John S. Drewitz v. Motorwerks, Inc.

STATE OF MINNESOTA
IN COURT OF APPEALS
A14-1351

John S. Drewitz,
Appellant,

vs.

Motorwerks, Inc., et al.,
Respondents.

Filed June 22, 2015
Affirmed in part, reversed in part, and remanded
Hooten, Judge

Hennepin County District Court
File No. 27-CV-04-008927

Paul W. Chamberlain, Ryan R. Kuhlmann, Chamberlain Law Firm, Wayzata, Minnesota
(for appellant)

Michael H. Streater, W. Knapp Fitzsimmons, Briggs and Morgan, P.A., Minneapolis,
Minnesota (for respondents)

Considered and decided by Hooten, Presiding Judge; Schellhas, Judge; and Minge,

Judge.

SYLLABUS

1. A director’s self-distribution of corporate funds that renders the corporation

unable to satisfy a pending claim of a corporate creditor is a breach of the director’s

fiduciary duty to that creditor.

2. An action against a corporate director or shareholder seeking to recover a

judgment already obtained against the corporation is equivalent to a creditor’s bill at


Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
equity and is subject to the ten-year statute of limitations for actions upon judgments

under Minn. Stat. § 541.04 (2014).

3. The ten percent preverdict interest rate under Minn. Stat. § 549.09,

subd. 1(c)(2) (2014), applies to all judgments entered on or after August 1, 2009,

regardless of whether any underlying conduct or litigation occurred prior to that date.

OPINION

HOOTEN, Judge

This appeal arises out of protracted shareholder litigation between appellant, a

former minority shareholder of respondent-corporation, and respondents, the corporation,

its corporate director and majority shareholder, and other former shareholders. Appellant

argues that the district court erred by failing to hold respondent-corporate director

personally liable for breach of his fiduciary duty as a corporate director, and by failing to

comply with this court’s instructions on remand from a previous appeal. By notice of

related appeal, respondents challenge the district court’s award of preverdict interest in

entering judgment against respondent-corporation. As to appellant’s appeal, we affirm in

part, reverse in part, and remand. As to respondents’ related appeal, we affirm.

FACTS

In 1990, respondent Motorwerks, Inc., hired appellant John Drewitz as a car

salesman and later promoted him to general manager in 1993. In 1995, Drewitz and

Motorwerks entered into an employment agreement, which provided the terms of

Drewitz’s employment as vice-president and general manager of Motorwerks through

March 1999. Drewitz also executed a shareholder agreement with Motorwerks and

respondent R. Jack Walser, the sole shareholder in Motorwerks at that time. That
2
agreement provided that Drewitz would purchase 20% of the outstanding shares of

Motorwerks. It also granted Drewitz three annual options to purchase additional shares.

Drewitz exercised one of these options, increasing his total stake in Motorwerks to 30%.

The shareholder agreement provided that distributions would be paid to all shareholders

on a pro rata basis.

In 1996, respondents Paul and Andrew Walser, Jack Walser’s sons, each

purchased a 15% stake in Motorwerks. In December 1998, Paul Walser terminated

Drewitz’s employment with Motorwerks and offered Drewitz a severance agreement,

which Drewitz rejected. Drewitz instead sued Motorwerks and Jack and Paul Walser,

seeking a fair-value buyout of his shares due to breaches of the employment agreement,

the Walsers’ fiduciary duties to Drewitz as a shareholder, and the covenant of good faith

and fair dealing. The parties settled the claims asserting breach of contract. The district

court granted summary judgment in favor of Motorwerks and the Walsers on Drewitz’s

remaining claims. Drewitz appealed and we affirmed, holding that the shareholder

agreement provided for Motorwerks to buy back Drewitz’s shares at book value upon

termination of his employment. Drewitz v. Walser (Drewitz I), No. C3-00-1759, 2001

WL 436223, at *3–6 (Minn. App. May 1, 2001). Between 1999 and 2004, during the

litigation of Drewitz I and continuing in its aftermath, Motorwerks made a series of

tender offers to Drewitz for his shares, which Drewitz rejected because he believed that

they did not conform to the shareholder agreement.

In May 2004, Drewitz filed another lawsuit against Motorwerks and its

shareholders at the time, Jack, Paul, and Andrew Walser. Asserting that the Walsers had

acted with unfair prejudice toward him as a shareholder after our decision in Drewitz I,
3
Drewitz again sought a fair-value buyout of his outstanding shares. Drewitz further

claimed that respondents had breached their fiduciary duty to him as a shareholder.

