review from the Iowa Court of Appeals.
from the Iowa District Court for Polk County, David Porter,
seek further review of judgment denying action for
contribution. DECISION OF COURT OF APPEALS VACATED;
DISTRICT COURT JUDGMENT REVERSED AND CASE REMANDED.
E. Weinhardt and Danielle M. Shelton of the Weinhardt Law
Firm, Des Moines, for appellants.
C. Palmer and Timothy N. Lillwitz of Bradshaw, Fowler,
Proctor & Fairgrave PC, Des Moines, for appellees.
case, the parents of coguarantors of a loan provided funds to
their children to pay part of an underlying debt. The funds
were placed in accounts owned or co-owned by the
coguarantors. The coguarantors then paid down a debt with
funds drawn from these accounts. The coguarantors filed an
action seeking contribution from other guarantors of the
trial, the district court held that the coguarantors were not
entitled to contribution because the funds used to make the
payments on the debt were provided to them by their
respective parents. The court of appeals affirmed. We granted
reasons expressed below, we vacate the decision of the court
of appeals, reverse the judgment of the district court, and
remand the case to the district court.
Factual and Procedural Background.
Introduction. This case centers on the financial
difficulties of Continuous Control Solution, Inc. (CCS). In
2005 and 2006, CCS borrowed a total of approximately $900,
000 from Wells Fargo Bank. The CCS debt was personally
guaranteed by eight CCS shareholders: Vadim Shapiro, Boris
Pusin, Ilya Markevich, Alex Komm, and Dmitry Khots (the
Shapiro Group); and Alexander Shcharansky, Boris Shcharansky,
and Zoya Staroselsky (the Shcharansky Group).
September 2007, faced with financial difficulty, members of
the Shapiro Group, then comprising the majority of the
shareholders of CCS, began to prepare for bankruptcy. On
September 16, the Shcharansky Group agreed to purchase the
Shapiro Group's shares in CCS pursuant to a stock
purchase agreement. Paragraph 7.1(a) of the stock purchase
agreement provided that the Shcharansky Group would cause CCS
[u]se best efforts to, and prior to the payment of any
existing or new debt obligations payable by the Corporation
to any Buyer or any Buyer's immediate relative or any
entity affiliated with any Buyer or any Buyer's immediate
relative, satisfy and repay in full all debt obligations of
the Corporation owed to Wells Fargo Bank, N.A.
however, did not make any principal payments to Wells Fargo
from the time it entered into the stock purchase agreement
through May 2009.
October 2008, Wells Fargo filed a petition seeking to collect
on the personal guaranties made by the Shapiro and
Shcharansky Groups to secure the loans made to CCS. In April
2009, the district court granted summary judgment in favor of
Wells Fargo on its claims against CCS and the eight
guarantors in the amount of $909, 338.27 plus interest.
Litigation continued with respect to other claims brought by
the Shcharansky and Shapiro Groups against each other, with
the end result of an entry of a $2.8 million judgment in
favor of the Shapiro Group and against the Shcharansky Group.
See Wells Fargo Bank, Nat'l Ass'n v. Continuous
Control Sols., Inc., No. 10-1070, 2011 WL 2695269, at
*3, 7 (Iowa Ct. App. July 13, 2011) (affirming the judgment).
2009, CCS, Alexander and Tatiana Shcharansky entered into a
forbearance agreement with Wells Fargo and CCS. Pursuant to
the forbearance agreement, CCS paid Wells Fargo $400, 000.
CCS agreed to pay the remaining amount in eight quarterly
payments of $76, 022.11 beginning September 1, 2009, and
ending June 1, 2011. CCS made the quarterly payments in
September 2009, December 2009, and March 2010.
2010, CCS did not make its quarterly payment on the Wells
Fargo debt. Instead, Alexander made the June 2010 quarterly
payment of $76, 022.11 from a joint account co-owned by
Leonid Shcharansky-Alexander's father-Alexander, and Raya
Shcharansky, after Leonid transferred funds to the joint
account from his retirement account. Leonid was not a
coguarantor of the loan and had no personal exposure arising
out of the CCS indebtedness to Wells Fargo.
in September 2010 and December 2010, CCS did not make its
quarterly payment on the Wells Fargo indebtedness. Instead,
Tatiana made the quarterly payment of $76, 022.11 in
September and $190, 039.15 and $51, 896.77 in December from
her checking account. The December payment was in excess of
the ordinary quarterly payment in the amount needed to pay
the remainder of the debt in full. The funds for these
payments were provided by Tatiana's parents.
total, the Shcharanskys paid $393, 980.14 of the Wells Fargo
debt. Following the final payment of the CCS indebtedness,
Wells Fargo filed a satisfaction of judgment in favor of CCS
and the personal guarantors, thus relieving all guarantors,
including the Shapiro Group, from personal liability for the
Wells Fargo debt.
CCS and the Shcharanskys were attempting to manage the Wells
Fargo debt, CCS entered into a number of additional loan
transactions with Shcharansky-affiliated persons. During
2008, 2009, and 2010, CCS obtained a number of loans from
Alexander, Alexander's father Leonid, Tatiana,
Alexander's cousin, and Zorass, LLC, an entity owned by
Alexander, his father, and Slava Staroselsky. The amount of
these Shcharansky-affiliated loans was cumulatively in excess
of $500, 000. By October 2010, prior to the retirement of
CCS's indebtedness to Wells Fargo, CCS repaid at least
$467, 599.66 on these loans. As President of CCS, Alexander
made the decisions to make these loan repayments.
Original District Court Proceedings.
and Tatiana Shcharansky subsequently filed this action,
seeking contribution from each of the five members of the
Shapiro Group for their respective shares of the Wells Fargo
debt paid by the Shcharanskys on behalf of all guarantors.
The amount sought was $218, 877.85, or 5/9 of the amount the
Shapiro Group filed an answer denying liability with
affirmative defenses. The Shapiro Group also brought a
counterclaim against Alexander and Tatiana and a third-party
petition against Boris Shcharansky, Zoya Staroselsky, Leonid
Shcharansky, and Slava Staroselsky. The Shapiro Group alleged
that Alexander, Boris, and Zoya breached the stock purchase
agreement by making "improper and excessive payments to
themselves and/or to entities which they own or are
affiliated with, rather than satisfying and repaying in full
all debt obligations of CCS owed to Wells Fargo." With
respect to Leonid and Slava, the Shapiro Group alleged that
they tortiously interfered with the stock purchase agreement.
Further, in a claim entitled "contribution, " the
Shapiro Group alleged, to the extent it is liable to the
Shcharanskys, that the cause was the failure of CCS to repay
loans and that it is entitled to contribution against all
third-party defendants. Finally, the Shapiro Group brought a
fraudulent misrepresentation claim related to the stock
purchase agreement in which the Shapiro Group alleged that
the counterclaim and cross-claim defendants falsely
represented that they would use their best efforts to cause
CCS to satisfy and repay the obligations of CCS in full.
10, 2012, the Shapiro Group filed a motion for partial
summary judgment. On August 31, 2012, following a hearing on
the matter, the district court granted the Shapiro
Group's defensive motion for summary judgment on the
Shcharansky contribution action. The district court also
granted the Shapiro Group's offensive ...