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Shcharansky v. Shapiro

Supreme Court of Iowa

December 29, 2017


         On review from the Iowa Court of Appeals.

         Appeal from the Iowa District Court for Polk County, David Porter, Judge.

         Appellants seek further review of judgment denying action for contribution. DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT REVERSED AND CASE REMANDED.

          Mark E. Weinhardt and Danielle M. Shelton of the Weinhardt Law Firm, Des Moines, for appellants.

          Jason C. Palmer and Timothy N. Lillwitz of Bradshaw, Fowler, Proctor & Fairgrave PC, Des Moines, for appellees.

          APPEL, JUSTICE.

         In this 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 underlying debt.

         After 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 further review.

         For the 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.

         I. Factual and Procedural Background.

         A. 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).

         In 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 to

[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.

         CCS, however, did not make any principal payments to Wells Fargo from the time it entered into the stock purchase agreement through May 2009.

         In 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).

         In June 2009, CCS, Alexander and Tatiana Shcharansky[1] 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.

         In June 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.

         Similarly, 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.

         In 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.

         While 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.

         B. Original District Court Proceedings.

         Alexander 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 Shcharanskys paid.

         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.

         On May 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 ...

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