Drewitz also asserted the breach of contract claim involved in this appeal: that

respondents breached the shareholder agreement by failing to pay him distributions in

accordance with his stock ownership while the buyout of his shares was pending.

Respondents contended that these claims were precluded by our decision in Drewitz I and

were without merit because Drewitz’s shareholder status vanished when respondents

terminated his employment.

While litigation proceeded on this second lawsuit, the Walsers and Peter

Hasselquist entered into a July 2004 “Contingent Walser Asset and Liability Split-Up

Agreement.” In the agreement, Jack Walser and Hasselquist agreed to take ownership of

Motorwerks and two other Walser dealerships, while Paul and Andrew Walser would

control all remaining Walser businesses. The agreement stated that the parties would

“split the costs associated with asserted and unasserted claims for Walser business

actions” on or before the closing date, and expressly acknowledged “the existence of

lawsuits by John Drewitz.” At the end of December 2004, Paul and Andrew Walser

transferred all their shares of Motorwerks stock to Jack Walser. Hasselquist acquired a

20% stake in Motorwerks, leaving Jack Walser as the majority shareholder with 80% of

the outstanding stock.

In September 2004, the district court dismissed Drewitz’s complaint primarily on

res judicata grounds, and he appealed. In a December 2005 decision, this court affirmed

in part and reversed in part, reinstating Drewitz’s breach of contract claim based upon

respondents’ subsequent failure to pay him shareholder distributions. Drewitz v.
4
Motorwerks, Inc. (Drewitz II), 706 N.W.2d 773, 780–82 (Minn. App. 2005), aff’d in part,

rev’d in part, 728 N.W.2d 231 (Minn. 2007). We concluded that this claim was not

precluded under res judicata principles by the resolution of Drewitz I. Id. We also held

that Drewitz, notwithstanding the termination of his employment with Motorwerks,

remained a shareholder with the right to corporate distributions. Id. at 783–84. Within

ten days of our decision in Drewitz II, Motorwerks again tendered payment for Drewitz’s

shares, which we later held to have finally terminated Drewitz’s shareholder status in

Motorwerks. Drewitz v. Motorwerks, Inc. (Drewitz IV), No. A09-1529, 2010 WL

1541436 at *5–6 (Minn. App. Apr. 20, 2010), review denied (Minn. July 20, 2010).

In February 2006, two months after this court issued Drewitz II, Motorwerks and

Jack Walser entered into an agreement to sell substantially all of Motorwerks’ assets to a

third-party buyer for nearly $33 million. The purchase agreement provided that

Motorwerks, Jack Walser, and Hasselquist would indemnify the third party against any

liability related to Drewitz’s lawsuit. The sale closed in May 2006. In June 2006, Jack

Walser executed an agreement with Hasselquist indemnifying Hasselquist from any

liability relating to Drewitz’s still-pending lawsuit.

Soon thereafter, Jack Walser and Hasselquist, the only remaining directors of

Motorwerks, decided to distribute nearly all of the income from the asset sale to

themselves as the two remaining Motorwerks shareholders. Tax records show that $21.3

million was distributed to the two, with Jack Walser receiving over $17 million. He also

received a $70,000 BMW convertible in connection with the sale. Hasselquist claimed

that he and Jack Walser decided to make the distribution after consulting with several

financial and legal professionals, and determined that, based upon the recommendations
5
of those professionals and “[their] own review and analysis,” Motorwerks could

distribute over $21 million in 2006 and still satisfy its debts in the ordinary course of

business. Jack Walser testified that, without Motorwerks’ BMW franchise rights, “there

was no point in leaving the money” in what had become a “shell corporation.” The

record does not include any corporate documentation authorizing this transfer. After the

2006 distribution, Motorwerks retained only $225,000 in cash, which dwindled to

$169,108 by the end of 2006, and the valuation of its assets dropped from nearly $20

million to $690,657. Motorwerks made further distributions in 2007, 2010, and 2012,

totaling nearly $600,000. As majority shareholder, Jack Walser received distributions in

the amount of $325,600 in 2007, $80,000 in 2010, and $59,083 in 2012, leaving the

corporation with no funds.

