Michael H. Rennhack v. Roy H. Rennhack

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
May 12, 2022
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2021AP1257 Cir. Ct. No. 2020CV273

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV

MICHAEL H. RENNHACK,

PLAINTIFF-APPELLANT,

V.

ROY H. RENNHACK, HOWARD H. RENNHACK, JR., AND
HOWARD H. RENNHACK, SR.,

DEFENDANTS-RESPONDENTS,

RENNHACK CONSTRUCTION CO., INC.,

DEFENDANT.

APPEAL from an order of the circuit court for Dodge County:
JOSEPH G. SCIASCIA, Judge. Affirmed.

Before Blanchard, P.J., Graham, and Nashold, JJ.
No. 2021AP1257

¶1 GRAHAM, J. Michael Rennhack appeals a circuit court order
granting summary judgment in favor of Roy Rennhack, Howard Rennhack, Jr.,
and Howard Rennhack, Sr.1 Michael argues that the terms of a shareholder
agreement, which he contends are unambiguous, require Roy to sell his shares in a
closely held family business, Rennhack Construction Co., Inc.2 We conclude that
the pertinent provisions in the shareholder agreement are ambiguous. However,
no party has offered extrinsic evidence to resolve the ambiguity. Therefore, the
circuit court properly interpreted the contract on summary judgment as a matter of
law. We further conclude that the circuit court’s interpretation of the agreement is
the most reasonable available interpretation. Therefore, we affirm.

BACKGROUND

¶2 Rennhack Construction Co., Inc. is a family-owned business
established in 1972. It currently has four shareholders: Howard Sr., who founded
the company and is now retired, and Howard Sr.’s three sons, Michael, Roy, and
Howard Jr. Up through 2016, at least, the three Rennhack brothers were the sole
directors and officers of the company.3 Additionally, up through 2016, all three
brothers were employed by the company in positions related to its day-to-day
operations. For his part, Roy was employed as a construction crew supervisor.

1
Because they share a family name, we refer to Michael, Roy, Howard Jr., and Howard
Sr. by their first names.
2
For ease of reference, we sometimes refer to Rennhack Construction as the company.
3
Pertinent to this dispute, Michael is the president of the company and Roy has been its
secretary and treasurer.

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¶3 In 2003, well before the current dispute, the company and its four
shareholders entered into the shareholder agreement that is at issue here. The
current dispute is about the legal effect—if any—that Roy’s decision to terminate
his employment in 2016 has under the agreement. We discuss the agreement’s
pertinent terms in detail below.

¶4 Roy provided notice to the company that he intended to “terminate
his employment from the Company effective February 1, 2016.” The notice did
not specify whether he intended to resign from his position as a crew supervisor
only, or whether he also wished to resign from his role as an officer and his role as
a director.

¶5 At the same time, Roy initiated negotiations with the other
shareholders to sell his shares to them or to the company itself. The parties
engaged in a process to determine the value of Roy’s shares, but they were unable
to agree on a share price. An appraiser determined that the total fair market value
of Roy’s shares was $569,826. However, due to a failure to agree on the
correctness of the appraised share value, Roy’s attorney informed the company in
2017 that Roy would not be selling his shares. Roy continued to serve as an
officer and director of the company, at least in name. His signature is on company
construction contracts and company checks from the time period following his
resignation, and annual filings with the state department of financial institutions
have listed Roy as an officer and a director at least through 2020, the year in
which the parties submitted their summary judgment materials to the circuit court.

¶6 The conflict over the family business eventually escalated. In
April 2020, Michael’s legal counsel advised Roy, by letter, that the company was
purchasing Roy’s shares for the appraised value. The letter also stated that Roy

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owed the company $225,452.17 for distributions and benefits that he improperly
received after he terminated his employment in 2016, and that his debts to the
company would be deducted from the purchase price of Roy’s shares.

