FILED 

AUGUST 15,2013 


In the Office ofthe Clerk of Court 


WA State Court of Appeals, Division III 


IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON 


DIVISION THREE 


SENTINELC3, INC., a Washington ) No. 30553-8-111 

Corporation, ) consolidated with 30592-9-111; 

) 30837-5-111; 30881-2-111 

Respondent, ) 

) 

v. ) PUBLISHED OPINION 

) 

CHRIS J. HUNT, an individual and the ) 

marital community, if any, comprised of ) 

CHRIS l. HUNT and CARMEN HUNT; ) 

MICHAEL BLOOD, an individual and the ) 

marital community, if any, comprised of ) 

MICHAEL BLOOD and JANAE ) 

BLOOD, ) 

) 

Appellants. ) 

KORSMO, C.l. - Dissenting shareholders appeal from rulings at summary 

judgment that valued their shares in accordance with the corporation's offer and imposed 

penalties and attorney fees for intransigence. We reverse and remand for further 

proceedings. 

FACTS 

SentinelC3 (Sentinel) is a closely held corporation that facilitates transactions 

between health care providers and medical equipment suppliers. It began in 2003 as an 
No. 30553-8-III consolidated with 30592-9-III; 


30837-5-111; 30881-2-111 


SentinelC3 v. Hunt 


Idaho corporation, but became a Washington corporation in 2010. Its activities that year 

triggered the actions that resulted in this appeal. 

At that time, the biggest single shareholder in the corporation was Chris Hunt with 

1,000,000 shares, approximately 22 percent of the corporation's 4,500,000 total shares. 

Four members ofthe Owens family owned 3,000,000 shares, while Michael Blood and 

Ken Moore each owned 250,000 shares (approximately 5.5 percent). Sentinel attempted 

.1 

, 

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to buyout Mr. Hunt that April. Its expert, James Kukull, using the corporation's value on 1 

f December 31, 2009, valued the shares at $107,200 when using a "minority, 

i 

l 

J 

nonmarketable basis" or at $195,200 on a "control, marketable basis." Mr. Kukull 

i explained that a "control, marketable basis" valuation was the same as "fair value" under 

'I the dissenters' rights statute. The company offered the lower value; Mr. Hunt declined to 

sell. 

! On October 8, 2010, the company became a Washington corporation. At the same 

i 

i time, it proposed a reverse stock split of 1.5 million to one; those with less than one new ,l 

, 

1

share were required to sell their stock. The shareholders voted 5 to 2, with Mr. Hunt and 

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I 

l 

i 
No. 30553·8·111 consolidated with 30592-9-111; 

30837·5-111; 30881·2·111 

SentinelC3 v. Hunt 

Mr. Blood 1 dissenting, to adopt the reverse stock split on October 28, 2010. After forcing 

out the two dissenters, the remaining shareholders instituted a forward stock split that 

issued them the same number of shares of the new stock as they used to own. 

Sentinel paid Mr. Hunt $195,200.00 plus interest in accordance with the greater 

valuation Mr. Kukull had previously made and paid Mr. Blood $48,956.60 plus interest. 

Both Hunt and Blood believed Mr. Kukull's valuation to be out of date. Each made 

counteroffers to Sentinel based on a valuation from an undisclosed professional, 

subsequently determined to be C&H Group.2 Hunt revised his valuation upwards 20 

percent based on the beliefthat a buy-out of Sentinel was imminent. Blood's valuation 

was revised upwards based on his view that there were only approximately 3,000,000 

shares of Sentinel (rather than the original 4,500,000 shares) because of an alleged 

agreement for the company to buy the stock ofsome of the other shareholders. Kukull 

expressed the view that because of falling earnings before taxes, Sentinel's value had not 

significantly changed since his original valuation despite an increase in sales. 

1 Although both the Blood and Hunt marital communities are parties to this action, 

we will refer to them in the singular for convenience. 

2Both men declined to produce the documents supporting the new valuation on 

the basis that C&H was only a consulting expert. 