As Jack Walser and Hasselquist began to wind down Motorwerks’ affairs, the

supreme court granted review of Drewitz II in February 2006. In its February 2007

opinion, the supreme court affirmed our decision that Drewitz’s shareholder status did

not automatically terminate upon his loss of employment and that his breach of contract

claim was not barred by res judicata. Drewitz v. Motorwerks, Inc. (Drewitz III), 728

N.W.2d 231, 238–41 (Minn. 2007). The supreme court remanded for the district court to

decide, among other things, whether Motorwerks had made a conforming tender offer to

Drewitz and whether Motorwerks breached the shareholder agreement by subsequently

failing to pay out distributions to Drewitz while he owned shares. Id. at 241.

On remand, the district court determined that Motorwerks had made a conforming

tender offer for Drewitz’s shares in December 2005. Following a jury trial, the district

court dismissed Drewitz’s claim asserting a breach of the shareholder agreement and
6
denied his motion for judgment as a matter of law. Drewitz appealed, and this court

affirmed the district court’s determination that Motorwerks made a conforming tender

offer for the book value of Drewitz’s shares in December 2005. Drewitz IV, 2010 WL

1541436, at *5–6. But, we reversed the denial of Drewitz’s motion for judgment as a

matter of law and remanded for the district court to determine whether respondents

breached the shareholder agreement by failing to pay Drewitz his share of Motorwerks’

distributions. Id. at *3–6.

After this second remand, the district court held a bench trial and concluded, in

part, that Motorwerks did not breach the shareholder agreement by failing to make

shareholder distributions to Drewitz between March 1999 and December 2005. Drewitz

appealed, and we reversed the district court’s ruling that Motorwerks had not breached

the shareholder agreement, concluding that “[t]he shareholder agreement provided that

shareholders would receive annual distributions” and that Motorwerks breached its

promise “to make distributions to Drewitz while he was a shareholder.” Drewitz v.

Motorwerks, Inc. (Drewitz V), No. A12-0604, 2012 WL 5476148, at *7 (Minn. App.

Nov. 13, 2012), review denied (Minn. Jan. 29, 2013). We therefore remanded “for a

calculation of [Drewitz’s] associated damages” in connection with Motorwerks’ breach

of the shareholder agreement. Id.

Upon this third remand, the district court determined that Motorwerks, and not the

Walsers, was liable for breaching the shareholder agreement. It found that Motorwerks

failed to pay Drewitz $3.9 million in distributions and, after calculating preverdict

interest, entered judgment against Motorwerks for $7.9 million on July 24, 2013.

7
 Until this point in the litigation, the record indicates that Drewitz appears to have

been unaware that the proceeds of the 2006 asset sale had been distributed to Jack Walser

and Hasselquist. Drewitz had earlier moved to compel discovery of Motorwerks’

financial and corporate records, especially those relating to its 2006 asset sale, several

times after the supreme court’s 2007 remand in Drewitz III. The district court had

reserved ruling on this motion to compel, but, in September 2010, it ultimately compelled

respondents to turn over the final sales documents. But, these documents did not include

the corresponding financial or corporate records that would have evidenced the four

distributions between 2006 and 2012. In Drewitz’s arguments to the district court

regarding calculation of damages after Drewitz V, he claimed that the sale assets had

already been distributed by Motorwerks. Respondents countered by contending that

“these allegations [were] unsubstantiated” and “[w]hether Motorwerks will be able to

satisfy any judgment that is entered against it remains to be seen.” In August 2013,

Drewitz finally discovered that Motorwerks no longer had any remaining assets when his

writ of execution upon the judgment was returned unsatisfied, Motorwerks provided

Drewitz with discovery answers that included tax returns showing Motorwerks’

distributions between 2006 and 2012, and Drewitz was permitted to depose Jack Walser

regarding these distributions.

Drewitz then sought to impose liability upon Jack Walser for the unpaid

distributions. He successfully amended his complaint to add fraudulent transfer, veil

piercing, and breach of contract claims. Both parties moved for summary judgment on

the new claims in Drewitz’s amended complaint. Before the district court ruled on those

motions, Drewitz moved again to amend the pleadings, seeking to add a claim alleging
8
that Jack Walser and Motorwerks violated the Minnesota Business Corporations Act

(MBCA) by causing Motorwerks to issue unlawful distributions. The district court

granted summary judgment in favor of respondents on all of Drewitz’s claims and denied

Drewitz’s motion to amend the pleadings. This appeal by Drewitz and a related appeal

by respondents followed.

ISSUES

I. Did the district court err by granting summary judgment in favor of

respondents on Drewitz’s claim for breach of fiduciary?

II. Did the district court err in its calculation of preverdict interest in its

judgment against Motorwerks?

ANALYSIS

I.