¶7 Roy and Howard Jr. called a special meeting of the shareholders and
directors, at which they purported to issue five additional shares to each of the
company’s shareholders. The effect of this issuance of shares would have been to
change the voting power of different blocks of shareholders, and it would have
deprived Michael of his existing effective veto power over certain company
decisions. Michael objected to the actions at the shareholder meeting on multiple
grounds. Pertinent to this appeal, Michael argued that, under the shareholder
agreement, Roy was obligated to sell his shares upon termination of his
employment with the company. Therefore, Michael asserted, Roy could not
properly call a special meeting of the shareholders and could not vote his shares at
any special meeting.4

¶8 In July 2020, Michael commenced this action by filing a complaint
in the circuit court, which names Roy, Howard Jr., and Howard Sr., as
defendants.5 In addition to requesting relief concerning actions taken at the
4
Based on a subsequent stipulation by the parties, the shares that had purportedly been
issued at the special meeting were rescinded. Neither the issuance of these shares nor their
rescission is directly at issue in this appeal.
5
Michael’s complaint also names Rennhack Construction as a defendant; however, the
circuit court determined that this is effectively a dispute between two factions of shareholders.
Based on a stipulation between the other parties, the court determined that the company was not
required to answer the complaint and would not be considered in default for not answering.

When Michael filed his notice of appeal, he identified Rennhack Construction as a
respondent. Upon our review of the record and the parties’ briefing, we have determined that
Michael is not challenging any circuit court decision in favor of the company. Therefore, on our
own motion, we now order the clerk to amend the caption in this appeal to reflect that the
company is a defendant, but not a respondent.

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special meeting, Michael also seeks specific performance of Roy’s obligations
under the shareholder agreement. More specifically, Michael interprets the
agreement as obligating Roy to transfer his shares to the company in exchange for
$344,373.83,6 and Michael seeks an order compelling Roy to do so.7

¶9 Michael moved for summary judgment. At a hearing, the circuit
court identified the ultimate question as whether Roy is required to sell his shares
at the appraised price pursuant to the shareholder agreement. And, as discussed at
length below, that question comes down to the meaning of the term
“employment,” as that term is used in section 6.01 of the agreement. If it refers
exclusively to Roy’s position as a construction crew supervisor, then Roy is
obligated under the agreement to sell his shares after resigning from that position.
However, if it could encompass his other roles in the company as an officer or
director, then Roy is not obligated to sell his shares.

¶10 The circuit court initially questioned whether it could resolve the
dispute over the meaning of the shareholder agreement as a question of law on
summary judgment, or whether there are material factual disputes that would

This sum is the appraised value of Roy’s shares minus the amount that Michael claims
6

Roy owes the company.
7
The complaint also seeks damages from Roy and Howard Jr. based on alleged breach
of the implied duty of good faith and fair dealing, and injunctive relief prohibiting any further
votes and actions by the directors and shareholders during the pendency of the lawsuit. These
claims are not at issue in this appeal. Likewise, Roy, Howard Sr., and Howard Jr. all filed cross-
claims against the company for indemnification, but the cross-claims are not at issue in this
appeal. As a result, we discuss these claims and cross-claims no further.

Although Howard Sr. and Howard Jr. are respondents in this appeal, Michael and Roy
appear to be the central figures in this dispute, with Howard Sr. and Howard Jr. playing a
secondary role. Therefore, when addressing arguments advanced by Roy, Howard Sr., and
Howard Jr., we sometimes refer to them as Roy’s arguments.

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require a trial. In the supplemental briefing that followed, Michael acknowledged
that the agreement contained “some duplicative or inartful language,” and Roy
conceded that it was “not a model of clarity or careful draftsmanship.”
Nevertheless, while their reasoning and interpretations differed, Michael and Roy
both insisted that pertinent terms of the agreement could be interpreted as a matter
of law. For his part, Michael argued that the agreement is unambiguous,
presenting a question of law for the circuit court to decide. For his part, Roy
argued that portions of the agreement are ambiguous, but that it is not ambiguous
as a whole, and that it has to be interpreted as a matter of law because “no
extrinsic evidence or other circumstances exist for the court to consider.”

