Bohac v. Benes Service Co.
310 Neb. 722
Neb.2022Background
- Benes Service Co. (BSC) is a family-owned C corporation formed in 1966; after the founders died, four sons managed the company and Marlene Benes’s 14.84% interest passed to her estate (the Estate), represented by Karen Bohac.
- Bohac (as personal representative) filed a petition for judicial dissolution alleging wrongful/ oppressive conduct by majority shareholders; BSC responded by electing to purchase the Estate’s shares in lieu of dissolution under Neb. Rev. Stat. § 21-2,201.
- The district court held a bench trial to determine the fair value of the Estate’s 14.84% interest as of September 19, 2018, and found the 14.84% interest worth $2,886,790; the court denied Bohac’s request for attorney fees/expenses and set payment over 5 annual interest-free installments.
- Bohac appealed and BSC cross-appealed. The Nebraska Supreme Court reviewed de novo (equitable action) and with abuse-of-discretion review for payment terms and fee awards.
- The Supreme Court held that (1) the Part 13 (appraisal rights) definition of “fair value” applies to Part 14 elect-to-purchase actions, (2) discounts for lack of marketability and minority status are inapplicable, (3) the proper premise is going concern and the proper methodology is the asset-based approach, and (4) the denial of attorney fees was affirmed; the court vacated the valuation and remanded for recalculation consistent with these rulings.
Issues
| Issue | Plaintiff's Argument (Bohac) | Defendant's Argument (BSC) | Held |
|---|---|---|---|
| Definition of “fair value” for elect-to-purchase under Part 14 | Apply Part 13 (§ 21-2,171(3)) definition (customary valuation techniques; exclude marketability/minority discounts) | Part 13 definitions apply only to Part 13; Part 14 should be interpreted independently | Court adopted Part 13 definition for Part 14 elect-to-purchase actions and applied it here |
| Applicability of minority and lack-of-marketability discounts | Discounts are barred by § 21-2,171(3)(iii); dissenter protections require no discounts | Discounts appropriate for closely held company buyouts; official model commentary allows minority discount under certain sections | Court held neither discount applies in elect-to-purchase actions; equity considerations support exclusion |
| Premise and valuation methodology (going concern vs liquidation; asset vs income) | Highest-and-best-use supports asset-based valuation (experts’ higher asset numbers) | Income approach better reflects ongoing business value; asset approach may overstate value | Court held going-concern premise applies and directed use of asset-based approach (market approach inapplicable) |
| Award of expenses/attorney fees and payment terms | Bohac sought attorney fees and expenses under § 21-2,201(e) and prejudgment interest; argued probable grounds for relief | BSC opposed fees and interest; supported 5-year interest-free installments | Court held attorney fees are not available under § 21-2,201(e) (statute omitted fee language); affirmed district court’s denial of expenses; payment terms left to district court discretion after recalculation |
Key Cases Cited
- Anderson v. A & R Ag Spraying & Trucking, 306 Neb. 484 (2020) (applied Part 13 fair value definition to Part 14 elect-to-purchase action)
- Wayne L. Ryan Revocable Trust v. Ryan, 308 Neb. 851 (2021) (standard of review for payment-term discretion under § 21-2,201)
- Detter v. Miracle Hills Animal Hosp., 269 Neb. 164 (2005) (prior interpretation allowing attorney fees under predecessor statute)
- Estate of Schluntz v. Lower Republican NRD, 300 Neb. 582 (2018) (statutory interpretation and legislative acquiescence principles)
- In re Estate of Hutton, 306 Neb. 579 (2020) (legislative intent can be expressed by omission)
- Link v. L.S.I., Inc., 793 N.W.2d 44 (S.D. 2010) (valuation discussion cited regarding appraisal contexts)
- Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353 (Colo. 2003) (appraisal case discussing enterprise value approach and protection against discounts)
- Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383 (1999) (equitable considerations counseled against minority and marketability discounts in appraisal contexts)