Drewitz argues that the district court erred as a matter of law by granting summary

judgment for respondents on his breach of fiduciary duty claim against Jack Walser.1

“On appeal from summary judgment, we must review the record to determine whether

there is any genuine issue of material fact and whether the district court erred in its

application of the law.” Dahlin v. Kroening, 796 N.W.2d 503, 504 (Minn. 2011); see

also Minn. R. Civ. P. 56.03. In reviewing a grant of summary judgment, we view the

evidence in the light most favorable to the nonmoving party. RAM Mut. Ins. Co. v.

Rohde, 820 N.W.2d 1, 6 (Minn. 2012). When the parties file cross-motions for summary

judgment and do not appear to dispute the relevant material facts, we review the district

1
All of the postjudgment claims raised by Drewitz in his amended complaint were
asserted against only Jack Walser. Drewitz is not seeking recovery on a breach of
fiduciary duty theory against Peter Hasselquist or Paul and Andrew Walser.
9
court’s application of the law de novo. Amica Mut. Ins. Co. v. Wartman, 841 N.W.2d

637, 640 (Minn. App. 2014), review denied (Minn. Mar. 18, 2014).2

A. Breach of Fiduciary Duty

In his amended complaint, Drewitz asserted that he was entitled to relief under

Snyder Elec. Co. v. Fleming, 305 N.W.2d 863 (Minn. 1981). There, the supreme court

held that when a corporation is insolvent or on the verge of insolvency, its directors and

officers who are repaid for their antecedent corporate loans have breached their fiduciary

duties to the corporation’s outside creditors by giving themselves a “preference” over

these creditors. Id. at 869; see also Farmers Co-op Ass’n of Bertha, Minn. v. Kotz, 222

Minn. 153, 158, 23 N.W.2d 576, 579 (1946) (“When a corporation is insolvent, its

directors cannot, by taking advantage of their fiduciary relation, secure to themselves a

preference over other creditors.”), abrogated on other grounds by Rubey v. Vannett, 714

N.W.2d 417 (Minn. 2006). A “preference” occurs when “a transfer or encumbrance of

corporate assets [is] made while the corporation is insolvent or verges on insolvency, the

effect of which is to enable the director or officer to recover a greater percentage of his

debt than general creditors of the corporation with otherwise similarly secured interests.”

Snyder, 305 N.W.2d at 869. When a creditor alleges a director’s self-payment was a

2
The supreme court has not deviated from a de novo standard of review of legal issues
“simply because the claims at issue are for equitable relief.” SCI Minn. Funeral Servs.,
Inc. v. Washburn-McReavy Funeral Corp., 795 N.W.2d 855, 861 (Minn. 2011). But see
Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 838 (Minn. 2012)
(declining to state whether a more deferential standard of review “might” be applicable
when district court balances equities but does not award equitable relief). Because the
district court did not weigh the equities in granting summary judgment for Motorwerks
on Drewitz’s breach of fiduciary duty claim, we review its legal determination de novo.
See SCI, 795 N.W.2d at 861.
10
preference, corporate executives bear the burden of showing that the payment “was made

in good faith and was not a preference.” Id.

The essence of Drewitz’s claim is that Jack Walser, as a director of Motorwerks,

breached his fiduciary duty to Drewitz by draining substantially all the corporate assets

by paying himself several shareholder distributions while the parties litigated Drewitz’s

claim for his share of prior shareholder distributions.3 The district court rejected this

argument and granted respondents’ motion for summary judgment on this claim based on

its conclusion that Snyder did not apply on these facts.

The parties first dispute whether Jack Walser owed Drewitz a fiduciary duty at the

time of the Motorwerks distributions. Drewitz argues that Snyder applies to creditors

whose pending claims are reduced to judgment after a director engages in self-dealing

transactions. The district court held that there was no fiduciary relationship because, at

the time of the distributions, Drewitz was a “future creditor” who had not yet reduced his

claim to judgment. Respondents urge that we adopt the district court’s conclusion and

hold that Drewitz was not a “general creditor[] of the corporation” at the time of the

distributions and was therefore not in a fiduciary relationship with Jack Walser. Id.

We are not persuaded by respondents’ argument. In Snyder, the supreme court did

not indicate that a creditor has to reduce its claim to a judgment prior to the distribution

in order to recover. The creditors in that case obtained judgments against the defendant-

3
We note that this type of claim is expressly authorized by the MBCA. The statute
provides that a creditor may bring an action when its claim “has been reduced to
judgment and an execution thereon has been returned unsatisfied,” and empowers the
district court to “grant any equitable relief it deems just and reasonable in the
circumstances.” Minn. Stat. § 302A.751, subd. 1(c) (2014).