¶11 The circuit court issued a written decision granting partial summary
judgment in Roy’s favor. It concluded that, even though the pertinent contract
provisions were not models of clarity and appeared to conflict, Roy’s
interpretation was the better one. Therefore, it determined, Roy was not required
to sell his shares as a result of the termination of his employment as a construction
crew supervisor. Apart from Michael’s claim regarding the issuance of new
shares at the special meeting discussed above, the court granted summary
judgment to the defendants on all other claims.

¶12 The circuit court later issued a final order resolving all remaining
matters in litigation between the parties. Michael appeals the court’s
determination that, under the terms of the shareholder agreement, Roy remains a
director and officer and is not obligated to sell his shares.

DISCUSSION

¶13 “Summary judgment is appropriate ‘if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if

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any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.’” Affordable Erecting, Inc. v.
Neosho Trompler, Inc., 2006 WI 67, ¶19, 291 Wis. 2d 259, 715 N.W.2d 620
(quoting WIS. STAT. § 802.08(2) (2019-20)). “We review summary judgment de
novo, viewing the facts in the light most favorable to the non-moving party … and
making all reasonable inferences in [the non-moving party’s] favor.” Id.

¶14 Resolution of this appeal turns on whether, based on the terms of the
shareholder agreement, Roy is obligated to sell his shares at the appraised price
because he is no longer employed as a construction crew supervisor. This requires
us to interpret the agreement, which is a contract between the company and its
shareholders.

¶15 “Contract interpretation generally seeks to give effect to the parties’
intentions.” Tufail v. Midwest Hospitality, LLC, 2013 WI 62, ¶25, 348 Wis. 2d
631, 833 N.W.2d 586. “We presume the parties’ intent is evidenced by the words
they chose” to use, and therefore, “unambiguous contract language controls
contract interpretation.” Id., ¶¶26, 25. A contract provision is unambiguous if it is
susceptible to only one construction. Id., ¶27. When the meaning of a contract is
unambiguous, its interpretation is limited to the four corners of the contract, and
we construe it as a matter of law according to its literal terms. Id., ¶26. On the
other hand, if the terms of the contract are ambiguous, the parties may introduce
extrinsic evidence, and such evidence may be used to determine the parties’ intent.
Town Bank v. City Real Estate Dev., 2010 WI 134, ¶32, 330 Wis. 2d 340, 793
N.W.2d 476. In such cases, our supreme court has explained that interpretation of
the contract presents a question of fact to be decided by a jury. Id.

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¶16 In this case, for reasons that we explain further below, we conclude
that the pertinent portions of the shareholder agreement are ambiguous when they
are read as a whole. However, neither Michael nor Roy argues that a trial was
needed to determine the meaning of the agreement, nor do they argue that its
interpretation turns on any extrinsic evidence. On the contrary, both sides urged
the circuit court to interpret the language of the agreement as a matter of law,
applying the canons of construction that are used to discern contract meaning.

¶17 This approach is consistent with Wisconsin law. In Bauman v.
Midland Union Ins. Co., 261 Wis. 449, 451-52, 53 N.W.2d 529 (1952), for
example, our supreme court stated that, if a provision in an insurance contract is
ambiguous and there is no extrinsic evidence bearing on the meaning intended by
the parties, the proper interpretation is to be determined by the court as a question
of law. In a more recent case from our supreme court involving the interpretation
of a business agreement, three dissenting justices observed (with no stated concern
by the majority) that contract interpretation “is a question of law for the court if
the contract is unambiguous or if the contract is ambiguous but no extrinsic
evidence has been presented.” Seitzinger v. Community Health Network, 2004
WI 28, ¶69, 270 Wis. 2d 1, 676 N.W.2d 426 (Abrahamson, C.J., dissenting).8

