IN THE COURT OF APPEALS OF IOWA

No. 14-1412

Filed July 27, 2016

JOHN R. BAUR,

Plaintiff-Appellant,

vs.

BAUR FARMS, INC., and 

ROBERT F. BAUR,

Defendants-Appellees.

________________________________________________________________

Appeal from the Iowa District Court for Madison County, Gary G. Kimes, 

Judge.

Plaintiff appeals the district court’s decision denying his petition for 

dissolution of a closely-held family farm corporation. AFFIRMED.

Douglas A. Fulton and Allison M. Steuterman of Brick Gentry, P.C., West 

Des Moines, for appellant.

David L. Charles of Crowley Fleck, P.L.L.P., Billings, Montana, and Mark 

McCormick of Belin McCormick, P.C., Des Moines, for appellee.

Heard by Vogel, P.J., and Doyle and Bower, JJ.
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BOWER, Judge.

Plaintiff John Baur (Jack) appeals the district court’s decision denying his 

petition for dissolution of a closely-held family farm corporation. The district court 

concluded the corporation’s decision not to purchase Jack’s shares of stock for 

an amount in excess of the fair value of his interest in the corporation did not 

show oppression by the corporation. We affirm the district court’s conclusion.

I. Background Facts & Proceedings

Jack is a minority shareholder, owning 26.29% of the shares in Baur 

Farms, Inc. (BFI), a family farm corporation. Jack is a director of the corporation

and receives $250 per year in director’s fees but is not an officer of the 

corporation. James Baur, Jack’s nephew, is the current farm manager. Robert 

Baur (Bob), who is Jack’s cousin, is the majority shareholder in the company and 

was formerly the farm manager. For several years, Jack attempted to have 

either BFI or the other shareholders purchase his shares. The parties negotiated 

over the period from 1992 to 1997, but there was no agreement on a suitable 

purchase price. The parties disagreed concerning the value of BFI and the value 

of Jack’s shares.

On August 7, 2007, Jack offered to sell his shares to BFI for $1,825,000. 

BFI did not respond to his offer, and on October 10, 2007, Jack filed an action 

seeking dissolution of the corporation under Iowa Code section 490.1430 (2007),

based on a claim of oppressive conduct. He also raised a claim against Bob for 

breach of fiduciary duty. The district court granted summary judgment to 

defendants, finding Jack’s claims were barred by the statute of limitations. We 
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reversed the decision of the district court and remanded for further proceedings.

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See Baur v. Baur Farms, Inc., No. 09-0480, 2010 WL 447063, at *11 (Iowa Ct. 

App. Feb. 10, 2010).

The remanded case was tried to the court in equity on March 1, 2011. 

After Jack presented evidence, BFI and Bob moved for a directed verdict. The 

court granted the motion and dismissed the action. The court denied Jack’s 

motion to enlarge or amend brought pursuant to Iowa Rule of Civil Procedure 

1.904(2). Jack appealed.

On appeal, the Iowa Supreme Court found, “every shareholder may 

reasonably expect to share proportionally in a corporation’s gains.” Baur v. Baur 

Farms, Inc., 832 N.W.2d 663, 673 (Iowa 2013). “When this reasonable 

expectation is frustrated, a shareholder-oppression claim may arise.” Id. The 

court concluded, “The determination of whether the conduct of controlling 

directors and majority shareholders is oppressive under section 490.1430(2)(b) 

and supports a minority shareholder’s action for dissolution of a corporation must 

focus on whether the reasonable expectations of the minority shareholder have 

been frustrated under the circumstances.” Id. at 674. The court also stated, “We 

hold that majority shareholders act oppressively when, having the corporate 

financial resources to do so, they fail to satisfy the reasonable expectations of a 

minority shareholder by paying no return on shareholder equity while declining 

the minority shareholder’s repeated offers to sell shares for fair value.” Id.

The supreme court determined:

 

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 The district court denied Bob’s motion seeking sanctions against Jack. We affirmed 

the district court’s decision on this issue.
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Because BFI is a closely held corporation, Jack has no access to 

an active market in its shares that might allow his realization of a 

return on his equity position. The negotiations for the sale of Jack’s 

stock to the other shareholders at a mutually agreed upon price 

have been unavailing. Without ready access to an active market, 

Jack has effectively been precluded from capturing the increased 

value of his shares because BFI has retained and reinvested its 

revenue in the company over the years rather than paying out 

dividends. As a minority shareholder and nonofficer, Jack will 

remain effectively precluded from capturing any return on his 

shareholder equity for as long as the board concludes income 

distributions are inappropriate.