11
corporation years after the corporation had become insolvent and at least one alleged

preferential transfer had taken place. Id. at 866, 869. The situation here is materially

indistinguishable. Furthermore, Jack Walser knew of Drewitz’s claim and found it

sufficiently credible to shield others from it—he agreed to split any liability associated

with Drewitz’s lawsuit with his two sons and indemnified both the purchaser of

Motorwerks’ assets and Peter Hasselquist from liability. Motorwerks undertook a

contractual obligation to pay Drewitz shareholder distributions, and Drewitz filed suit in

2004 seeking to vindicate his right to those payments. Drewitz’s belated receipt of a

judgment was mainly due to the incredibly protracted litigation in this case, much of

which was due to adverse district court rulings that he three times successfully appealed.

Drewitz was a “creditor” within the meaning of Snyder.

Drewitz further argues that Motorwerks was caused to be “insolvent, or on the

verge of insolvency” by the distributions, so as to create the necessary fiduciary duty

between himself and Jack Walser. See id. at 869. We agree. Generally, a corporation

becomes insolvent when it is no longer able to pay its debts in the ordinary course of

business. Minn. Stat. § 302A.551, subd. 1(a) (2014) (noting the definition of insolvency

applicable to distribution decisions under the MBCA); see also Daniels v. Palmer, 35

Minn. 347, 349, 29 N.W. 162, 164 (1886) (defining “insolvency” as the “inability to pay

one’s debts in the ordinary course of business” that “must be construed with reference to

the business conducted by the person or entity”); Black’s Law Dictionary 867 (9th ed.

2009) (defining “insolvency” as “[t]he condition of being unable to pay debts as they fall

due or in the usual course of business” or “the inability to pay debts as they mature”).

12
 It is undisputed that, in 2006, Jack Walser caused Motorwerks to sell nearly all of

its assets, cease operating as a car dealership, and then distribute $21.3 million to himself

and Hasselquist. While it no longer sold BMW vehicles, Motorwerks retained its

corporate registration and maintained funds that were used to pay other creditors. Yet, it

continued to make distributions to its remaining shareholders, Jack Walser and

Hasselquist, resulting in the complete depletion of these funds by 2012.

But, while Jack Walser made provision for other creditors and himself and

Hasselquist as shareholders, he made none for Drewitz and his pending claim.

Respondents assert that Drewitz’s claim to a 30% share of Motorwerks’ distributions

between 1999 and 2005 was “readily ascertainable” at nearly $4 million by simply

applying Drewitz’s ownership percentage to the yearly distributions. By selling the car

dealership and distributing the proceeds, respondents depleted Motorwerks of the assets

to satisfy Drewitz’s share, let alone the preverdict interest on any resulting judgment.

And that is what happened—Motorwerks could not satisfy the $7.9 million judgment due

to the distributions caused by its directors. By ignoring a “readily ascertainable” claim,

Jack Walser engaged in preferential dealing that rendered Motorwerks unable to pay its

debts in the ordinary course of business after making the distributions, causing

Motorwerks’ insolvency.

The primary question is whether corporate distributions, as opposed to a director’s

use of corporate funds to repay debt he or she is owed by the corporation, can constitute a

breach of the fiduciary duty that directors owe to creditors. Respondents argue that

because Walser did not specifically prefer the repayment of his own corporate debt over

Drewitz’s claim, he was free to drain Motorwerks of its assets without having to consider
13
the impact these distributions would have on Drewitz’s pending claim. For support,

respondents cite an Eighth Circuit decision for the broad proposition that a director’s

distribution of assets to himself as a shareholder does not breach that director’s fiduciary

duty to any corporate creditors because, under Snyder, that duty can only be breached by

the preferential repayment of debt owed to the director by the corporation. Helm Fin.

Corp. v. MNVA R.R., Inc., 212 F.3d 1076, 1082 (8th Cir. 2000). This argument is

unpersuasive. First, Eighth Circuit decisions on matters of state law are merely

persuasive and are not precedential. Regner v. Nw. Airlines, Inc., 652 N.W.2d 557, 563

(Minn. 2002). And, this reading of Snyder has not been followed by any Minnesota

appellate decision.