8
The Seitzinger dissent cites two contract law treatises, both of which support this
proposition outside of the insurance law context. See Seitzinger v. Community Health Network,
2004 WI 28, ¶54, 270 Wis. 2d 1, 676 N.W.2d 426 (Abrahamson, C.J., dissenting) (citing 11
RICHARD A. LORD, WILLISTON ON CONTRACTS § 30:7 (4th ed. 1999); 5 MARGARET A. KNIFFEN,
CORBIN ON CONTRACTS § 24.6 (rev. ed. 1998). More specifically, the Williston treatise states
that, “[i]n the absence of relevant extrinsic evidence, any ambiguity in a written contract may be
resolved by the court as a matter of law. Furthermore, if a contract is ambiguous, its
interpretation is a question of law for the court as long as the extrinsic evidence bearing on the
interpretation is undisputed.” WILLISTON, § 30:7; see also id. (cumulative supplement) (citing
Wicklund v. Sundheim, 2016 MT 62, ¶16, 383 Mont. 1, 367 P.3d 403 (2016), for the proposition
that, “[i]n the absence of relevant extrinsic evidence, any ambiguity in a written contract is
resolved by the court as a matter of law.”).

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Accordingly, like the circuit court, we interpret the ambiguous contract language
as a matter of law without the aid of any extrinsic evidence to resolve the
ambiguity.

¶18 We now turn to that contract language. The parties direct us to three
provisions of the shareholder agreement: section 3 (“Termination of Employment,
Shareholders Must Buy”); section 8.05.04 (defining “Employee-Shareholder”);
and section 6.01 (“Termination”). We set forth these provisions in full, addressing
various arguments by the parties along the way.

¶19 Section 3, titled “Termination of Employment, Shareholders Must
Buy,” provides that shareholders “shall be deemed to have offered to sell all of
[their] … shares of the stock” if they cease to be “Employee-Shareholders”:

The parties desire to limit the ownership of stock to
Employee-Shareholders, it being in the best interests of the
Corporation and the Shareholders. Therefore, it is agreed
that any Shareholder who, at any time, ceases to [be] an
Employee-Shareholder as a result of termination of
employment by the mutual consent of the Shareholder and
the Corporation, termination of employment by the
Corporation pursuant to Section 1, or because the
Shareholder is a Disabled Shareholder, shall be deemed to
have offered to sell all of his or her shares of the stock to
the other Shareholders for the Agreement Price and on the
Agreement Terms. Such offer shall be deemed made on
the date on which such Shareholder ceased to be an
Employee-Shareholder. The other Shareholders may
accept such deemed offer and buy all of the offered stock,
in proportion to their respective ownership of the stock
(excluding the offered stock), or in such other proportion as
they shall agree upon. In the event the other Shareholders
do not accept the offer within 60 days, then the Corporation
shall accept such deemed offer and purpose all of the
offered shares. The price and payment terms shall be set
forth in section 5.01-5.03. Nothing in this Agreement
imposes any obligation on the Corporation to employ any
Shareholder. The parties to this Agreement acknowledge
that Howard Rennhack, Sr. is no longer an employee of the

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Corporation and agree that this provision requiring non-
employees to sell their stock shall not apply to him.

(Emphasis added.)

¶20 Section 8.05.04 defines “Employee-Shareholder” as “a Shareholder
who is also an officer, employee or director (or some combination thereof) of the
Corporation.” (Emphasis added.)

¶21 Michael interprets section 3 to mean that a shareholder who is no
longer an employee “ceases to [be] an Employee-Shareholder” and, in turn, also
ceases to be an officer or director of the company. However, section 8.05.04
specifically defines “Employee-Shareholder” as a shareholder “who is also an
officer, employee, or director,” “or some combination thereof.” In other words,
this definition unambiguously contemplates that a shareholder remains an
“Employee-Shareholder” if he is an officer or director but not an “employee.” It
would have been easy to include language in the agreement stating that a
shareholder who is an officer or director ceases to have those roles if he ceases to
be an “employee” of the company, but no such language appears in section 3 or in
any other section. Michael’s assertions about the meaning of section 3 are not
consistent with its language, especially when considered in light of the
unambiguous definition of Employee-Shareholder found in section 8.05.04.