As a minority shareholder, Jack also lacks voting power to 

force the board of directors to set a book value that is reasonably 

related to the fair value of the company’s assets. Yet, we believe 

the record is not adequate to determine whether the price offered 

by BFI for the purchase of Jack’s shares is so inadequate under the 

circumstances as to rise—when combined with the absence of a 

return on investment—to the level of actionable oppression.

Id. at 676-77 (citations omitted).

The court determined the case should be reversed and remanded, stating:

Although we have defined the legal standard for adjudicating 

Jack’s claim of oppression, we express no view on the question of 

whether the last position taken by BFI during negotiations on the 

price offered for Jack’s interest in the corporation was outside the 

range of fair value and incompatible with the reasonable 

expectations of a shareholder in Jack’s position under 

circumstances including a history of no return on shareholder equity 

during the several decades of the corporation’s existence.

Id. at 677. The court remanded with the following instructions:

The district court shall take whatever additional evidence is 

required for the proper development of the record from which the 

fair value of Jack’s equity interest may be determined. If, after 

taking any additional evidence bearing on this question and 

applying the reasonable expectation standard set forth above, the 

district court finds BFI acted oppressively under the circumstances, 

the court, sitting in equity, has considerable flexibility in resolving 

the dispute.

Id. Additionally, the court stated, “We also note that if, instead, the district court 

finds from the fully developed record evidencing the fair value of Jack’s equity 
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interest that no oppression has been demonstrated by a preponderance of the 

evidence, this action shall be dismissed.” Id. at 678.

On remand, the parties agreed the transcript from the hearing on March 1, 

2011, would be part of the record in the second trial, held on March 18 and 19, 

2014. Telford Lodden, a certified public accountant (CPA), testified concerning 

the taxes the corporation would be required to pay if it liquidated. James Van 

Werden, an attorney, also testified about the liquidated value of the corporation.

The district court found the fair value of Jack’s shares was the market 

value of BFI’s assets, discounted for their liquidation value. The court 

determined Jack did not have a reasonable expectation his shares could be 

redeemed for a greater amount and his request to have BFI purchase his shares 

for $1.8 million was unreasonable. The court also noted BFI did not have the 

resources to pay Jack $1.8 million for his shares. The court concluded, 

“Because his demands have exceeded the fair value of his equity interest, Jack 

has failed to meet his burden to prove oppression by a preponderance of the 

evidence.” Jack’s action for dissolution of the corporation was dismissed. Jack 

appeals the decision of the district court.

II. Standard of Review

A claim of oppression by a minority shareholder is tried in equity and our 

review is de novo. Id. “In equity cases, we are not bound by the district court’s 

factual findings; however, we generally give them weight, especially with regard 

to the credibility of witnesses.” Soults Farms, Inc. v. Schafer, 797 N.W.2d 92, 97 

(Iowa 2011); see also Iowa R. App. P. 6.904(3)(g).
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III. Discussion

A. Jack claims the district court did not adequately follow the directive 

of the Iowa Supreme Court in the previous appeal. The Iowa Supreme Court 

stated the district court should determine “whether the last position taken by BFI 

during negotiations on the price offered for Jack’s interest in the corporation was 

outside the range of fair value and incompatible with the reasonable expectations 

of a shareholder in Jack’s position.” Baur, 832 N.W.2d at 677. On August 7, 

2007, Jack offered to sell his shares for $1.8 million. During the remanded 

hearing, evidence was presented to show BFI did not respond to Jack’s offer 

prior to the initiation of this lawsuit on October 7, 2007. Thus, BFI’s last position 

was its failure to accept Jack’s offer to sell for $1.8 million. On this basis, we do 

not consider the parties’ prior negotiations occurring from 1992 to 1997.

B. Jack claims the court improperly considered the corporate bylaws, 

an amendment to the bylaws, and the expectations of other shareholders on the 

issue of whether the fair value of his shares should be determined by their book 

value. The supreme court noted, “As a minority shareholder, Jack also lacks 

voting power to force the board of directors to set a book value that is reasonably 

related to the fair value of the company’s assets.” See id. at 676. The book 

value for the corporation’s assets was set in 1983 and did not reflect current 

values.

