## Facts

- In 1983, Donna J. Taylor and her husband, Reed Taylor, formed AIA Services Corporation (AIA).
- In 1987, Donna and Reed divorced. Under the divorce settlement, Donna received 200,000 shares of AIA Series A preferred stock, making her the sole holder of that class.
- After the divorce, AIA amended its articles of incorporation to provide for redemption of Donna’s preferred shares over a 15-year amortization schedule at an interest rate of prime minus 1.5%.
- In 1993, Donna demanded redemption, and AIA began making monthly redemption payments.
- In 1995, as AIA pursued a corporate reorganization, Donna and AIA entered a written “1995 Letter Agreement” changing the redemption terms to a 10-year amortization schedule at an interest rate of prime plus 0.25%. The change was documented in letters and was not submitted for a shareholder vote.
- In 1996, the parties executed another agreement concerning the preferred shares (the 1996 Series A Preferred Shareholder Agreement). In separate, earlier litigation, the Idaho Supreme Court held the 1996 agreement illegal and unenforceable under former Idaho Code § 30-1-6 (surplus limitations on certain distributions/redemptions).
- While the parties’ disputes continued, AIA stopped redeeming Donna’s shares at the 1995 rate. Donna sued AIA and individual defendants connected to AIA’s management (including AIA’s president and majority shareholder), asserting claims that included breach of contract (based on the 1995 Letter Agreement) and fraud; she also asserted unjust enrichment. AIA filed a counterclaim.
- The district court dismissed Donna’s fraud-based claims under the economic loss rule, rejected her unjust enrichment theory, and ultimately concluded (after reconsideration) that redemption was governed by the 1987 amended articles rather than the 1995 Letter Agreement—finding that all but 7,110 shares had been redeemed under the 1987 terms.
- Donna appealed. Defendants cross-appealed parts of the district court’s rulings.

## Issues

1. Did the district court err by concluding Donna’s share redemption was governed by AIA’s 1987 amended articles rather than the 1995 Letter Agreement, and by dismissing her breach of contract claim tied to the 1995 terms?
2. Did the district court err by dismissing Donna’s fraud claims as barred by the economic loss rule?
3. Was dismissal of Donna’s unjust enrichment claim proper where written agreements governed the redemption relationship?
4. Was dismissal of AIA’s counterclaim against Donna proper?

## Decision

- Reversed the dismissal of Donna’s breach of contract claim to the extent it was based on the 1995 Letter Agreement, and remanded for further proceedings.
- Reversed the dismissal of Donna’s fraud claims, and remanded.
- Affirmed dismissal of Donna’s unjust enrichment claim.
- Affirmed dismissal of AIA’s counterclaim.

## Legal Principles

- A shareholder’s redemption rights may be addressed in corporate governing documents, but the corporation and the shareholder may also enter separate written agreements affecting redemption terms; whether such an agreement controls can present a contract question unsuitable for dismissal when disputed facts and defenses remain.
- A challenge to a corporate contract based on alleged lack of internal authorization must be properly framed and supported; a court should not dispose of a contract claim on that basis where the record and pleadings do not establish invalidity as a matter of law.
- The economic loss rule generally restricts recovery in tort for purely economic losses in certain settings, but it does not categorically bar intentional tort claims such as fraud when the claim rests on alleged misrepresentations rather than only a failure to perform contractual duties.
- Unjust enrichment is generally unavailable when an express contract governs the same subject matter and provides the framework for the parties’ rights and remedies.
- A counterclaim must plead a viable, independent theory of relief; dismissal is appropriate where the counterclaim fails as pleaded in light of the governing agreements and rulings on enforceability.

## Conclusion

The Idaho Supreme Court held that Donna Taylor could proceed on her breach of contract claim based on the 1995 Letter Agreement modifying AIA’s preferred-share redemption terms and on her fraud claims, while leaving in place the district court’s dismissal of unjust enrichment and AIA’s counterclaim; the case was remanded for further proceedings consistent with those rulings.


Taylor v. Taylor, 163 Idaho 910, 422 P. 3d 1116 (2018)