¶22 If sections 3 and 8.05.04 were the only pertinent provisions, we
would have no problem concluding that the shareholder agreement is
unambiguous when applied to the facts here. Under this hypothetical agreement,
its unambiguous terms would provide as follows. Despite Roy’s resignation as a
construction crew supervisor, he continues to be an Employee-Shareholder, as that
term is defined in section 8.05.04. That is because Roy continues to be an officer

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and director (indeed, he would need to be only one or the other and not both), and
he has not been removed from either of those positions through the process for
removal set forth in the shareholder agreement. Therefore, if we were to interpret
sections 3 and 8.05.04 in isolation, we would conclude that Roy has not “cease[d]
to [be] an Employee-Shareholder as a result of termination of employment,” and
that the provisions of section 3 are inapplicable.

¶23 However, sections 3 and 8.05.04 are not the only pertinent
provisions in the shareholder agreement. The ambiguity in the shareholder
agreement is introduced by section 6.01, titled “Termination.” That section
provides:

In the event any Shareholder shall voluntarily or
involuntarily be terminated from his employment with the
Corporation, or in the event of retirement or disability as
hereinafter defined, said Shareholder shall sell and the
other Shareholders or Corporation as the case may be shall
purchase all of said Shareholder’s stock in the Corporation.
As set forth at the end of Section 3, this provision shall not
apply to Howard Rennhack, Sr.

¶24 Michael and Roy disagree about the proper interpretation of this
section. Michael contends that section 6.01’s reference to “employment” refers
exclusively to Roy’s role as a construction crew supervisor, and that, under a plain
language interpretation, Roy must sell his shares because he has resigned from that
position. By contrast, Roy contends that section 6.01’s reference to “employment”
is best interpreted to include officer and director roles, consistent with the
shareholder agreement’s definition of “Employee-Shareholder.”

¶25 To be clear, if section 6.01 existed in isolation, we would have
concluded that Michael has offered the most reasonable interpretation of that
section. However, we do not read contract provisions in isolation. A provision

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that is unambiguous in isolation may become ambiguous when considered
alongside other contractual provisions (and vice versa). See Maryland Arms Ltd.
P’ship v. Connell, 2010 WI 64, ¶¶39-40, 326 Wis. 2d 300, 786 N.W.2d 15; MS
Real Estate Holdings, LLC v. Donald P. Fox Fam. Trust, 2015 WI 49, ¶43, 362
Wis. 2d 258, 864 N.W.2d 83. Here, section 6.01’s reference to “employment”
becomes ambiguous when read in conjunction with section 3 and the definition of
“Employee-Shareholder” found in section 8.05.04. This is because, as we have
discussed, a plain meaning interpretation of section 6.01 suggests that a
shareholder must sell his shares if he ceases to be an employee of the company.
By contrast, a plain meaning interpretation of sections 3 and 8.05.04 suggests that
a shareholder remains an “Employee-Shareholder,” and need not sell his shares, if
he remains an officer or director but not an employee.

¶26 When we consider the shareholder agreement as a whole, as we
must, neither Michael’s interpretation nor Roy’s interpretation is entirely
satisfying, and both interpretations violate certain canons of construction that
courts use to determine contract meaning. We now acknowledge the problems
inherent in both interpretations, and then explain why we agree with the circuit
court that Roy has offered the least problematic (and thus, the most reasonable)
interpretation of the agreement.

¶27 Roy’s argument that section 6.01’s reference to “employment”
includes his roles as an officer and director is problematic because courts generally
presume that the parties’ intent is conveyed by the words they use in a contract.
Tufail, 348 Wis. 2d 631, ¶26. In some situations, it is reasonable to presume that,
when parties choose to use two different words, they intend to convey different
meanings. Cf. Nelson v. McLaughlin, 211 Wis. 2d 487, 496, 565 N.W.2d 123
(1997) (applying this concept in the context of the legislature’s choice of statutory

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language). Roy offers no reason besides a lack of careful draftsmanship to explain
why the parties used the undefined term “employment” rather than the defined
term “Employee-Shareholder” in section 6.01. Additionally, if Roy’s
interpretation is correct, the provisions in section 6.01 are largely duplicative of
provisions already found in section 3. See Maryland Arms, 326 Wis. 2d 300, ¶45
(“When possible, contract language should be construed to give meaning to every
word, ‘avoiding constructions which render portions of a contract meaningless,
inexplicable or mere surplusage.’”) (quoted source omitted).