3 
No. 30553-8-111 consolidated with 30592-9-111; 

30837-5-111; 30881-2-111 

SentinelC3 v. Hunt 

Sentinel instituted an action January 31, 2011, in the Spokane County Superior 

Court to establish the fair value ofthe dissenting shares in accordance with RCW 

23B.13.300. Discovery ensued; Mr. Hunt requested that Sentinel provide business 

records, contracts, and marketing plans going back five years. Sentinel objected on the 

basis that the records were irrelevant to the valuation process, but agreed to disclose if a 

protective order could be worked out. 3 Sentinel filed a proposed protective order on 

August 5,2011, and filed a motion for summary judgment four days later. The trial court 

granted the protective order on September 7. A few weeks later Hunt disclosed Jerry 

Hecker as his expert witness and also filed an answer to the summary judgment motion. 4 

Counsel for Mr. Hunt filed a declaration on October 18,2011, with Mr. Hecker's 

valuation report attached; Mr. Hecker, however, had not certified his report. 

The trial court heard the summary judgment motion on October 21. The court 

found that Hecker's valuation was not admissible through counsel's declaration and 

excluded it while noting that it presented genuine issues of fact that would have defeated 

summary judgment. Both Hunt and Blood had submitted their own affidavits that took 

3 Sentinel indicated a fear that Mr. Hunt might use the information to compete 

with it. 

4 Blood has proceeded pro se while Hunt has been represented by counsel 

throughout the action. 

4 
No. 30553-8-II1 consolidated with 30592-9-III; 

30837-5-111; 30881-2-111 

SentinelC3 v. Hunt 

issue with some ofKukull's work and referenced their own original demands. The court 

granted summary judgment and later awarded Sentinel its attorney fees and costs under 

RCW 23B.13.310. 

The dissenters sought reconsideration and Mr. Hunt submitted an admissible copy 

ofMr. Hecker's report. The court denied reconsideration, commenting only that there 

was "not sufficient cause shown to alter" its decision. Both Hunt and Blood timely 

appealed after the denial of reconsideration. 

The court subsequently entered a judgment in Sentinel's behalf for attorney fees 

and costs. Once again, the dissenters individually appealed to this court. The four 

matters were consolidated. 

ANALYSIS 

This appeal challenges the court's valuation ruling at summary judgment, the 

decision to exclude Hecker's valuation, and the award of attorney fees without 

appropriate findings. We agree with the challenges to the valuation and the attorney fee 

award; those two matters are discussed in that order. In light of our disposition, we do 

not address the exclusion ofthe valuation. 

5 
No. 30553~8~III consolidated with 30592~9~III; 

30837-5~III; 30881-2-II1 

SentinelC3 v. Hunt 

Summary judgment rulings are reviewed de novo since an appellate court sits in 

the same position as the trial court. Hubbard v. Spokane County, 146 Wn.2d 699, 706­

07,50 P.3d 602 (2002). Summary judgment is proper when, after viewing the evidence 

in a light most favorable to the opposing party, there are no issues of material fact and the 

moving party is entitled to judgment as a matter of law. Trimble v. Wash. State Univ., 

140 Wn.2d 88, 93, 993 P.2d 259 (2000). All facts and reasonable inferences are 

construed in the light most favorable to the nonmoving party. Id. Summary judgment 

should be granted ifreasonable persons could reach but one conclusion based on all of 

the evidence. Id. 

Valuation ofDissenters' Shares 

The parties strenuously debate the propriety of resolving a dissenters' rights 

valuation case at summary judgment, with the appellants contending that the trial court's 

obligations under the valuation statute necessitate weighing of evidence and preclude 

resolution at summary judgment. We need not go that far because we conclude that the 

appellants did establish material questions of fact that precluded summary judgment. 

6 

No. 30553-8-III consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

In a dissenters' rights action, a corporation is required to petition a court to 

determine the "fair value of the shares and accrued interest." RCW 23B.13.300(1). "Fair 

value," in tum, is defined as 

the value ofthe shares immediately before the effective date of the 

corporate action to which the dissenter objects, excluding any appreciation 

or depreciation in anticipation ofthe corporate action unless exclusion 

would be inequitable. 

