Opinion ID: 2453802
Heading Depth: 1
Heading Rank: 5

Heading: Stock Valuation

Text: [¶ 31] This Court typically reviews a district court's findings of fact after a bench trial to determine if they are clearly erroneous. The factual findings of a trial judge are not entitled to the limited review afforded a jury verdict. While the findings are presumptively correct, the appellate court may examine all of the properly admissible evidence in the record. Due regard is given to the opportunity of the trial judge to assess the credibility of the witnesses, and our review does not entail reweighing disputed evidence. A finding is clearly erroneous when, although there is evidence to support it, this Court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. Helm, ¶ 6, 244 P.3d at 1056; Hofstad v. Christie, 2010 WY 134, ¶ 7, 240 P.3d 816, 818 (Wyo.2010); Mullinnix LLC v. HKB Royalty Trust, 2006 WY 14, ¶ 12, 126 P.3d 909, 916 (Wyo.2006). [¶ 32] The Judgment in this case, however, is not typical. As already noted, the Judgment entered by the district court is in effect identical to the proposed findings of fact and conclusions of law presented to the district court by Dr. Ford. Not even typographical errors were corrected. More egregiously, substantive errors also exist. For instance, the Judgment refers to exhibits that were never admitted and incorrect transcript cites. [¶ 33] Although proposed findings of fact and conclusions of law submitted by the parties are helpful to a court, the court must exercise its independent analysis in reaching the final judgment. This does not mean that it is per se improper for a court to adopt, in toto, the proposed findings and conclusions of a party, but a judgment should reflect the studied decision of the court. This Court has stated: Speaking first to the degree of inquiry called for in this case, we note that findings and conclusions prepared by counsel and adopted, more or less verbatim, by the trial court may be less helpful on review than findings and conclusions drawn by a disinterested person. See, Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., 10 Cir., 497 F.2d 285, 287 (1974). Nevertheless, findings rendered under such circumstances will stand if supported by the evidence. United States v. El Paso Natural Gas Co., 376 U.S. 651, 656, 84 S.Ct. 1044, 12 L.Ed.2d 12 (1964). In appropriate cases, the circumstances may lead to a more searching inquiry for error, In re Las Colinas, Inc., 1 Cir., 426 F.2d 1005, 1010 (1970)[.] First Nat'l Bank of Lander v. First Wyo. Sav. & Loan Ass'n, 592 P.2d 697, 702-03 (Wyo.1979). In First National Bank, the Court found that a more searching inquiry was not necessary because the record reflected that the trial court gave the parties a great deal of preliminary guidance in drafting the proposed findings and conclusions. Unfortunately, the record before us contains no such indicia of involvement by the district court. Under the circumstances, we lack confidence that the judgment adequately reflects thorough consideration by the district court. As such, we will review the evidence behind the findings of fact more thoroughly than is customary. [¶ 34] Under the 2003 Formula, there are two components to valuing OJH stock. The first component is accounts receivable. The second is fixed assets. As a reminder, the 2003 Formula states: For a Shareholder redemption in the event of death or termination, Shareholder's individual AR continues to pay the Shareholder less a 10% collection fee and any of the collection rate less any liability associated with acquiring the shareholder's AR from Ortholink in the 2003 restructuring. Fixed assets less liabilities for fixed assets divided by the number of Shareholders will be the calculation for the balance of the valuation. Further, the language addressing the value of patient records is to be deleted. [¶ 35] We turn our attention first to fixed assets because this is the biggest point of contention between the parties. OJH claims that, as of December 31, 2005, the net value of any fixed assets it owned was zero. Dr. Ford, on the other hand, calculates several hundred thousand dollars worth of fixed assets. Part of the discrepancy arises because the parties do not agree on the definition of fixed assets. OJH's expert defined fixed assets essentially as tangible items that could be depreciated, such as equipment, chairs, tables, computer systems, etc. Dr. Ford's expert gave it a much broader meaning. He testified the term fixed assets was an acronym for total assets. [¶ 36] The resolution of the issue of the definition of fixed assets requires us to construe the language of the 2003 Formula. Construction of the language of a written agreement being an issue of law, we engage in our review of the language of the 2003 Formula de novo. Our goal is to discern, and give effect to, the intent of the contracting shareholders. In order to determine the intent, we look first to the plain language of the contract. Terris v. Kimmel, 2010 WY 110, ¶ 7, 236 P.3d 1022, 1025 (Wyo.2010); Double Eagle Petroleum & Mining Corp. v. Questar Exploration & Production Co., 2003 WY 139, ¶¶ 7-8, 78 P.3d 679, 681-82 (Wyo. 2003). [¶ 37] The term fixed asset has a generally accepted definition. The following definitions for a fixed asset are representative: An asset not readily convertible to cash that is used in the normal course of business. Examples of fixed assets include machinery, buildings, and fixtures. David L. Scott, Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor (Houghton Mifflin Harcourt Publishing Co. 2010), found at http://invest.yourdictionary.com/fixed-asset; [a] long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. Fixed assets are sometimes collectively referred to as `plant'. http://www.investopedia.com/terms/f/fixedasset.asp; capital asset [also termed fixed asset]: a long-term asset used in the operation of a business or used to produce goods or services, such as equipment, land, or an industrial plant. Black's Law Dictionary 134 (9th ed. 2009). [¶ 38] Along with this generally accepted definition, we can also look to the circumstances surrounding the execution of the document in determining if there is any ambiguity in the language. Davidson Land Co., LLC v. Davidson, 2011 WY 29, ¶ 14, 247 P.3d 67, 72 (Wyo.2011); Ecosystem Res., L.C. v. Broadbent Land & Res., L.L.C., 2007 WY 87, ¶ 10, 158 P.3d 685, 688 (Wyo.2007). In the instant case, the 2003 Formula was instigated by the Second Amended Service Agreement with Ortholink that provided that Ortholink was no longer obligated to provide OJH with capital assets. Thus, in the future, OJH would be acquiring fixed assets in its own name. The shareholders of OJH wanted the stock valuation to reflect the value of those fixed assets. Given the language and the circumstances, we find the intent of the shareholders is clear. The term fixed assets was used by the shareholders in the 2003 Formula in its generally accepted definition as identified above. [¶ 39] Dr. Ford itemized categories of assets he included in his calculation, making it simple to apply this definition. Among the assets he listed cash in hand and the Ortholink Service Agreement. These two assets plainly do not fit the definition of a fixed asset as used in the 2003 Formula. They therefore must be removed from the calculation. [¶ 40] The other major point of contention in determining the value of fixed assets concerns the capital assets owned by Ortholink and used by OJH in its practice. Pursuant to the Second Amended Service Agreement, OJH pays Ortholink a fee for the use of the assets. The fee is set according to Ortholink's depreciation schedule. After Ortholink fully depreciates a capital asset, it transfers ownership of that asset to OJH by means of a bill of sale for no further consideration. [¶ 41] OJH looks solely to title to determine the ownership of the capital assets. Ortholink has title until such time as Ortholink issues a bill of sale to OJH. Title is then transferred, but the purchase price is zero. Dr. Ford, on the other hand, claims this procedure in reality is a lease-to-own arrangement. Thus, Dr. Ford argues the value of the capital assets being used by OJH should be credited to OJH's books, with Ortholink having a security interest in the assets until full payment is received. [¶ 42] We need not delve into the merits of Dr. Ford's contention because even if he is correct, there is a basic failure of proof. The 2003 Formula calls for fixed assets minus liabilities for fixed assets. The only evidence presented by Dr. Ford was what he contended was the actual amount paid by OJH to Ortholink for the use of certain capital assets since 2003 when the second amendment was signed. He presented no evidence as to the actual value of the capital assets as of December 31, 2005. No consideration was given to the fact that, if an item had been paid off, then it had probably been in use for many years and thus of considerably less value than what OJH had paid over time. Also not taken into consideration is the fact that, if OJH was still paying for the use of an item, then under Dr. Ford's lease theory there was a corresponding liability. This failure of proof requires we remove this category of assets from Dr. Ford's calculation. [¶ 43] There is one fixed asset both parties agree on. OJH bought a computer hardware and software system in its own name. This computer system does constitute a fixed asset and is properly included. Dr. Ford has it listed for the purchase price minus depreciation. The evidence, however, discloses OJH borrowed the money to purchase the system and there is still outstanding debt. Dr. Ford failed to present any evidence regarding the amount of this debt or apply such debt to the value of the computer system to determine if any equity remained in the computer system. This failure of proof requires this asset be removed from Dr. Ford's calculation. [¶ 44] Dr. Ford listed no further categories of fixed assets. Given our determination that all the assets presented by Dr. Ford either did not meet the definition of a fixed asset or were not properly proven, Dr. Ford is left with no evidence that OJH had fixed assets that exceeded liabilities. Thus he is entitled to no recovery under the fixed assets portion of the 2003 Formula. [¶ 45] Turning to the AR component of the 2003 Formula, the parties actually are in fairly close agreement as to the amount owed. At trial, Dr. Ford was shown the calculations of this component prepared by OJH. OJH had calculated his AR at $183,543. Dr. Ford accepted the number as accurate. OJH then subtracted the ten percent collection fee to arrive at the net AR. From the net AR, OJH subtracted Dr. Ford's share of the liability associated with acquiring the shareholder's AR from Ortholink in the 2003 restructuring. OJH came up with what it termed equity value of $67,656. Dr. Ford agreed with the calculations to this point. From that number OJH deducted $4,749 for accumulated payroll deficit, leaving a net due to Dr. Ford of $62,907. Dr. Ford disagreed with this deduction. We agree with Dr. Ford that the accumulated payroll deficit should not be deducted from the amount owed. The 2003 Formula speaks of AR minus certain specifically delineated liabilities. The calculation of the value of Dr. Ford's share of stock ends at that point. We find the amount owed to Dr. Ford, as accepted by him at trial, is $67,656.