More importantly, respondent’s reliance on Helm is not persuasive given the facts

before us. The distribution in Helm differed from the distribution here, where the two

directors that decided to declare a distribution were also the two shareholders receiving

that distribution. While the claim in Helm was brought against two corporate directors,

the decision does not indicate that only those directors received the distributions in their

role as shareholders. See 212 F.3d at 1078 (“[The corporation] . . . approved the

distribution of [stock] to [the corporation’s] shareholders in proportion to the percentage

of stock they owned in [the corporation].”). The self-dealing distributions that occurred

in this case did not occur in Helm. See id. at 1082 (“There are no allegations of self-

dealing by defendants.”).

Respondents provide no explanation for the logical consequence of their

argument: that Jack Walser would be liable for breach of fiduciary duty under Snyder if

he had been repaying himself for past corporate debts, yet here he did not breach that
14
duty by liquidating the corporation’s assets and distributing a large majority of the

corporate funds to himself without any benefit to the corporation, such as the satisfaction

of antecedent debt. As a matter of black-letter law, “[s]tockholders of an insolvent

corporation cannot participate in the distribution of its assets until the claims of creditors

are paid” because “the only interest a stockholder has in the property of a corporation is

the interest in any surplus over and above what is required to pay its depositors and

creditors.” 15A William Fletcher, Fletcher Cyclopedia of the Law of Private

Corporations § 7417, at 169 (Larry Edmonson ed., rev. ed. 2000). Corporate dissolution

under the MBCA echoes this principle, requiring corporate directors to “pay or make

provision for the payment of all known debts, obligations, and liabilities of the

corporation” before distribution of remaining assets can be made to shareholders. Minn.

Stat. § 302A.725, subds. 1(b), 3 (2014).

As stated by Justice Simonett, “[t]ransactions involving corporations and their

executives . . . are to be regarded with skepticism by the courts and closely scrutinized.”

Snyder, 305 N.W.2d at 867. Here, the undisputed facts show that Jack Walser and

Hasselquist dismantled Motorwerks’ business structure and then distributed nearly all of

the corporation’s remaining liquid capital to themselves. If the prohibition on

“preferences” outlined in Snyder prevents corporate directors from favoring their own

bona fide debts over those of outside creditors with “otherwise similarly secured

interests,” see id. at 869, this prohibition similarly extends to directors who knowingly

“prefer” their share of corporate profits over the rights of a pending claimant. The dissent

in Helm raised the same concerns:

15
 Whether the transaction was a loan or a distribution, when
officers or directors act to the detriment of a corporate
creditor to benefit themselves, they have breached their
fiduciary duty to the creditors. They have used their special
role in the corporation to obtain a preference over the
creditors. After all, in the ordinary liquidation of a
corporation, the creditors get paid before redemption of
shares of stock. Here, the transaction put assets into the
hands of the stockholders to the ultimate detriment of the
creditors, thus endowing the officers and directors with an
advantage over other creditors.

212 F.3d at 1083 (Bright, J., dissenting). Jack Walser’s decision to ignore Drewitz’s

pending claim and siphon corporate funds without benefitting the corporation is an even

more egregious breach of fiduciary duty than that of the corporate directors repaying

themselves for corporate debt in Snyder. Accordingly, we conclude that Jack Walser

breached his fiduciary duty to Drewitz by causing Motorwerks to distribute assets to

himself and Hasselquist for the six-year period of 2006 to 2012.

Drewitz also argues that his breach of fiduciary duty claim in relation to

distributions made in 2006 and 2007 is not barred by the six-year statute of limitations

under Minn. Stat. § 541.05, subd. 1. The district court concluded that this statute barred

Drewitz’s claim because the 2006 and 2007 distributions occurred more than six years

before Drewitz’s August 2013 amended complaint.

By its plain language, Minn. Stat. § 541.05, subd. 1, does not apply to Drewitz’s

claim for breach of fiduciary duty. Drewitz is not seeking recovery under one of the

causes of action enumerated in that section; rather, Drewitz raises an equitable claim to

collect on an already-obtained July 2013 judgment against Jack Walser in addition to

Motorwerks. Actions asserting equitable claims against shareholders or directors to

recover judgments obtained against a corporate entity are equivalent to “creditor’s bills.”
16
See Wartman, 841 N.W.2d at 642 (“The veil-piercing action is in the nature of a

creditor’s bill . . . .”); see also Snyder, 305 N.W.2d at 870 n.2 (noting that the breach of

fiduciary duty action was “in the nature of a creditor’s bill”). The applicable statute of

limitations for such claims is not the six-year period found in Minn. Stat. § 541.05, subd.

