis acknowledges, the Stock Redemption
Agreement and the Second Agreement are not “models of draftsmanship,” a
circumstance that has complicated our task of interpreting them. To begin, the
agreements share the same title—Stock Redemption Agreement—but neither
memorializes a “redemption” of shares. In the securities context, “redemption”
refers to “[t]he reacquisition of a security by the issuer.” Redemption, BLACK’S
LAW DICTIONARY (11th ed. 2019). In addition, the agreements are not a model of
clarity with respect to the identity of the seller. The Stock Redemption Agreement
uses the terms “subscribes” and “issued” and gives the Practice discretion to
decide how Moraski would pay for the share, all of which suggest that Moraski
purchased her share from the Practice. While the Second Agreement identifies
Lewis as the “seller” and states that he “owns 2 shares of the [Practice]’s Common
Stock” and wishes to sell one of those shares to Moraski, it also provides that he is
the sole owner of the Practice, a service corporation, and importantly, Lewis
affirms that he signed the Second Agreement on behalf of the Practice as its
President.
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¶14 According to Lewis, the Second Agreement and the Stock
Redemption Agreement were intended to be part of the same transaction. Moraski
echoes this understanding in her appellate brief, describing the Second Agreement
as setting forth “the terms upon which Moraski was to pay Lewis for the share
over time.”
¶15 Both parties agree that Moraski was to purchase only one share of
the Practice from the Practice, not from Lewis personally. In addition, the Second
Agreement and the Stock Redemption Agreement were signed on the same day
and relate to the same subject. Accordingly, we will construe the agreements
together and attempt to harmonize their terms as best we are able “since [the
agreements] are, in the eyes of the law, one contract[.]” James Talcott, Inc. v.
P&J Contracting Co., 27 Wis. 2d 68, 76, 133 N.W.2d 473 (1965) (citation
omitted).
¶16 The parties focus significant attention on the second and third
sentences of the Stock Redemption Agreement, which address when the share
Moraski agreed to purchase was to be issued. Moraski argues that the circuit court
erred in determining that she was not a shareholder because the third sentence of
the agreement specifies that the share she purchased “will be issued at closing on
March 7, 2016.” Lewis argues that the second sentence of the agreement supports
the circuit court’s determination, contending that the provision that Moraski’s
share would be issued to her “upon such payment” refers to the first sentence
setting forth the $125,000 purchase price.
¶17 Considered in isolation, and focusing only on the amount of the
purchase price, these two sentences could be read to create ambiguity as to
whether Moraski is a shareholder. However, when considered in the context of
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No. 2021AP1149
the entire Stock Redemption Agreement and the related Second Agreement, we
conclude that the parties’ intent as expressed in the contractual language was for
Moraski to become a shareholder on March 7, 2016.
¶18 We begin with the first sentence of the Stock Redemption
Agreement, which states in part that Moraski “agrees to pay $125,000 for each
share subscribed for by her in cash, services or property as required by the Board
of Directors of the [Practice].” The words “as required by the Board of Directors
of the [Practice]” empower the board—which consisted solely of Lewis—to
specify how Moraski would pay for her share.
¶19 We construe the Second Agreement, which Lewis prepared after
Moraski asked for “more time to pay for the share she wished to purchase[,]” to
set forth the payment terms. Of import here, the Second Agreement establishes
two key points. First, Lewis chose cash as the method of payment. The Second
Agreement makes no mention of payment in services or property; instead, it sets
forth terms under which Moraski would pay the full purchase price in cash.
Second, the Second Agreement specifies that only partial payment of the purchase
price was due at closing. Specifically, the Second Agreement provides that “at the
Closing”—which is identified later in the agreement as March 7, 2016—“Seller
shall sell and [Moraski] shall purchase 1 share [of] Stock for $125,000.” The
Second Agreement then states that Moraski is to pay $50,000 of the purchase price
“via check at Closing.” The agreement states further that the “remaining $75,000”
of the purchase price “will be loaned to [Moraski]” and sets forth, in three bulleted
paragraphs, terms for repayment of that loan.
¶20 When read together, the Stock Redemption Agreement and the
Second Agreement support Moraski’s position that she became a shareholder on
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March 7, 2016. First, the Stock Redemption Agreement specifically states that the
share Moraski agreed to purchase “will be issued at closing on March 7, 2016.”
This language is unconditional and, insofar as it identifies a specific date on which
the share is to be issued, prevails over the more indefinite language upon which
Lewis relies. See Goldmann Trust v. Goldmann, 26 Wis. 2d 141, 148, 131
N.W.2d 902 (1965) (“Another important rule employed in construing agreements
is that where there is an apparent conflict between a general and a specific
provision, the latter controls.”). Second, the Second Agreement states that the
buying and selling of the share was to occur on March 7, notwithstanding the fact
that Moraski was only required to pay a portion of the purchase price on that date.
Third, the Second Agreement refers to March 7 as the “closing” date. In the
context of a business transaction, “closing” commonly refers to the final meeting
of buyer and seller at which “the conveyancing documents are concluded and the
money and property transferred.” See Closing, BLACK’S LAW DICTIONARY (11th
ed. 2019; McNamee v. APS Ins. Agency, Inc., 112 Wis. 2d 329, 333, 332 N.W.2d
828 (Ct. App. 1983) (“This court may resort to the use of a recognized dictionary
to ascertain the meaning of contract terms.”). These aspects of the agreements
lead us to conclude that the parties intended the Practice to issue the share and
transfer it to Moraski on the closing date.
