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IN THE COURT OF APPEALS OF IOWA No. 9-931 / 09-0480 Filed February 10, 2010

JOHN R. BAUR, Plaintiff-Appellant/Cross-Appellee, vs. BAUR FARMS, INC. and ROBERT F. BAUR, Defendants-Appellees/Cross-Appellants. ________________________________________________________________

Appeal from the Iowa District Court for Madison County, Peter A. Keller, Judge.

John Baur appeals from summary judgment entered in favor of defendants based on statute of limitations grounds. Robert Baur and Baur Farms, Inc. crossappeal. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Douglas A. Fulton and Zachary C. Eubank of Brick Gentry, P.C., West Des Moines, for appellant. Holly M. Logan of Belin McCormick, P.C., Des Moines, for appellee Baur Farms. David L. Charles of Crowley Fleck, P.L.L.P., Des Moines, for appellee Baur.

Heard by Sackett, C.J., and Doyle and Danilson, JJ.

2 DANILSON, J. John Baur appeals from summary judgment entered in favor of defendants based on statute of limitations grounds. Robert Baur and Baur Farms, Inc. crossappeal from the denial of their motion for summary judgment on substantive grounds, as well as the denial of their motion for sanctions. We reverse the entry of summary judgment, and affirm the denial of sanctions. I. Background Facts & Proceedings. We recite the following undisputed facts as set forth by the district court: Defendant Baur Farms, Inc., ("BFI") is a family farm corporation that was formed on December 30th, 19[66]. It was formed by Merritt Baur and Edward Baur, two brothers who owned and jointly farmed Madison County property, which had been owned by the family since the 1850s. The brothers were the third generation to farm the property. BFI was formed with the intent the property would remain intact as a farming operation in the future instead of being sold and divided upon the deaths of Merritt and Edward. When BFI was formed, Merritt and Edward decided the majority interest should go to Edward, as his son, Defendant Robert F. Baur ("Bob Baur"), was the only heir interested in carrying on the farming operation. In line with such wishes, 1262 shares of stock, or 51.51%, went to Edward and 1188 shares, or 48.49%, went to Merritt. According to BFIs bylaws, the sale of the shares was restricted--BFI was allowed to purchase the shares for $100 a piece if any disposition was attempted. BFI has never paid any dividends on the shares. Merritt Baur has two sons: Plaintiff John R. Baur ("Plaintiff") and Dennis Baur. By the time BFI was incorporated, the Plaintiff had made it clear he was not interested in farming. He attended law school and was employed in various capacities until his retirement on September 30, 2004. Dennis Baur was unable to act as an operator of the farm due to a brain tumor and medical procedure he went through during his youth. Ultimately, Merritt passed his shares of BFI through gift and inheritance to the Plaintiff and Dennis--the Plaintiff receiving 644 shares, or 26.29%, and Dennis receiving 544 shares, or 22.20%, that are owned through two trusts of which Dennis is the beneficiary. The Plaintiff did not contribute any money or anything else of value, including sweat equity, for his shares. He was made one of

3 the original members of BFIs Board of Directors and has served on the Board through the present period. Edward Baur died in May 1977, and his wife died in March of 1990. Upon his wifes death, the last of his majority ownership was transferred to Bob Baur. Prior to becoming the majority shareholder, Bob Baur worked on the farm from childhood on, became employed by BFI when it was formed, and ran the farm operation from the mid-1970s on. In approximately 1998, he began delegating day-to-day work to employees until James Baur, Dennis Baurs son, returned to the farm in 2002. Bob withdrew from day to-day work in 2005. In June 2002, James Baur and his family, including three sons, returned to the farm. James began working for BFI, assuming more and more duties as time passed. When the farm manager left in 2005, James became the farm manager. James has held this position ever since and has expressed a desire to hold it into the indefinite future. At some point after the death of Merritt Baur and Edward Baurs surviving widow, the Plaintiff began attempting to have either Bob Baur or BFI buy his shares. The parties could never reach an agreed upon price, or even a "process" for arriving at a price per share. Both parties admit to attempting to negotiate a sale. On October 10, 2007, John filed a two-count petition. In the first count, John sought judicial dissolution of BFI pursuant to Iowa Code section 490.1430 (2007) based on claims of oppressive conduct. In the second count, against Robert F. Baur for a violation of a fiduciary duty upon the same claims of oppressive conduct, John sought alternatively that either the corporation be dissolved, or that he be paid his interest in the corporation plus exemplary damages. The petition specifically alleged that Bob Baur,1 president of BFI and majority shareholder, "has total control of all the Corporations assets, operations, and finances"; John2 was removed as an officer of BFI in 1997; due to Bobs actions, Johns involvement in the corporation "has been minimal"; John had "not

This court will refer to Robert as "Bob," as did the district court. As noted by the district court, John was one of the original members of the board of directors and remains so.
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4 received dividends . . . nor any return on his ownership interest . . . even though the Corporation holds assets worth in excess of Seven million dollars "; his repeated requests that BFI make a distribution of assets or profits or "be dissolved so that minority shareholders would receive a return on their investment"3 had been rejected; and Bob had utilized corporation assets to his own advantage and for his own purposes, and for the benefit of his immediate family and friends. Furthermore, John alleged BFI should be dissolved because Bob "has acted in a manner that is illegal, oppressive and fraudulent towards the minority shareholders" and his actions are "harsh, oppressive, hostile and designed to ,,freeze out a minority shareholder." He also claimed that Bob

"misapplied, misused and wasted corporate assets," thereby breaching a fiduciary duty owed to a minority shareholder by a majority shareholder. Bob moved for summary judgment arguing (1) a minority shareholder has no right to force shareholders or the corporation to buy a minority shareholders interest or to force dissolution of the corporation, and (2) a shareholder can force dissolution only on very limited grounds, none of which are applicable here. He asked that sanctions be assessed against the plaintiff under Iowa Rule of Civil Procedure 1.413(1) (pleadings are to be well grounded in fact and warranted by existing or a good faith extension of law). BFI joined in Roberts motion and separately moved for summary judgment on statute-of-limitations grounds. BFI asserted the five-year statute of limitations found at Iowa Code section 614.1(4) is applicable to Johns claims, all of which are based upon alleged conduct that
John does not, however, indicate what this "investment" might be. It is undisputed that John received his shares as gifts (as did Bob and Dennis) and has never invested any of his own money in BFI.
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5 occurred before the limitations cut off. John resisted both motions. The district court noted: The Plaintiff responded to an interrogatory asking for all facts supporting the claim Bob Baur utilized corporate assets to his own advantage or for the benefit of the family and friends in relevant part as follows: The Plaintiff has been a member of [BFI] for nearly twenty years. In the time that the Plaintiff has been a member of [BFI], despite the fact that [BFI] owns millions of dollars of assets both as land and buildings, equipment, livestock, crops, the Plaintiff has received nothing for his own use and the operation has been monopolized by [Bob] Baur to the exclusion of the Plaintiff. Plaintiffs efforts to rectify the situation and to seek information have repeatedly been blocked and the Plaintiff has been excluded from corporate activities. Def.s Statement of Undisputed Material Facts

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