1, but rather the ten-year period for actions upon judgments under Minn. Stat. § 541.04

(2014).4 See Wartman, 841 N.W.2d at 640–41. That is because this action seeks

equitable enforcement of a judgment, and therefore can only be pursued once a party has

already obtained a judgment that it cannot enforce at law. Id. at 641 (noting that “a

creditor’s bill is ancillary to the original judgment,” and is brought “for the purpose of

obtaining satisfaction of[] an existing judgment” (quotation omitted)).

This ten-year statute of limitations begins running either when the judgment is

docketed or when execution upon the judgment is returned unsatisfied, depending on

what type of creditor’s bill the action is considered to be under equity principles. See

Lind v. O.N. Johnson Co., 204 Minn. 30, 37, 282 N.W. 661, 666 (1938). Deciding which

date applies here is unnecessary, as the district court granted Drewitz’s motion to amend

his complaint to add his breach of fiduciary duty claim five months after judgment was

docketed against Motorwerks. Accordingly, Drewitz’s claim is not time-barred.

We conclude that the fiduciary duty of directors described in Snyder also prohibits

directors of insolvent or nearly insolvent corporations from distributing corporate assets

4
We further note that our conclusion is consistent with other state courts that have
rejected timeliness challenges asserting that general statutes of limitation barred similar
claims seeking recovery of already-obtained judgments from individuals. See Oceanics
Schs., Inc. v. Barbour, 112 S.W.3d 135, 145–46 (Tenn. Ct. App. 2003) (holding that
plaintiff’s veil-piercing claim was controlled by ten-year statute of limitations addressing
actions on judgments); Shockley v. Harry Sander Realty Co., 771 S.W.2d 922, 925 (Mo.
Ct. App. 1989) (same).
17
to themselves without first satisfying the claims of the corporation’s creditors.

Accordingly, we reverse the district court’s grant of summary judgment in favor of

respondents and direct that summary judgment be entered in favor of Drewitz. However,

because “[t]he fashioning of an equitable remedy is committed to the sound discretion of

the [district] court,” we remand for the district court to determine the remedy necessary

“to restore the injured party to the position it occupied before the breach of fiduciary

duty.” Shepherd of the Valley Lutheran Church of Hastings v. Hope Lutheran Church of

Hastings, 626 N.W.2d 436, 443 (Minn. App. 2001), review denied (Minn. July 24, 2001).

This remedy may include, but is not limited to, an order by the district court amending its

July 24, 2013 judgment to include Jack Walser as a party from whom Drewitz can seek

recovery of his $7.9 million award.

B. Remaining Postjudgment Claims

On appeal, Drewitz further argues that the district court erred by entering

summary judgment against him on his claims of veil piercing and fraudulent transfer, and

that the district court also erred by denying his second motion to amend his complaint to

add claims asserting a violation of the MBCA. However, our ruling on Drewitz’s breach

of fiduciary duty claim disposes of his appeal to the extent Drewitz seeks to enforce his

judgment against the personal assets of Jack Walser. “[J]udicial restraint bids us to

refrain from deciding any issue not essential to the disposition of the particular

controversy before us.” Lipka v. Minn. Sch. Employees Ass’n, Local 1980, 550 N.W.2d

618, 622 (Minn. 1996). As addressing these issues is “unnecessary to the resolution of

the controversy in question,” id., we decline to express any opinion on the district court’s

disposal of Drewitz’s remaining claims against Jack Walser.
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 C. July 24, 2013 Judgment Against Motorwerks

Drewitz also appeals the district court’s decision after the remand in Drewitz V to

enter judgment against Motorwerks only, arguing that the district court erroneously

deviated from this court’s remand instructions and should have entered judgment against

all of the individual defendants named in his original complaint—Jack, Paul, and Andrew

Walser—in addition to Motorwerks. He raises numerous legal and factual theories

asserting error, all of which are unpersuasive. “On remand, a district court must execute

[an appellate court’s] mandate strictly according to its terms and lacks power to alter,

amend, or modify that mandate.” Rooney v. Rooney, 669 N.W.2d 362, 371 (Minn. App.

2003), review denied (Minn. Nov. 25, 2003). Our decision in Drewitz V made clear that

Motorwerks had an obligation to distribute corporate earnings to Drewitz and that

Motorwerks breached that obligation. 2012 WL 5476148, at *7. Accordingly, it follows

that, upon remand for entry of judgment after Drewitz V, any resulting damages would be

paid only by Motorwerks. While we now hold that judgment may be entered against Jack

Walser due to his breach of fiduciary duty, the district court did not err on remand by

entering judgment only against Motorwerks.

II.

In their related appeal, respondents argue that the district court’s judgment against

Motorwerks failed to award the proper amount of preverdict interest. We review an

award of preverdict interest de novo. Duxbury v. Spex Feeds, Inc., 681 N.W.2d 380, 390

(Minn. App. 2004), review denied (Minn. Aug. 25, 2004).

In calculating the judgment amount, the district court held that Drewitz was

entitled to $3,960,661 as his share of the distributions issued by Motorwerks between
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1999 and 2005. The district court then applied two different preverdict interest rates to

this damages amount: six percent annual interest under Minn. Stat. § 334.01, subd. 1

(2014), for all distributions owed to Drewitz from the date of the distributions until

Drewitz commenced his lawsuit on May 25, 2004, and ten percent annual interest under

Minn. Stat. § 549.09, subd. 1(c)(2) (2014), after that date. The result was a final

judgment of $7,914,637.98 against Motorwerks.

Respondents first argue that the district court should have awarded interest for the

entire preverdict period at the six percent rate provided by Minn. Stat. § 334.01, subd. 1.

Respondents have forfeited this argument, as they did not raise the potential application

of this statute before the district court. As a general rule, a party may not raise new issues

for the first time on appeal. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). And,

while respondents claim that this is a purely legal question, the parties both argue at

length whether Drewitz’s claim was liquidated and readily ascertainable. See Hogenson

v. Hogenson, 852 N.W.2d 266, 274 (Minn. App. 2014) (holding that preverdict interest is

calculated under section 334.01 when “damages are ascertainable or liquidated”).

“[W]hether a claim is liquidated, readily ascertainable, or unliquidated” is a question of

fact to be resolved by the factfinder. Trapp v. Hancuh, 587 N.W.2d 61, 63 (Minn. App.

1998). Without litigation of this issue in the district court, it is not properly before us.

Respondents further argue that the district court erred by applying the ten percent

interest rate under Minn. Stat. § 549.09 (2014) because the statute’s interest rate was

raised to ten percent in 2009, five years after the complaint was filed in this case and ten

years after Motorwerks first failed to pay shareholder distributions to Drewitz. “The

retroactivity of a statute is a matter of statutory interpretation, which we review de novo.”
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State v. Basal, 763 N.W.2d 328, 335 (Minn. App. 2009). In its current form, the statute

provides that preverdict interest “shall be computed” at ten percent per year if the

judgment or award is over $50,000. Minn. Stat. § 549.09, subd. 1(b), (c)(2). The

legislation amending section 549.09 to increase the interest rate to ten percent provided

that “[t]his section is effective August 1, 2009, and applies to judgments and awards

finally entered on or after that date.” 2009 Minn. Laws ch. 83, art. 2, § 35, at 1055.

We conclude that the district court’s imposition of the ten percent interest rate for

a judgment entered after August 1, 2009 is not a “retroactive” application of section

549.09. While this action was initiated before the 2009 amendment, judgment was

finally entered, and interest was therefore awarded, well after the statute had been

amended. Moreover, we have previously directed a district court to apply the ten percent

interest rate under section 549.09 to a judgment when the underlying verdict and

injurious conduct occurred before the effective date of the 2009 amendment. See Cnty. of

Washington v. TMT Land V, LLC, 791 N.W.2d 132, 134–35, 138 (Minn. App. 2010).

The statute is clear: judgments and awards finally entered after August 1, 2009, receive

the benefit of the interest rates set by the legislature on that date. Accordingly, we affirm

the district court’s award of preverdict interest.

DECISION

Because the district court erred as a matter of law by denying Drewitz’s motion for

summary judgment on his breach of fiduciary duty claim against Jack Walser, and

because the relevant material facts are undisputed, we reverse the district court’s grant of

summary judgment on this claim in favor of respondents and direct that the district court

enter summary judgment in favor of Drewitz. On remand, the district court, sitting as a
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court of equity, may fashion whatever equitable remedy it deems necessary under the

circumstances to rectify Jack Walser’s breach of fiduciary duty. This includes, but is not

limited to, amending the judgment against Motorwerks to include Jack Walser as a party

from whom Drewitz can seek recovery of his $7.9 million award.

We affirm the district court’s post-Drewitz V entry of judgment against

Motorwerks. As to respondents’ related appeal, we affirm the district court’s award of

preverdict interest.

Affirmed in part, reversed in part, and remanded.

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