¶28 On the other hand, Michael’s interpretation would render definitions
and provisions in the shareholder agreement entirely meaningless. As stated
above, Michael contends that section 6.01’s reference to “employment” refers
exclusively to Roy’s former employment as a construction crew supervisor, not to
his roles as an officer or director. However, Michael offers no persuasive reason
why, if that is so, the parties purposefully included the defined term Employee-
Shareholder in the agreement and defined it to include shareholders who are
officers or directors but not employees. As explained above, section 3
unambiguously provides that Roy can continue to be a shareholder because he
continues to be an Employee-Shareholder by virtue of being a shareholder who is
an officer and director. If, despite this language, Roy must sell his shares under
section 6.01 because he is no longer employed as a construction crew supervisor,
the definition of “Employee-Shareholder” and the provisions in section 3 are
surplusage. See id.

¶29 Based on our independent review of the entirety of the shareholder
agreement, we agree with the circuit court that, despite its flaws, Roy’s
interpretation is more reasonable than Michael’s interpretation. Roy’s
interpretation better harmonizes the contract provisions by avoiding a direct

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conflict between section 3 and section 6.01, and thus, resolves the ambiguity in a
manner that does the least harm to what appears to have been the shareholders’
intent when they entered into the agreement. The only place the defined term
“Employee-Shareholder” appears in the agreement is in section 3, which
specifically states that the company and shareholders “desire to limit the
ownership of stock to Employee-Shareholders.” This is a clear expression of the
parties’ intent. As discussed above, Roy remains an Employee-Shareholder if he
is a shareholder and an officer or director but not an “employee.” Section 6.01
contains a reference to section 3, suggesting that the parties meant these sections
to be read together to protect the same interests and rights. It would be
unreasonable to conclude that section 3 protects Roy’s right to remain a
shareholder by virtue of his continued roles as an officer or a director and, at the
same time, conclude that section 6 eviscerates that same right. Therefore, we
conclude that the references to “employment” in section 6.01 include roles as an
officer or director.

¶30 We now briefly address Michael’s remaining arguments. Michael
argues that only his interpretation results in a consistent interpretation of the term
“employee” and “employment” across provisions of the shareholder agreement.
Admittedly there is some force to this argument, but not enough to overcome the
reasons we have given for concluding that Roy’s interpretation of the agreement is
more reasonable than Michael’s. From our discussion above, it is apparent that
the drafter of the shareholder agreement did not use care to avoid internal
inconsistencies and conflicts, and this particular inconsistency is not as glaring as
the inconsistency discussed above that would result from Michael’s interpretation
of the agreement.

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¶31 Along similar lines, Michael argues that, if section 3’s reference to
“employment” encompasses Roy’s role as an officer or a director, then Roy
necessarily resigned from these roles when he sent a notice stating that he intended
to terminate his employment effective February 1, 2016. But assuming without
deciding that Roy intended to relinquish all positions with the company when he
sent his resignation letter in 2016, Michael does not develop any legal argument,
apart from the contract interpretation we have already rejected, showing that Roy
was obligated to follow through with those resignations. Whatever Roy may or
may not have intended to convey in his resignation notice, he remained an officer
and director of the company through at least 2020, when the parties filed their
summary judgment materials. As stated, the company’s annual filings with the
state department of financial institutions continued to identify Roy as an officer
and director.

¶32 Finally, Michael advances an argument that diverges from the
agreement’s contractual language, and instead focuses on Roy’s actions. Michael
argues that, by offering to sell his shares upon notice that he intended to terminate
“his employment,” Roy effectively acknowledged that the shareholder agreement
obligated him to sell. We reject this argument. Roy might have wished to sell his
shares in the company, but that does not necessarily mean that the language of the
agreement obligated him to do so.

¶33 Because we have concluded that the most reasonable interpretation
of the shareholder agreement does not obligate Roy to sell his shares, we do not
address the parties’ remaining arguments, including their arguments about the
purchase price.

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By the Court.—Order affirmed.

Not recommended for publication in the official reports.

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