¶21 As noted above, Lewis relies on language in the Stock Redemption
Agreement which specifies that the share is to be issued “upon such payment,”
which he contends refers to full $125,000 purchase price set forth in the first
sentence of that agreement. He argues further that the way to harmonize the two
agreements is as follows: failure to pay the full purchase price at closing is a
breach of the Stock Redemption Agreement “forfeiting any right to purchase the
share[,]” but the Second Agreement “avoids a breach by giving Dr. Moraski
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additional time for payment” and, so long as Moraski makes the $50,000 payment
at closing, commits “the Seller to the ultimate sale.” We do not agree with
Lewis’s interpretation of the agreements.
¶22 Lewis’s interpretation fails to take into account other language in
each of the agreements. In the Stock Redemption Agreement, Moraski agreed to
pay $125,000 for her share “in cash, services or property as required by the Board
of Directors of the [Practice.]” The Second Agreement reflects what the board
“required” in terms of payment—$50,000 at closing plus an obligation to pay the
remaining $75,000 over time. Lewis’s reading of the phrase “upon such payment”
as referring simply to full payment of the $125,000 purchase price at closing
ignores the payment obligation set forth in the Second Agreement. The phrase
“upon such payment” does not simply refer to the total purchase price, but rather
the manner in which the board directed it to be paid—a portion at closing and an
obligation to pay the rest later. Lewis’s reading improperly requires adding terms
to the agreement, specifically inserting the word “full” before the word
“payment.”
¶23 In short, Lewis’s interpretation cannot be reconciled with other
language in the agreements. As we have discussed above, both the Stock
Redemption Agreement and the Second Agreement contain language reflecting
the parties’ understanding that the transfer of the share to Moraski would occur on
the closing date. Lewis’s conception of an “ultimate sale” occurring at some point
in the future is at odds with this language. It is apparent that the parties
understood that Moraski would not pay the full purchase price at closing.
Construing the Stock Redemption Agreement to impose a condition—full
payment at closing—that neither of the parties expected to occur would
undermine, rather than give effect to, the parties’ intent. Indeed, it defies common
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sense to conclude that the parties drafted an agreement that was breached on the
date it was signed.
¶24 Additionally, even if Lewis’s interpretation of the Stock Redemption
Agreement was a reasonable alternative to Moraski’s, we would be obliged to
construe the document against Lewis because he drafted it. See Walters v.
National Props., LLC, 2005 WI 87, ¶¶13-14, 282 Wis. 2d 176, 699 N.W.2d 71(“[T]his court has traditionally adhered to … a universally accepted legal maxim
that any ambiguities in a document are to be construed unfavorably to the
drafter.”). Lewis drafted both the Stock Redemption Agreement and the Second
Agreement. He could have omitted the sentence specifying that the share would
be issued on March 7, 2016 and included language specifying that the share would
be transferred to Moraski only upon payment of the full purchase price. We
cannot relieve him of the consequences of his failure to do so by construing one
phrase he did choose to include in a way that brings it into conflict with other
language in the agreements.5
¶25 Finally, Lewis cites a statute in the Wisconsin business corporation
law that allows a corporation to place shares it has issued in escrow when full
payment of the purchase price is not immediately made:
The corporation may place in escrow shares issued for a
contract for future services or benefits or a promissory note,
or make other arrangements to restrict the transfer of the
shares, and may credit distributions in respect of the shares
against their purchase price, until the services are
performed, the benefits are received or the note is paid. If
5
Because any ambiguity in the sentences of the Stock Redemption Agreement that
address issuance of the share can be resolved by construing them in the context of that agreement
and the Second Agreement, we need not consider the extrinsic evidence cited by the parties in
support of their respective interpretations.
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the services are not performed, the benefits are not received
or the note is not paid, the corporation may cancel, in
whole or in part, the shares escrowed or restricted and the
distributions credited.
WIS. STAT. § 180.0621(5). Lewis contends that this statute is “consistent” with his
reading of the parties’ contract. That may be true, but it does not carry the day for
Lewis. The Stock Redemption Agreement and the Second Agreement do not refer
to this statute or contain any language indicating that the Practice would hold the
share issued to Moraski in escrow until the full purchase price was paid. To the
contrary, the agreements provide that the transfer of the share to Moraski was to
occur at closing. If the parties had intended that the share be withheld until full
payment was received, or that the share was restricted and subject to cancellation,
it was incumbent upon Lewis as the drafter to make sure the terms of the
agreements reflected that arrangement.
CONCLUSION
¶26 For the reasons explained above, we conclude that Moraski became
a shareholder in the Practice on March 7, 2016. Accordingly, we reverse the
circuit court’s judgment and remand this case with directions to enter declaratory
judgment in favor of Moraski and for further proceedings with respect to
Moraski’s claims for an accounting and inspection of corporate records and
Lewis’s counterclaim for breach of contract.
By the Court.—Judgment reversed and cause remanded with
directions.
This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.
14