While the district court engaged in a lengthy discussion of book value as 

set by the corporate bylaws, as amended, the court did not ultimately determine 

the fair value of Jack’s shares was their book value. The court stated, “The Court 

holds that the fair value of Jack’s shares under the standard adopted by the 
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supreme court does not exceed the amount of his proportionate share of the 

market value of BFI’s assets, discounted to their liquidation value.” (Emphasis 

added). The court also stated, “The fair value of Jack’s equity interest in BFI in 

the record in this case cannot and does not exceed his proportionate share of 

BFI’s liquidation value.” We conclude the district court did not find the fair value 

of Jack’s shares was set by their corporate book value.2

Jack also claims the district court improperly considered the impact of 

redemption on the other shareholders in determining his reasonable expectations

for his interest in the corporation. The Iowa Supreme Court stated, “We hold that 

majority shareholders act oppressively when, having the corporate financial 

resources to do so, they fail to satisfy the reasonable expectations of a minority 

shareholder by paying no return on shareholder equity while declining the 

minority shareholder’s repeated offers to sell shares for fair value.” Id. at 674

(emphasis added). Thus, whether a corporation has the financial resources to 

purchase a minority shareholder’s shares is a legitimate consideration, and we 

determine the district court properly considered this aspect of the case.

C. Jack states any offers to purchase his shares by BFI improperly 

included a minority discount. The district court did not include a minority 

discount. The court stated the fair value of Jack’s shares was the market value 

of BFI’s assets, discounted to their liquidation value. The Iowa Supreme Court 

stated, “We note, however, our recent disapproval of share valuations 

 

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 The district court’s ruling is somewhat confusing in this regard, and includes 

statements in the Findings of Fact that seem to support the corporation’s book value as 

the value of Jack’s shares. In the Conclusions of Law, however, the court clearly states 

the fair value of the shares is the fair market value of the corporation’s assets, taking into 

consideration the full liquidation tax consequences.
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incorporating a discount for a minority interest in other corporations.” Id. at 669 

n.5. We agree the fair value of Jack’s shares should not include a minority 

discount.

D. Finally, Jack claims the district court improperly concluded a 

liquidation discount should be applied to the value of his shares. The district 

court stated:

The court cannot say that BFI’s insistence on a liquidation 

tax discount, reduced to “present value,” was unreasonable. Both 

Van Werden and CPA Lodden testified credibly that the use of a 

liquidation tax discount is customary in such transactions. Jack 

presented no contrary evidence. With BFI’s low tax basis on its 

assets, a purchase of Jack’s interest would give BFI a substantial 

built-in gain that would constitute a burden on the remaining 

shareholders. No reliable basis existed for determining when the 

remaining shareholders would be hit with the impact of that burden. 

The illustration provided by Lodden regarding the impact of the 

built-in gain is reasonable and persuasive.

Lodden’s testimony is particularly persuasive in light of the 

relief requested by Jack in this lawsuit, consistent with his repeated 

motions at the BFI board meetings for dissolution of the 

corporation. If BFI was dissolved as Jack requested, the amount 

available to BFI shareholders would be its net liquidation value. 

Moreover, Jack has asked for an order of dissolution as one of the 

remedies he seeks in this action. That is the ultimate statutory 

remedy available on proof of oppression. The income taxes are 

only one of the costs that would result from dissolution. Fair value 

for Jack’s shares does not exceed a value that takes the full 

liquidation tax consequences into consideration.

We agree with the district court’s conclusion the fair value of Jack’s shares 

should take into consideration the taxes and other costs that would result from 

liquidation of the corporation. See In re Marriage of Muelhaupt, 439 N.W.2d 656, 

660 (Iowa 1989) (finding the value of a party’s shares of stock should be “subject 

to a substantial discount because such an amount could be realized only upon 
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liquidation of the company”). The testimony of Van Werden, an attorney, and 

Lodden, a CPA, supports the application of a liquidation tax discount.

IV. Conclusion

The Iowa Supreme Court held “majority shareholders act oppressively 

when, having the corporate financial resources to do so, they fail to satisfy the 

reasonable expectations of a minority shareholder by paying no return on 

shareholder equity while declining the minority shareholder’s repeated offers to 

sell shares for fair value.” Baur, 832 N.W.2d at 674. The district court concluded 

Jack’s offer to sell his shares for $1.8 million exceeded the fair value of his 

interest in BFI and, therefore, the corporation’s failure to accept his offer did not 

show oppression. We affirm the district court’s conclusion.

AFFIRMED.