Court Opinion

ID: 9517357
Source: CourtListenerOpinion
Date Created: 2023-08-07 00:14:37.894052+00
Date Added: 2024-06-11T09:43:58.915085
License: Public Domain

PAULSON, Judge
(dissenting in part).
I dissent to the total value per share determined by the majority in the instant case. As this issue is one of first impression in North Dakota, the majority sought *260the experience of other jurisdictions and, in so doing, concluded that the State of Delaware had the most litigation in this area of law. The majority found that the Delaware cases indicate that all of the relevant factors which may affect the value of shares of stock owned by minority shareholders must be examined and appropriate weight accorded, based upon the facts and circumstances of the particular case, when considering the market value method, the asset value method, and the investment value method. Thus the particular facts of each case are determinative of the weight given each method. It is my opinion that the majority has given an inordinate amount of weight to the testimony given by the Hedahls in this action. This point is demonstratively illustrated by the similarity in the total-value-per-share evaluation found by the majority and the estimated value as expressed by the Hedahls. Certainly the self-serving nature of the testimony given by the testifying litigants must be considered. The majority has discounted much of the testimony of an expert, Charles Bailly, a certified public accountant and an attorney. Although admittedly Mr. Quan-rud’s witness, Mr. Bailly's vast experience in corporate accounting and law must be given greater weight than has been given by the majority. Mr. Bailly emphasized the fact that Q B & R had been a close corporation for many years and thus that a market value method of evaluation would be artificial in nature. Mr. Bailly relied primarily on the asset value of the corporation in making his determination. Little mention was made of the earnings except to demonstrate that losses had been incurred by Q B & R for several years prior to the merger. However, it must be noted that these losses were due primarily as the result of vast reductions in corporate surplus for several years prior to the merger. The reasons for the reduction of surplus were not specifically given at the time of trial. Obviously any number of reasons could be given by way of explanation for this type of activity. Suffice to say that while the earnings of the corporation would ordinarily determine the value of that corporation from an investor’s standpoint, in a close corporation with surpluses greatly reduced, the earnings perhaps played a far less part in the value of stock than, for example, an increase in value when one obtains controlling interest. Thus it is my opinion that had the majority considered all of the factors supporting the methods of evaluation, such as was required by the holdings of the cases which the majority cites, the majority would then have made a more equitable determination by allocating a sixty-five per cent weight to the asset value, a ten per cent weight to the market value, and only a twenty-five per cent weight to the earnings value. Thus we would have a situation where we would take sixty-five per cent of the recognized asset value of $242.81, or $157.83; ten per cent of the estimated market value of $69.00, or $6.90; and twenty-five per cent of the earnings value, which is zero. Then our total value per share would be increased to $164.73. This is a value far less than that estimated by the Hedahls. I consider this to be a more equitable evaluation than that found by the majority, as I have given more consideration to the testimony of the expert witness, Mr. Bailly; while I have also given some weight to the market value as testified to by the Hedahls.
NORBERT J. NUGGLI, District Judge, concurs.