Daniels v. Thomas, Dean & Hoskins, Inc.

Supreme Court of Montana · 1990 · Corporations

804 P.2d 359 (1990)

Updated August 22, 2026

CorporationsClose corporationsMinority shareholder rightsFiduciary dutiesOppressionContractsRestrictive covenantsclose corporation

Facts

Daniels was a minority shareholder in T & D Properties, a closely held corporation that leased property to TD & H, where Daniels had also been employed. When Daniels's employment relationship with TD & H deteriorated, the parties discussed termination and also discussed a possible purchase of Daniels's T & D Properties shares, but no written buy-sell agreement existed for those shares and negotiations over price never resulted in agreement. The district court found for Daniels and ordered the corporation to purchase his shares, but the record showed only negotiations, unsuccessful settlement efforts, and Thomas's statements that the corporation was willing to negotiate and had made no guarantee of reaching agreement. The TD & H shareholder agreement separately contained a restrictive covenant reducing payment for TD & H stock to 75% of fair value if a terminated shareholder competed with the corporation.

Issue

Whether the district court could require T & D Properties to purchase Daniels's shares based on an alleged contract, dissenter's rights, breach of fiduciary duty, oppression, or constructive fraud. The court also addressed whether the restrictive covenant in the TD & H buy-sell agreement was void under Montana's restraint-of-trade statute.

Rule

An enforceable contract requires identifiable parties, consent, lawful object, and consideration; consent requires both an offer and an acceptance, and a mere willingness to negotiate a reasonable settlement does not constitute an offer. In a close corporation, shareholders owe one another a fiduciary duty of the utmost good faith and loyalty, but the controlling group may act if it shows a legitimate business purpose and the minority shareholder cannot show a practicable less harmful alternative. Hard bargaining, conditional offers, or threatened future misconduct do not by themselves establish oppression or constructive fraud warranting a compelled buyout. A covenant restraining competition is enforceable if it is reasonable: limited in operation as to time or place, supported by consideration, and affording reasonable protection without imposing an unreasonable burden on the employer, employee, or public.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Missoula, Redwood Survey Group is a closely held corporation. During a meeting about a departing shareholder, president Nolan Price told minority owner Elena Cruz that the company was "willing to negotiate a reasonable price" for her shares and "would consider fair value if everyone agrees," but added that there was no guarantee any deal would be reached; Elena later sued to compel the purchase after talks failed.

Is Elena most likely entitled to enforce a contract requiring the corporation to buy her shares?

Explanation. An enforceable contract requires consent, which in turn requires both an offer and an acceptance. A statement that the corporation is willing to negotiate a reasonable settlement or would pay fair value if terms are agreed is merely evidence of negotiations, not an offer justifying the other party in believing assent will conclude the bargain. The majority opinion rejected use of equity to supply missing contract terms.