RCW 23B.l3.010(3). These standards are part ofthe current Washington Business 

Corporation Act, Title 23B RCW, adopted by LAWS OF 1989, ch. 165. 

Prior to the adoption of the current provisions, the former corporations act had 

required that the trial court "shall, by its decree, determine the value of the shares" held 

by the dissenters. § 3803-41 Rem. Supp. 1949 (quoted in In re Nw. Greyhound Lines, 41 

Wn.2d 672,677,251 P.2d 607 (1952».5 Noting that the legislature had not developed a 

definition of "value," Greyhound defined it as a word that 

contemplates a consideration of all the facts and circumstances pertinent to 

a particular case in an effort to arrive at a fair and reasonable compromise 

or arbitration which may in some degree be lacking in mathematical 

exactness or certitude. 

41 Wn.2d at 680. 

5 This provision subsequently was codified at former RCW 23.01.450(1) and 

former RCW 23A.24.040. 

7 
No. 30553-8-II1 consolidated with 30592-9-III; 

30837-5-111; 30881-2-111 

SentinelC3 v. Hunt 

The legislature in 1965 changed the statute to reflect the need to give "fair value" 

rather than "value" to the minority shares. LAWS OF 1965, ch. 53 § 83 (repealing LAWS 

OF 1949, ch. 188). In adopting the current Business Corporation Act in 1989, the 

legislature noted that the term "fair value" "leaves untouched the accumulated case law." 

SENATE JOURNAL, 51st Leg., 2nd Spec. Sess., at 2977-3112 (Wash. 1989) (reprinting the 

Comments on the Washington Business Corporation Act prepared by the Corporate Act 

Revision Committee ofthe Washington State Bar Association, §13.01). Since "value" 

and "fair value" mean the same, our courts have continued to apply Greyhound to the 

valuation of dissenters' shares. E.g., Matthew G. Norton Co. v. Smyth, 112 Wn. App. 

865,874,51 PJd 159 (2002); Robblee v. Robblee, 68 Wn. App. 69, 77-78, 841 P.2d 

1289 (1992). 

At the time of Greyhound, the statutory scheme required the trial court to appoint 

an appraiser to value the stock. 41 Wn.2d at 676 (citing § 3803-41, Rem. Supp. 1949). 

The appraiser's valuation was not dispositive; the trial court was to review the valuation 

de novo. ld. at 683,685. Our current statute permits, but does not require, the court to 

appoint one or more appraisers to assist it. RCW 23B.13JOO(5). The court has "plenary 

and exclusive" jurisdiction over the case. ld. The modem statute "retains the concept of 

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I 

f 

I 
No. 30553-8-II1 consolidated with 30592-9-III; 

30837-5-III; 30881-2-111 

SentinelC3 v. Hunt 

judicial appraisal as the ultimate means of determining fair value." SENATE JOURNAL, 

51st Leg., 2nd Spec. Sess., at 3092-3093 (Wash. 1989) (reprinting the Comments on the 

Washington Business Corporation Act prepared by the Corporate Act Revision 

Committee ofthe Washington State Bar Association, §13.30). 

We believe this statutory arrangement thus retains the obligation of the trial judge 

to undertake a de novo review ofthe evidence and not uncritically accept the appraiser's 

report. In this respect the obligation is similar to that imposed in other areas. E.g., 

Richey & Gilbert Co. v. Nw. Natural Gas Corp., 16 Wn.2d 631, 649-50,134 P.2d 444 

(1943) ('" And, while great weight should always be given to the opinions ofthose 

familiar with the subject, they are not to be blindly received, but are to be intelligently 

examined by the jury in the light oftheir own general knowledge.'" (quoting Head v. 

Hargrave, 105 U.S. 45, 49,26 L. Ed. 1028 (1881)); In re Marriage a/Pilant, 42 Wn. 

App. 173,178, 709 P.2d 1241 (1985) (court rejected the testimony ofthe sole expert on a 

pension valuation issue: "A court is not required to accept the opinion testimony of 

experts solely because oftheir special knowledge; rather, the court decides an issue upon 

its own fair judgment, assisted by the testimony of experts."); Suther v. Suther, 28 Wn. 

9 

No. 30553-8-II1 consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

App. 838, 627 P.2d 110 (1981) (court in dissolution proceeding properly valued stock 

differently than experts). 

With this background, we now address the issues presented by the summary 

judgment ruling. First, the dissenters argue that in light of the court's obligation to find 

fair value, the court could never resolve a dissenters' rights case at summary judgment 

because the court must weigh the testimony and determine whether to accept the expert's 

valuation, actions that are contrary to the standards of a summary judgment hearing. As 

a categorical matter, we reject the argument while acknowledging that it has some force. 

This court previously has permitted summary judgment on valuation procedures in a 

dissenters' rights case. See Matthew G. Norton Co., 112 Wn. App. 865 (partial summary 

judgment). We can envision valuation fact patterns that would be subject to summary 

judgment. For instance, if competing experts agreed on the corporation's fair value, but 

one of them improperly applied a discount that our courts have already rejected, we could 

see a trial judge accepting the agreed-upon valuation for the corporation since the fact of 

valuation was not in dispute. The trial court would also, however, have been free to 

reject the valuation altogether. 

10 
No. 30553-8-II1 consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

Nonetheless, the trial court's duty to find fair value and not blindly accept the 

expert's opinion has some play in this summary judgment and informs the court on 

whether a material question of fact exists. Mr. Blood's affidavit, his settlement demand, 

and interrogatory answers were all put before the court at summary judgment. In them, 

he explained that the experts he and Mr. Hunt had consulted had evaluated the company 

at $0.4267 cents per share. He then valued his stock at an even higher rate due to the 

belief that the company had an agreement to buy nearly one-quarter of its shares back 

from some ofthe other stockholders. Mr. Hunt similarly used the consulting expert's 

valuation as the basis for his request before increasing it due to the belief that a sale was 

in the offing. 

We believe these facts established a genuine issue of material fact that went to the 

court's duty in this case to determine the fair value ofthe stock. The court was given a 

valuation of 42 cents per share attributed to an expert that conflicted with Kukuil's 

valuation of 19 cents per share. Although it constituted hearsay and was set forth without 

the reasoning supporting the valuation, this unchallenged evidence still suggested that 

Kukull's valuation was not the sole calculation before the court. The court had a duty 

under the statute to consider all ofthat information in making its determination of fair 

11 
No. 30553-8-III consolidated with 30592-9-III; 

30837-5-III; 30881-2-II1 

SentinelC3 v. Hunt 

value. Given the evidentiary support for Kukull's work, it was reasonable for the court to 

be persuaded by that valuation. Nonetheless, under these facts, that determination 

required the court to consider the dissenters' evidence. While it was understandably 

rejected, the weighing ofthat evidence at summary judgment was improper and needed to 

be done at trial. 6 

The dissenters' valuations, even without the evidence from their trial expert 

Hecker, raised a question of fact under the court's statutory duty in this area. The 

conflicting evidence did not allow the court to determine fair value at summary judgment. 

Accordingly, we reverse the summary judgment order and remand for further 

proceedings. 

Attorney Fees 

In light of our reversal ofthe summary judgment ruling, the award of attorney fees 

necessarily falls. The award also failed on its merits. 

6 The parties do not address, and we do not consider, whether moving the 

company from Idaho to Washington changed its tax burdens or other costs in a manner 

that would have impacted the valuation of the corporation. The change was effective 

prior to the reverse stock split and thus was a relevant consideration, although the record 

does not indicate ifthe change had any significance. 

12 
No. 30553-8-III consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

RCW 23B.13.310 governs the award of costs and attorney fees in these actions, 

which provides: 

(1) The court in a proceeding commenced under RCW 23B.13.300 shall 

determine all costs of the proceeding, including the reasonable 

compensation and expenses of appraisers appointed by the court. The court 

shall assess the costs against the corporation, except that the court may 

assess the costs against all or some of the dissenters, in amounts the court 

finds equitable, to the extent the court finds the dissenters acted arbitrarily, 

vexatiously, or not in good faith in demanding payment under RCW 

23B.13 .280. 

(2) The court may also assess the fees and expenses of counsel and 

experts for the respective parties, in amounts the court finds equitable: 

(a) Against the corporation and in favor of any or all dissenters if 

the court finds the corporation did not substantially comply with the 

requirements ofRCW 23B.13.200 through 23B.13.280; or 

(b) Against either the corporation or a dissenter, in favor of any 

other party, if the court finds that the party against whom the fees and 

expenses are assessed acted arbitrarily, vexatiously, or not in good faith 

with respect to the rights provided by chapter 23B.13 RCW. 

(3) Ifthe court finds that the services of counsel for any dissenter 

were of substantial benefit to other dissenters similarly situated, and that the 

fees for those services should not be assessed against the corporation, the 

court may award to these counsel reasonable fees to be paid out ofthe 

amounts awarded the dissenters who were benefited. 

Subsections (1) and (2) set forth the general principles at issue in this action. The 

corporation will normally bear the costs, including those of appraisal, unless the court 

finds that some of the dissenters acted "arbitrarily, vexatiously, or not in good faith" with 

respect to the payment demand. RCW 23B.13.310(1). The court can award attorney 

13 
No. 30553-8-III consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

fees, as well as expert fees, against the corporation if it does not substantially comply 

with the statute's dissenters' rights processes. RCW 23B.l3.31 0(2)(a). The court can 

assess attorney and expert fees against any party that acts "arbitrarily, vexatiously, or not 

in good faith" under the statute. RCW 23B.13.31 0(2)(b). The amount ofthe award of 

attorney and expert fees must be "equitable." RCW 23B.l3.310(2). 

RCW 23B.13.31O appears directed toward intransigence and unreasonable 

behavior. The legislature expressed the intent ofthis provision: 

Proposed section 13.31 provides that generally the costs ofthe 

appraisal proceeding should be assessed against the corporation. But the 

court is authorized to assess these costs, in whole or in part, against the 

dissenters if it concludes they acted arbitrarily, vexatiously, or not in good 

faith in making the Proposed section 13.28 demand for additional payment. 

Similarly, counsel fees may be charged against the corporation or against 

dissenters upon a finding of a failure to comply in good faith with the 

requirements of this chapter. Individual dissenters, in turn, can be called 

upon to pay counsel fees for other dissenters ifthe court finds that the 

services were of substantial benefit to the other dissenters. 

The purpose of these grants of discretion with respect to costs and 

counsel fees is to increase the incentives of both sides to proceed in good 

faith under this chapter to attempt to resolve their disagreement without the 

need of a formal judicial appraisal ofthe value of shares. 

SENATE JOURNAL, 51 st Leg., 2nd Spec. Sess., at 3093 (Wash. 1989) (reprinting the 

Comments on the Washington Business Corporation Act prepared by the Corporate Act 

Revision Committee ofthe Washington State Bar Association, §13.31). 

14 
No. 30553-8-III consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

In a pair of opinions on the same case, the Washington Supreme Court recently 

dealt with the virtually identical fee provisions ofRCW 25.15.480 that govern limited 

liability companies.7 It stated the standards ofreview in the first opinion: an award under 

the statute is not mandatory, but is discretionary with the trial court and is reviewed on 

appeal for abuse ofthat discretion. Humphrey Indus. v. Clay St. Assocs., 170 Wn.2d 495, 

506-07,242 P.3d 846 (2010) (Humphrey I). In the second opinion, the court clarified its 

holding in the first case with respect to the behavior and standards governing fee awards .. 

As provided in the statute, fees are available only if a party acted "arbitrarily, 

vexatiously, and not in good faith." Humphrey Indus. v. Clay St. Assocs., 176 Wn.2d 

662, 670,295 P.3d 231 (2013) (Humphrey II). The court also clarified that the 

dissenters' actions of declining the corporation's offer and submitting an excessive 

valuation did not violate the statutory standard. Id. 

Neither Humphrey I nor Humphrey II addresses the trial court's obligations in 

addressing a fee request. We believe that consistent with the standards in other attorney 

fee award situations, the trial court is obligated to enter findings of fact and conclusions 

7 The events in this case, including the appellate briefing, occurred between the 

two Humphrey opinions, so the trial court and the parties did not have the benefit of 

Humphrey II. 

15 
No. 30553-8-III consolidated with 30592-9-III; 

30837-5-III; 30881-2-II1 

SentinelC3 v. Hunt 

of law that support its detennination that a party acted "arbitrarily, vexatiously, or not in 

good faith" under the statute. See generally, Mahler v. Szucs, 135 Wn.2d 398, 435, 957 

P.2d 632 (1998) (requiring trial court to apply lodestar formula and enter written findings 

to facilitate review). The failure to enter appropriate findings will nonnally result in a 

remand. Id. 

Application of these principles to this case requires that we reverse the attorney 

fee award. The absence of a record explaining the basis for the fee award at minimum 

would require a remand. Id. However, in light ofHumphrey II, nothing in the record of 

this case supports a detennination of arbitrary, vexatious, or bad faith litigation. The 

dissenters did not accept Sentinel's valuation and, instead, sought their own which they 

then used as the basis for their counterproposals. Litigation ensued when Sentinel did not 

accept the counterproposals. The record does not suggest that either side instigated the 

litigation by behaving improperly, nor does it show that either side engaged in litigation 

conduct that would trigger fees under the statute. 

Sentinel argues that the failure to admit Hecker's report (or any expert opinion) at 

the summary judgment hearing justified the award. For two reasons, it did not. First, the 

failure to admit evidence is not the same as a failure to obtain a valuation. At worst, 

16 
No. 30553·8-111 consolidated with 30592-9·111; 

30837·5·111; 30881·2-111 

SentinelC3 v. Hunt 

assuming some sort of duty even existed, the failure to properly authenticate the report 

only hurt the dissenters and was negligence, not intransigence or arbitrary conduct. 8 The 

dissenters had evidence to support their position and had made the evidence known to 

Sentinel, but they simply did not present it in admissible fonn at the hearing. 

Second, even if the dissenters had behaved vexatiously at the summary judgment 

hearing, such action would not have retroactively made the entire proceedings arbitrary 

or vexatious. An award of fees to address vexatious behavior is proper under the statute. 

Nothing in the statute should be read, however, to shift the entire costs ofthe litigation to 

one party just because of a late stumble in the proceedings. Instead, we read the statute 

as attempting to discourage bad faith and arbitrary behavior by providing a remedy to the 

nonoffending party for all costs associated with the bad behavior. Properly and perfectly 

conducted pretrial litigation does not become vexatious merely because of arbitrary 

conduct during the ensuing trial. As noted in the legislative history, arbitrary or 

vexatious behavior that triggers litigation may properly shift the cost ofthe entire case 

because it causes the ensuing litigation. However, the remedy for later occurring 

8 It appears that the problem arose in the rush to get the report completed and filed 

before the summary judgment hearing. With the benefit of hindsight, it would have been 

better to have continued the hearing, but the failure to do so was not arbitrary conduct 

that harmed Sentinel. 

17 
No. 30553-8-II1 consolidated with 30592-9-III; 

30837-5-III; 30881-2-III 

SentinelC3 v. Hunt 

improper behavior should only reach the consequences of the offending conduct; it does 

not address earlier proper conduct. 

F or the reasons noted, the award of attorney fees is reversed. Both parties seek 

attorney fees for this appeal. We exercise our discretion under the statute to decline their 

requests. Appellants, as prevailing parties, are entitled to solely their statutory costs and 

fees in this action. RAP 14.1, et seq. 

Reversed and remanded. 

> ~c~b 

Korsmo, C.J. 

WE CONCUR: 

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