519 P.3d 543
Or. Ct. App.2022Background
- GHP is a closely held family corporation owned equally by four siblings; GHP owns farmland leased to GHE, a related entity owned by two siblings (Steven and Joseph).
- Plaintiffs (two siblings) filed an ORS 60.952(1) shareholder proceeding alleging deadlock and oppression after a dispute over conducting a rent study and lease terms between GHP and GHE.
- After plaintiffs filed, GHP (and the individual defendants) served ORS 60.952(6) notices electing to purchase each plaintiff’s 25% GHP interest; the individual defendants’ offers were contingent on GHP not purchasing.
- Appraiser Daniel Gilbert valued each 25% interest at $437,600, applying a 22% marketability discount; plaintiffs disputed both GHP’s ability to elect and the valuation/discounts.
- The trial court accepted GHP’s election, found no oppression, adopted Gilbert’s valuation (including the marketability discount), and ordered GHP to purchase the shares; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GHP could validly elect under ORS 60.952(6) while corporate directors were deadlocked | Hill: GHP was incapacitated by deadlock; any corporate action (like filing an election) was void | GHP: ORS 60.952(6) expressly permits the corporation to elect to buy the claimant’s shares once a proceeding is filed; the statute displaces internal deadlock formalities | Court: Election was authorized by ORS 60.952(6); trial court properly accepted GHP’s notice |
| Whether the trial court erred by using fair market value evidence and applying a marketability discount to determine fair value | Hill: ‘‘Fair value’’ under ORS 60.952 differs from fair market value; marketability discount was inappropriate (and minority discount allegedly applied) | GHP: Fair market value is a relevant component of fair value in absence of oppression; close-corp illiquidity justifies a marketability discount | Court: Fair market value evidence is relevant to fair value; because court found no oppression, applying a marketability discount was permissible |
| Whether the trial court erred by failing to resolve ownership/disposition of the Hill house | Hill: (asserted) House should be adjudicated as part of remedies | GHP: Court properly limited scope to share purchase valuation under ORS 60.952(5) | Court: Assignment concerning Hill house rejected (issue not addressed further on appeal) |
| Procedural complaint that result was unfair / noncompliance with appellate rules | Hill: Broad claim of unfair outcome | Defs: Procedural noncompliance; merits reviewed as governed by statute and record | Court: Fourth assignment rejected for noncompliance with ORAP 5.40; substantive relief denied |
Key Cases Cited
- Graydog Internet, Inc. v. Giller, 362 Or. 177 (2017) (ORS 60.952(6) election exists to incentivize buyouts and reduce litigation in close corporations)
- Columbia Management Co. v. Wyss, 94 Or. App. 195 (1988) (fair value inquiry should consider market value, asset value, and earnings; marketability discounts appropriate for illiquid close-corp shares absent oppression)
- Cooke v. Fresh Express Foods Corp., 169 Or. App. 101 (2000) (marketability or minority discounts are inappropriate where buyout is remedy for oppression)
- Hayes v. Olmsted & Associates, Inc., 173 Or. App. 259 (2001) (no marketability discount when oppression is established)
- Hickey v. Hickey, 269 Or. App. 258 (2015) (ORS 60.952(5) requires determining fair value taking into account impacts from actions giving rise to the proceeding)