No. 84-371 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

FAYE ANN MADDOX, 

Plaintiff and Appellant, 

FRANK A. NORMAN, JR., and 

GLORIA NORMAN and NORMAN 

RANCHES, INC. , 

Defendants and Respondents. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Thomas Olson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Berg, Coil, Stokes & Tollefsen, Bozeman, Montana 

For Respondent : 

Moore, Rice, O'Connell & Refling, Bozeman, Montana 

Filed. .APg t 

Submitted on Briefs: Jan. 24, 1985 

Decided: April 16, 1985 

Clerk 
Mr. Justice Frank R. Morrison delivered the Opinion of the 

Court. 

This is an appeal from the District Court's judgment 

valuing stock, rendered on remand from the original appeal to 

this Court. This Court 's initial decision, published j.n 

Maddox v. Norman (Mont. 1983), 669 P.2d 230, 40 St.Rep. 1463, 

provides a detailed factual account. 

Faye Ann Maddox and T. Donald Norman, brother and sister, brought an action in November, 1980 against their brother Frank A. Norman Jr., mother, Gloria E. Norman, and Norman 

Ranches, Inc., to have a receiver appointed to sell assets of 

the family ranch corporation. This Court affirmed the trial 

judge's d.ecision ordering Faye Madd.ox to sell her 75 shares 

to the corporation. We remanded the case for additional 

testimony supporting valuation of corporate net worth and. 75 

shares of stock. 

In 1961 Frank Norman, Sr. incorporated his family ranch, 

Norman Ranches, Inc. He deeded title to 1140 acres to the 

family corporation in 1963. Frank, Jr., remained on the 

ranch with his father and mother while Faye and Don left to 

pursue other lifestyles. At the time of the initial action 

ownership of corporate shares was allocated as follows: 

Frank, Jr. 849 shares 

Gloria 1 share 

Faye 75 shares 

Don 75 shares 

Prior to commencement of the initial action, the corporation agreed to pay $175,000 for Faye and Don's 150 shares 

of stock, contingent upon financing. The corporation's 

failure to obtain financing caused this agreement to lapse. 

After the complaint was filed, Don Norman entered a settlement agreement with the corporation by which he transferred 
his 75 shares to Norman Ranches, Inc. in exchange for $20,000 

plus 20 acres of corporate land. The trial court found this 

settlement to be fair, reasonable and voluntary and removed 

Don as a party pla.intiff in the action against Norman Ranches, Inc. Faye refused the corporation's offer to settle on 

the same terms accepted by Don. After a bench trial the 

trial judge ordered Faye to sell her 75 shares of ownership 

in the corporation pursuant to the same terms of Don's settlement: $20,000 plus a 20 acre tract of corporate land, 

comparable in value to the land deeded to Don. This Court 

remanded the action to the District Court for evidence supporting the net value of the corporation and the appraised 

value of the proposed 20 acres to be transferred to Faye in 

return for her stock holdings. Appellant appeals the District Court's valuation of her stock ownership. 

On appeal the following issues are presented.: 

I. Whether the court erred in determining the net worth 

of the corporate assets. 

2. Whether the court erred in employing an agricultural 

appraisal to evaluate corporate lands and plaintiff's share 

value, but applying subdivision appraisal to determine the 

exchange value of plaintiff's shares. 

3. Whether the court erred in failing to consider the 

"agreed" value of plaintiff's stock in determining her 

"share" value. 

4. Whether the gain realized by the purchase of the 

Gerva-is section is in part a corporate asset. 

Appellant's four issues may be consolidated into a 

singular dispositive issue: Whether the District Court 

awarded proper value to Faye Ann Maddox for her share of 

stock in Norman Ranches, Inc. 
On remand, this Court directed the lower court to con-- 

sider certain items of evidence in determining the value of 

appellant's stock. These specific items include: 

1. A corporate balance sheet documenting assets and 

liabilities of Norman Ranches, Inc. 

2. An accounting by Frank Norman, Jr., of all corporate 

funds including corporate rental income, lease proceeds, and 

loan proceeds. 

3. A claim by Frank, Jr., and Gloria for any or alllabor or improvements to corporate property. 

4. Appraisals of all the lands proposed to be transferred in exchange for Faye's corporate ownership. 

Having received these accounting documents and appraisals into evidence, the trial judge entered its initial judgment on April 26, 1984. 

