Opinion ID: 2214241
Heading Depth: 2
Heading Rank: 3

Heading: Proposed Buy-Sell Agreement

Text: ś 137 The circuit court held extensive hearings on the meaning of book value. At their conclusion, the court found that `[b]ook value' could mean anything from simple adoption of the year end statement to an audited determination. Memorandum Decision 1 (Jefferson County Cir. Ct. Nov. 29, 2006). It also found that [t]he parties' conduct is insufficient to give definite meaning to the vague term. Id. at 2. The circuit court then concluded that it must grant[] Plaintiff's motion to declare `book value' undeterminable. Id. ś 138 On review, we sustain a circuit court's findings of fact unless they are clearly erroneous. Phelps v. Physicians Ins. Co. of Wis., Inc., 2009 WI 74, ś 34, 319 Wis.2d 1, 768 N.W.2d 615 (citing Steinbach v. Green Lake Sanitary Dist., 2006 WI 63, ś 10, 291 Wis.2d 11, 715 N.W.2d 195). Whether an alleged contract is indefinite can be determined by the trier-of-fact or as a matter of law. Mgmt. Computer Servs., 206 Wis.2d at 178, 557 N.W.2d 67. Here, according to the findings and conclusions of the circuit court, the indefiniteness of book value could not be made more certain by surrounding circumstances. See Gerruth Realty, 17 Wis.2d at 92, 115 N.W.2d 557. ś 139 I conclude that the circuit court's findings are not clearly erroneous and that the proposed buy-sell agreement is incurably indefinite. First, there is nothing in the record from which to ascertain the basis upon which the parties decided that book value was to be calculated, when the proposed agreement was signed. [3] Yet, that is the relevant timeframe for establishing the meaning of book value. See Bank of Sun Prairie, 86 Wis.2d at 674-76, 273 N.W.2d 279. ś 140 Second, while book value is generally accepted as the assets of a corporation less its liabilities, there is no universal method by which a corporation values its assets and liabilities. For example, assets could be valued on a cost basis, a tax basis, a fair market value basis or some other basis. The proposed buy-sell agreement is silent about valuation of Evald's assets and liabilities for purposes of a shareholder buyout. Book value, with no further instructions about what is to be included and on what basis valuation is to be made, is too amorphous a term to provide the definiteness necessary to create an enforceable agreement. ś 141 For example, in Gardner v. Gardner, 190 Wis.2d 216, 527 N.W.2d 701 (Ct. App.1994), the court of appeals upheld a settlement agreement because the wife was informed by separate counsel that there was a difference between book value and the fair market value of certain stock. Id. at 230-31, 527 N.W.2d 701. Therefore, she could not complain that her husband had not adequately disclosed a major asset in the estate, which was listed as book value. Id. In Wisconsin Department of Revenue v. River City Refuse Removal, Inc., 2007 WI 27, 299 Wis.2d 561, 729 N.W.2d 396, we described a computation of book value as subtracting the accumulated depreciation from the original purchase price of assets, during a transfer of assets between a subsidiary and a parent company. Id., ś 8. ś 142 In Schumann v. Samuels, 31 Wis.2d 373, 142 N.W.2d 777 (1966), the parties had a partnership agreement that addressed buyouts upon retirement. In regard to valuation, that agreement provided: [B]ooks shall be kept on ... a cash receipts and disbursements method of accounting, with use of inventories. However, this result is to be achieved by making the daily entries on the accrual system and adjusting them on any valuation date to the cash receipts and disbursements method, with use of inventories. Id. at 374, 142 N.W.2d 777. ś 143 Schumann decided to retire, and Samuels elected to purchase his interest under the above quoted provision of the partnership agreement. Id. at 375, 142 N.W.2d 777. We concluded that even though both parties agreed that Schumann's interest could be purchased for book value, the agreement was nevertheless unenforceable. Id. at 376-77, 142 N.W.2d 777. As we explained, [t]here is no doubt that `book value' can be almost anything that the parties to a contract clearly define it to be. Id. We then remarked that in Townsend v. La Crosse Trailer Corp., 254 Wis. 31, 35 N.W.2d 325 (1948), we said that book value was `the market value of the assets' less the company's liabilities. Schumann, 31 Wis.2d at 377, 142 N.W.2d 777 (quoting Townsend, 254 Wis. at 36, 35 N.W.2d 325). We then imposed Townsend's determination of book value on the parties. Id. ś 144 While we may have reached the correct result for the parties in Schumann, we cannot apply its reasoning here because Townsend did not decide that book value equaled market value of assets less the company's liabilities. Rather, Townsend was a discovery case in a pre-complaint filing posture where the plaintiff wanted to view a list of documents to determine whether he could file a complaint alleging that the balance sheet provided to him was fraudulently constructed. Townsend, 254 Wis. at 36-37, 35 N.W.2d 325. Suffice it to say that the definitions ascribed to book value and the methods used in calculating book value vary considerably from case to case. ś 145 Third, Hauser does not contend that the circuit court's finding, that book value under the buy-sell agreement could mean anything from simple adoption of a year end statement to an audited determination, is clearly erroneous. Instead, he argues that the circuit court incorrectly diagnosed the problem as indefiniteness instead of ambiguity. Hauser's brief in chief, 17. The findings of the circuit court cannot be set aside by simply contending that the legal issue is whether the proposed agreement is ambiguous rather than indefinite. ś 146 I conclude that the proposed agreement is indefinite as a matter of law, irrespective of whether that conclusion is based on the circuit court's findings of fact or is simply derived from the face of the agreement. The circuit court's findings of fact are not clearly erroneous, and there is no explanation in the proposed agreement from which one can objectively determine the basis on which Evald's assets and liabilities are to be valued when calculating book value. Accordingly, I would affirm the court of appeals' affirmance of the circuit court, albeit on a different basis.