In Finding of Fact No. 19, the lower court found: 

"19. The net worth of the corporation as of December 31, 1983 is as follows: 

Fair market value of land and 

improvements $640,000.00 

Balance of 1970 loan to Frank 

Norman, Jr. 52,550.00 

Profits receivable from Frank 

Norman, Jr. 55,800.00 

Cash ( 25.00) 

Less Federal Land Bank note ( 52,550.00) 

Less improvements made by Normans ( 38,090.00) 

NET WORTH 

Faye's 75 shares evidenced. a 7.5 percent ownership in 

the family corporation. Accordingly, the trial judge 

calculated the fair market value of Faye Maddox's stock as 

$49,326.38 which is 7.5 percent of the net corporate worth, 

$657,685.00. 

The trial judge also held the expired $175,000 purchase 

a.greement for 150 sha.res established the "top value for these 
shares" and that Don's settlement agreement of $20,000 plus 

20 acres of corporate land was "the lowest value for Faye 

Maddox's shares. " In Finding No. 16 the trial judge found.: 

". . . Therefore, the value of Faye 

Maddox's shares lies somewhere between 

FORTY THOUSAND DOLLARS ( $4 0,O 0 0 ) and 

EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($87,500.00)." 

At the accepted appraised value of $2,000 per acre, the 

twenty-acre tract is worth $40,000. This land value plus 

$20,000 in cash establishes a "floor" on the value of Faye's 

stock of $60,000 instead of the $40,000 value quoted in the 

initial judgment. 

In its amended judgment on June 12, 1984, the trial 

judge justified the original value of $49,326.38 for Faye's 

stock ownership as follows: 

"Findings of fact number 15 and 16 contain obvious arithmetic errors. The 

value of T. Donald Norman's stock' is 

$20,000 plus the 20 acre tract valued at 

$2,000 per acre, for a total value of 

$60,000. The court cannot rationally 

conclude that this established the lower 

value of the plaintiff's stock because by 

the very nature of a compromise settlement, the ultimate value could have been 

higher or lower depending on whether the 

facts are viewed in favor of either 

party. For this reason findings of fact 

number 15 and 16 are stricken." 

The trial court did not disturb its original decision 

ordering Faye ~addox""to transfer her 75 shares of stock in 

Norman Ranches, Inc. 

The trial judge distributed the total amount due Faye 

Maddox in Conclusion of Law No. 3 as follows: 

'I3 . Plaintiff shall transfer her 75 shares of 

stock in Norman Ranches, Inc. to Norman Ranches, 

Lnc. in exchange for receiving NINE THOUSAND THREE 

HUNDRED TWENTY-SIX AND 38/100 DOLLARS ($9,326.38) 

in cash and a 20 acre tract of land which equals 

FORTY THOUSAND DOLLARS ($40,000.00) worth of real 

estate owned by the corporation. Norman Ranches, 
Inc. shall convey tract A or tract B to Faye Ann 

Maddox . " 

We agree with the trial court's original finding that 

the settlement terms offered to and accepted by T. Donald 

Norman establish the "floor" value of 75 shares of Norman 

Ranches, Inc. corporate stock. Therefore, $20,000 in cash 

plus 20 acres of corporate land is the minimum amount which 

Faye Maddox can be awarded for her 75 shares of stock ownership in the family-ranch corporation. 

The trial court erred by awarding the appellant 

$49,326.38, an amount less than the minimum value of $20,000 

in cash and 20 acres of real estate. Notwithstanding the 

undisputed appraised value of $2,000 per acre for the 20 

acres of corporate land, the assigned cash value of $40,000 

constitutes an erroneous corollary valuation. Even if appellant were to sell the subject tract for a total selling price 

of $40,000, closing costs would considerably diminsh the 

actual cash realized from the sale. The probability of a 

contract sale also reduces the actual cash received from the 

sale of the twenty acres. Furthermore, the cash value of the 

contracts would be considerably discounted on resale. For 

these reasons, it is an erroneous assumption to attribute a 

cash va-lue of $40,000 for twenty a-cres of land. 

We reverse the trial court's decision and remand with 

the direction to pay appellant $20,000 in cash plus the 20 

acres of corporate land already tendered to the trial court 

for transfer to appellant. 

We concur: