*1 BROTHERS, In re GLOSSER INC. BROTHERS,
Appeal of Appellant. GLOSSER INC. BROTHERS, In re GLOSSER INC.
Appeal WURZBURGER, Individually, Wurzburger, of W.S. Keough, Inc.,
Morrow and and Morton Glosser, Appellants.
Superior of Pennsylvania. Court 5,
Argued May 1988.
Filed Jan. 1989.
Reargument Denied March 1989. *4 O’Connor, Edward G. Pittsburgh, appellant for in no. 1052 and appellee no. 92. CIRILLO,
Before Judge, BECK, President and and POPOVICH, JJ.
BECK, Judge: This is an appeal cross-appeal and from a trial court determination of the fair value of the common stock of Bros., appellant/cross-appellee (the Glosser Inc. “Compa- ny”). impetus for the trial court’s valuation was a petition by Company for a determination of the fair value to paid to appellees/cress-appellants, shareholders who dissented from management spon- sored leveraged buy-out merger of the Company pursu- ant to Section 515 of the Corporations Business Law. 15 (1967 Pa.Stat.Ann. Supp.1988). & §
I. Background is a Pennsylvania corporation with its prin-
cipal office headquarters Johnstown, Pennsylvania. It operated stores, a chain of 24 discount department stores, outlet a conventional department store and a chain *5 At the time to appeal, relevant supermarkets.
2,269,000 shares the common stock were Company’s outstanding. stock listed on the Ameri- issued and was Exchange. (50-60%) to Fifty percent can of the sixty Stock closely management the by stock held and was members In the family. publicly The remainder was traded. Glosser to prior the announcement of instant trans- six months (the merger), average action the stock traded at an rate 30,000 40,000 shares month and at an approximately per years prior share. In the two average price per $14.00 average monthly trading slight- volume merger, was was ly higher, average trading price substantially but In the years prior merger, the same. three of the stock never exceeded price market $19.00. 28, 1985, the announced a January Company proposed On merger all of the common stock of the whereby acquired exchange payment for a cash would be of the per goal shareholders of share. The transaction $20 of the to a small to shift control apparently was group, working This with the New group. management Co., Bear B.S. York firm of Stearns & formed investment in turn Holding, Gee Bee which Holding Corporation, now called B.S. wholly subsidiary Acquisition formed owned the offer for Corp. corporation buy-out The latter made Company’s proposed merge stock with merger approved the vote proposed by Company. meeting of the shareholders at a majority of a substantial effec- merger held became September 11,1985. Thus, the net result was that B.S. tive on October merger the survivor of the and now Acquisition Corp. was Acquisition wholly B.S. is Company’s owns the business. Holding, Bee which turn controlled owned Gee management group Company. the former dissenting are three share- Appellees/cross-appellants Glosser, holders, Wurzburger and namely, Morton W.S. Mor- corporation, Wurzburger, owned Wurzburger’s wholly pro- refused to accede to the Keough, They row Inc. & share contending per price that the posed merger, $20 their stock did not represent *6 offered for Acquisition B.S. Therefore, required Section the fair value thereof. action 515, appraisal this for an Company instituted named petition The Morton Glosser Company’s the stock. dissenter, Wurzburger did not name or his as a but Wurzburger corporation peti- and his corporation. Mr. intervene, petition granted.1 their tioned to rather appoint appraiser, The trial court did not but jury consisting mainly conducted a trial without day several of methods of regarding variety of expert testimony the stock. The trial court determining the fair value of the fair value of the stock determined that ultimately share and assessed interest at per should fixed at be $31.00 (8%) merger. the date of the eight percent the rate of from by assigning sixty-five The trial court arrived at this value (65%)to it determined to be the asset percent weight what (35%) percent weight to thirty-five value of the stock and it determined to the investment value of the stock. what gave weight The court no to the stock’s market value as determined at which it traded on the American price Exchange. Stock
II. Valuation Issues challenges the trial court’s valuation Company one of which we find to have merit. grounds, only
several all of the Company’s properly We will nevertheless address purpose for the to the valuation preserved objections on remand. guiding the trial court
A. Review Scope of appeal of review in an scope note that our
Initially we
of value under Section 515
from a trial court determination
In
in our case law.
In re Jones &
clearly
has been
defined
propriety
appeal by
is the
raised on
1. One of the issues
petition
grant
shareholders’
to intervene.
of the trial court’s
of these
not follow the
these shareholders did
contends
appraisal
requirements
perfection of a dissenter’s
of Section 515 for
fully
more
set
right.
pertinent
to this issue will be
forth
The facts
below.
A.2d 527
Corp.,
Steel
Pa.Super.
Laughlin
scope
our
of review as follows:
(1984),
described
O’Connor, 444 Pa.
case of Appeal
first look to the
scope
determine our
(1971) in order to
stated:
court
of review.... the
[O’Connor
]
an ascer-
appeal encompasses only
Our review of
trial court are
findings
of whether
tainment
evidence. We
competent and substantial
supported by
independent
that we make an
request
reject appellant’s
‘This
of her shares:
to the fair value
determination as
expecting
trier of issues of fact
not sit as a
court does
is more
one or the other side
persuaded
to be
the trial court and we
a task for
That is
credible.
*7
judicial process.’
area of the
invade that
would never
omitted).
citations
(Footnotes and
O’Connor,
A.2d at 280.
supra,
283
Appeal of
noted that substantial
court further
The O’Connor
means such relevant
a scintilla.
It
is more than
evidence
adequate
as
might accept
mind
a reasonable
as
evidence
a conclusion.
support
also
See
457-58,
at 534-35.
477 A.2d
Id. 328
Pa.Super. at
Note,
(1973);
287,
In of the determination independent making an refrain from Thus, Compa- although stock. Company’s value valuation, as particularly error as to allegations ny’s motions, no more than points are at post-trial stated in its decision, will court's on the trial attacks generalized pre- specifically both that were those issues address to this properly presented court and in the trial served court. Market Value
B. Relevance of to the objections strongest Company’s One refusal to court’s on the trial centers trial court’s valuation assign any weight market of the stock. value agree that this was error. leading Pennsylvania defining case the methodology in valuing stock a
for Section 515 is the proceeding second Appeal, by O’Connor decided in Supreme Court 1973. Appeal, (1973). There, 452 Pa. O’Connor A.2d 694 Supreme Court instructed that fair value is to be value, construed going concern as liqui- contrasted with dation value. The court noted that there is a potentially endless list of factors that are considered relevant to this value. The “going concept concern” of fair dissenting appraisal shareholders’ proceeding and the many individual factors it comprising aptly were described Delaware Supreme Court Corp. Tri-Continental v. Bat Del., tye, (1950): A.2d concept basic of value under appraisal is that the
stockholder is entitled to be for that paid which has been him, viz., taken from his proportionate going interest concern. By value of the stockholder’s proportionate interest the corporate enterprise is meant the or true intrinsic value of his stock which has been taken merger. In determining figure what represents this true value, or appraiser intrinsic and the courts must take into consideration all factors and might elements which reasonably Thus, enter into the fixing value. market *8 value, value, dividends, asset earning prospects, the na- enterprise ture of the and any other facts which were known or which could as of be ascertained the date of the merger and any light which throw on future of prospects the merged corporation pertinent are not only any as to the inquiry dissenting stockholders’ interest, fixing but must be considered the agency the value. at 72.
Id. The O’Connor court noted that courts had dis- properly tilled all of principal these factors into three valuation methods, (1) value; (2) i.e. value; net asset actual market (3)
and The court defined investment value. these valuation as follows: methods
Net is the share which the stock represents Asset Value in of net assets of corporation. the value the the Such value, assets include kind of and every property whether including personalty, tangible intangible, or and realty good corporation’s going will and the value as a concern. in present Investment Value is an estimate worth light present prospective and financial records of past, capitalizing earnings. and company is obtained in steps capitalization There are process: two basic representative earnings figure, calculation of a annual and choice of a ratio which reflects capitalization predictability earnings particular stability corporation. price at the stock was
Market Value refers
which
selling
prior
objected
on the market
to the action which is
to,
change
due to the action.
disregarding any
price
O’Connor,
7,n.
A.2d
n. 7.
However, opinion do read the as limit O’Connor only court to a consideration of these three ing trial 291-92, Id., Pa. 304 A.2d at valuation methods. at Financial has become com analysis increasingly 697-98. valuing of time. New methods of plex passage with developed generally accept have been and are investments recogni In community being ed the financial reliable. fact, tion of restrict jurisdictions previously this other foregoing valuation methods ed trial court three types have valuation information expanded now For proceeding. in a stock valuation may be considered (Del. UOP, Inc., 457 example, in v. A.2d 701 Weinberger Delaware, 1983), exper for its Supreme known Court matters, directed that Delaware courts would tise in these only no to use the traditional “Delaware longer be bound average approach By to valuation. weighted block” or method, generally Pennsylvania is still use which case, in the instant the trial court applied by which was three traditional methods of valúa court considers *9 tion, a result assigns percentage weight each and adds the Weinberger ing to come a total value. amounts approach found this too restrictive and directed that court approach courts henceforth use a “more liberal [which] of proof any techniques include value or methods by must financial generally acceptable which are considered court____” Id. at community and otherwise admissible 712-13. do not of the three
Although question reliability we valuation, methods of we do recognize they traditional determining are the exclusive methods to be used in not of the Weinberger going approve ap- concern value. We proach to valuation. Such broader attitude O’Connor recognition with the court’s that all comports considered, also factors relevant to value should be but will trial in their greatly to assist courts difficult valuation serve allowing perhaps task them to consider a broader and information. sophisticated range more of specific consider more Against backdrop, market value to a determina- question of the relevance of fair of in the context of a Section tion of the stock indicia has of this of value been proceeding. relevance of of Delaware as Chancery described the Court aptly follows: is, course, if is an established
It axiomatic that there the market value corporation market for shares of a ap- must into such shares be taken consideration And if no reliable praisal of their there is intrinsic value. for the shares a reconstructed market value established made, must value, given if one consider- market can be is, course, that market equally It axiomatic ation. constructed, sole element value, either actual not the or in the of stock. appraisal taken into to be consideration Association, 42 Del.Ch. Racing Application Delaware Henn, (1965). See also H. 406, 213 A.2d (3d J., at 1002-03 Corporations Law Alexander, § 1983) (“In there is reliable market ed. situations where is, value, presumptively many jurisdictions, such value *10 market one jurisdictions, in other value is controlling; course, no to considered Of when there is factor be ... value, various indi- readily-ascertainable market alternative weighted must and cia value be considered .. Thus, is to a of the market value relevant determination going on a concern basis true intrinsic value stock reliable, it represents it is i.e. whenever whenever the stock willing buyer willing pay amount that a is for seller to sell willing willing the amount for which a is market.2 open the stock in an and free Market value in reliability may less relevant as its decreases and becomes no provides deemed irrelevant where it properly fact be stock. reliable information as to the true value of the In Pennsylvania cases are in accord with this view. itself, although found O’Connor Supreme Court that relevant, market the market value may generally guidance issue no as to true value. provided stock at The Court stated:
This where a certain method presents case instance whatever____[the compa- has no applicability valuation unlisted corporation having ny] closely-held family therefore, no market. are sold stock and Shares public part for infrequently play any too market value proceedings these ...
Id.
n.
We concur conclusion fact outstanding shares of a are percentage corporation entity group held one or can indicate that the closely guide is an remaining market value of the shares unreliable Jones, Appeal, to true value. See O’Connor su- supra; trading thin in the agree remaining We also pra. of market Id. reliability shares decreases value. How- case, ever, under precise facts of it is unwarranted weight market to conclude that no is to be accorded value. held, Here, closely the stock was only 50-60% of control that existed in compared to 80-100% levels disregarded. has been those cases where market value remaining in the stock was Although trading *12 thin, exchange a the stock listed on national admittedly was Moreover, Jones, traded. unlike this is steadily and was of manipulation a case there was evidence of any where exercise of the market or the of control the market the Finally, do not see the family management group. we been having lack “national research” relevance the Company’s unquestionnably on stock. It would done the court in require were the trial open a Pandora's box we indepen- much appraisal investigate matter how every con- investment information was available dently generated in order to cerning a stock before it was traded listed reflecting accurately market was the determine the how stock’s value. analogous most to the recent closely
We find case this Inc., 369 Industries, Pa.Super. In Spang case of re 9/13/88), the (1987) (allocatur denied court A.2d 86 where only at weighting court’s of market value the trial affirmed as (10%). The court this conclusion justified percent ten follows: traded, find the stock had been publicly Industries’
As included market value his valuation judge properly trial since agree We with the trial court that considerations. stocks the stock majority Industries owned of the traded, “controlling it had a and restrictive” lightly was mini- traded. Thus remaining being effect on the shares given consideration. mum value should to that Id., at A.2d at 90. Pa.Superior Ct. the Company’s reach the same conclusion here. Since traded, con- was albeit and since the publicly thinly,
stock group manipu- held thereof and did not trolling only 50-60% value, disregard- market the trial court erred totally late remand, court instructed market value. On the trial is ing in its to a include market value valuation considerations opinion.3 this degree consistent with Net Expert and Exhibits Relevant Testimony C. Asset Value strongest objection the to the trial
Perhaps Company’s of one of the testimony valuation centers court’s witnesses, Mr. expert Medwig, who dissenting shareholders’ Med- as to net asset of the stock. Mr. testified value experience is a tax accountant with wig, basically who valuation, that asset of the stock testified the net value necessarily was stock was share. This valuation per $38.00 going conclusions as to true upon Medwig’s based assets, Company’s which value was concern ground Judge Popovich that it was to this conclusion on 3. dissents disregard market value this within trial court’s discretion to Popovich significant concluding, Judge regards as the fact case. In so higher average than market Company’s $20 own offer indicating Company’s Judge Popovich own value. sees this as value. In true indicator fair distrust market value contrast, only did not significance fact see market value as the sole indicator of fair value. This reveals *13 teaching relevant law cited Company case that the was aware only many one of factors that text which market value as includes determining may value. be considered fair then allocated on per share basis. The trial court noted that there had also been testimony by expert for the Company to the effect that the net asset value of the stock share, per was creditted Medwig’s but Mr. analysis $19.00 per and found a share asset value of $38.00. above,
As stated gave the court no weight to the market value the stock and opined that it would rely primarily on this asset value and to a lesser degree on the investment value as to other expert However, witnesses. testified in light of what court saw as an “obvious adversarial atmosphere”, the court reduced its reliance on the net asset (65%) value to sixty-five percent (35%) and attributed investment value. As construe the trial court’s opinion, the court actually viewed this case as one where the asset value of the stock was the most reliable indicator of true However, going concern value. the court was also aware that the data it provided was on this value was influenced by the adversarial positions parties and their witness- fact, es. In recognition of this attempted court to arrive at an equitable by reducing result its reliance on net asset value and giving more credit to the much lower investment value than the court was to otherwise inclined accord it. does not object every portion of Mr.
Medwig’s testimony. They consistently have admitted that Mr. Medwig qualified testify was to the asset stock insofar as he Company’s used “a balance-sheet oriented” as approach, using Compa his source material the ny’s own financial records. The Company also does not object Medwig’s figures reliance on value provided Inc., an appraisal performed by Appraisals, Industrial which the had clearly adopted being correct. The Company Medwig’s finds fault with Mr. testimony underlay with sources that it insofar as Mr. Med- wig permitted testify as to the value of the Compa fixtures, ny’s equipment, improve vehicles and leasehold ments appraisal on the basis of another of those assets performed Company’s request by at Manufacturers’ *14 as of certain leases and to the value Appraisal Company of on Mr. calculation their value.4 Medwig’s based own apprais- The contends that the Manufacturers’ Company Mr. Med- al, part admitted evidence as which was into calculations, his was inadmissible wig’s documentation of no called to since one from Manufacturers was hearsay Thus, the Company argues testify appraisal. as Mr. on the thereof was inadmissi- Medwig’s testimony basis being on facts not admissible into properly ble based court, objects Company’s Company 4. In the this the also the brief to grounds on other in addition to those trial court’s asset valuation two specific objections Medwig’s testimony which are discussed in to Mr. Medwig generally objections are that Mr. relied on text above. doing accounting internally in his incorrect and inconsistent methods dissenters, expert the and another witness for Mr. asset valuation Reed, which employed a method variant an asset valuation totally unreliable. they specifically were We find these issues waived in that not possible post-trial preserved in Pa.R.C.P. 227.1. The motions. may challenges be found in reference to such to the asset valuation generalized post-trial Company’s statements that the trial court’s general These statements of error do asset valuation was incorrect. preserve appeal. not issues on issues, not We also note that were we to consider these we would find reversible error. additionally Company’s brief the note that footnote mentions, argument, alleged Company legal er- without three other Questions Company’s appear in Statement of rors. None of these are, therefore, 2116. How- section of its brief and ever, waived. Pa.R.A.P. perhaps points recon- one of these does merit clarification Mr. Reed's court on remand. This concerns sideration trial testimony. Company states that the trial court arrived valuation high figure of the stock consider- at too for the investment value value, ing testimony to whereas in Mr. Reed’s be about investment Company argues to a variation asset fact the that Mr. Reed testified precisely before us We cannot determine on record valuation. Although testimony classified. should be how Mr. Reed’s valuation applying variant of an asset value Mr. method, he was his own Reed stated that actually computing he an overall "fair that was he also stated Mr. characterized Reed’s value” The trial court itself stock. nisi, testimony but the final decree as asset the decree valuation per appears Mr. Reed’s share value $43.00 the court have included above, As we could consid- in the calculation. noted investment value However, appears to be confusion because there er issue waived. relied Mr. Reed’s exactly construed and as to how the trial court matter in testimony, light that we must remand the of the fact text, clarify any explained in the trial court should event for reasons The evidence. also objects Medwig’s re- his own liance on calculation of the value of certain of the leases on ground that he Company’s qualified such to make a calculation.
Appellees/cross-appellants counter that both Manu- appraisal facturers’ and Mr. Medwig’s testimony on the thereof was basis admitted. As properly appraisal itself, they argue that since the ordered the *15 appraisal, referred to it in proxy concerning their statement transaction, used in instant it analyzing whether the might adopt a certain tax of this treatment trans- action, adoptive it constitutes an admission of Company. Alternatively, that appellees argue assuming even that the appraisal was hearsay, Medwig’s opinion inadmissible on the thereof basis was nevertheless admissible under the of Federal Rule Evidence theory permits of which an on of in expert testify reports the basis not evidence not if report and/or admissible into evidence is “of a type reasonably upon by experts particular relied in the forming field in or opinions subject.” inferences on Appellees argue 703. also Mr. Medwig Fed.R.Evid. that qualified place a value on those of the Company’s had else by anyone using leases that not been valued an method of accepted conservative valuation based on leases in the same area. comparable in Preliminarily issue, note reviewing we that this we must remain mindful of our of scope not limited review above, of as set valuation determinations forth but also of discretion great concerning that is vested a trial court of the evidence. Bessemer Stores questions admissibility Stenhouse, v. Reed 218, 496 Shaw Pa.Super. A.2d 762 (1985). will not the decision trial disturb of the court unless it is demonstrated have been both an abuse this Id. See discretion and harmful to the complaining party. Transporta also v. Klyman Pennsylvania Southeastern Authority, tion Pa.Super. 172, (1984) and, necessary, testimony if correct its of Mr. Reed’s on use valuation remand. initially is for expert testimony matter (admissibility court; only where trial reversal warranted determination abused). discretion us provided any not with
Although the trial court has issue, a its admission of the at explanation for evidence the court was of transcript reveals that trial review trial, in the it non-jury context opinion evidence competent should receive all available weight it then make a determination as value and making ultimate valua- accord that evidence would foregoing with our discussion Wein- tion. Consistent case, general of this terms. approve approach berger involving complexity In of such non-jury questions action option appoint the court has exercised its where valuation, own we fully but rather to make its appraiser have its as disposal the court’s desire to at understand evidence, including expert opinion, pos- competent much recogni- realistic approve We also of the trial court’s sible. tion, however, weight that should be accorded such light of the adversarial evidence should be determined *16 that prevailed. presume that also atmosphere We upon weight expert testimony depend to be accorded will expert of the qualifications the court’s assessment of the Thus, testimony each of his is concerned. insofar as area court’s challenge to the trial reject Company’s asset Medwig’s testimony of Mr. on valuation admission appropri- is more Company’s objection and conclude that the to testi- weight to the to be accorded such ately addressed sixty-five percent mony, trial court reduced to which the (65%). to begin Company’s objection second with he Medwig’s regarding
Mr. the extent to which testimony his of the value of certain relied on own calculation argues that interests. Company’s leasehold appraiser, a was Medwig, property Mr. was not real who the value of these leases qualified give opinion an and, therefore, testimony of his was inadmissi aspect leases, Medwig Mr. Company’s As to ble. some 196
based his on the appraisals conclusions or computations value done by Industrial Appraisals, which the Company As adopted reliable. leases, others as to which appraisal there no actual computation was or of value by appraiser, Mr. Medwig did his computations own of value a computation based on of value the itself and/or its accountants used had for those leases. As to the re- maining had, leases the Company Medwig Mr. did a valuation his It is own. as to these values Company objects.
Mr. Medwig fixed value on these leases basically by using comparable comparable values other store leases in the same area. His technique was same as used its Company and/or in valuing accountant certain other of its leases. Apparently, he determined the “economic rent”, comparable i.e. rent which properties the same bring area would and deducted the actual rent the Company multiplied was at each location paying by the number of years left on the lease. He then reduced this number to present value. Medwig properly qualified expert as an as to
stock Pennsylvania imposes valuation. liberal law stan- qualification dard for of an expert, a witness allowing testify expert as an if he has any reasonable pretension specialized on the knowledge investigation. under subject weight given to be to his evidence for the factfinder. Gonzalez, Commonwealth v. Pa.
(1988) (citing (plurality) Kuisis v. Baldwin-Lima-Hamil 321, 338, Corp., (1974)). ton 457 Pa. A.2d standard, Given this broad particularly applied when of a context valuation where the proceeding court needs a variety relating broad of information value of true *17 issue, the stock at cannot say that the trial court erred in admitting Medwig’s Mr. valuation certain proposed of of the Company’s leases.
Obviously the method Mr. was not Medwig valuation used note, however, as an appraisal. reliable actual that it was in accordance a with method the itself and its Company It also for other had used leases. accountants in real interests general principle that accord with comparison properties similar to can be valued estate Iron Philadelphia and Coal and Reading area. the same County, Northumberland v. Commissioners Co. of Center, (1936); Shopping A. 105 McKnight Pa. and Review Property Appeals Assessment v. Board Inc. of (1965). 417 Pa. County Allegheny, to qualified Thus, Medwig we would not find Mr. although he as an which appraiser, the value of these leases appraise erred not, the trial court say we cannot admittedly was for them based Medwig posit to a value Mr. permitting comparable proper- concerning these leases and upon data area, own accountants Company’s as the ties the same Company’s objection done as to other leases. had is these leases as to the value of Medwig’s testimony Mr. to be accorded this weight properly more addressed and admissibility to its testimony, rather than aspect of it. Medwig’s qualifications give Mr. issue to the more difficult
We now turn concerning the Medwig’s admissibility testimony of Mr. furniture, fixtures, equipment Company’s ap Manufacturers’ vehicles, he relied on the as to which but rather Medwig appraiser, was not an praisal. Since Mr. valuation, rely necessarily he had expert in stock an the value regarding of information some source within his own other than facts the stock underlying assets provided these facts were Most of personal knowledge. customarily receives expert Medwig in the manner particular in a opinion form an necessary to the information financial own Company’s on the largely He relied case. property, of their calculations as to the value records own ac by their Company for the performed that value had ordered countant, appraisal reports by the actual value received records Company’s objec assets. large for one sale of similar assets, group of that as to one to the fact tion directed *18 198
the underlying appraisal was allegedly both inadmissible and incorrect.
We agree Company with the argues extent that it that the Manufacturers’ appraisal itself, attached to Mr. calculations, Medwig’s hearsay would be if inadmissible prove offered to the truth the matters asserted therein. It is an out-of-court statement and those who could testify and be cross-examined to its as contents were not called. Commonwealth v. Cassidy, 429, 315 Pa.Super. 462 A.2d (1983). Moreover, the Company’s limited use thereof does not constitute an admission its accuracy. Company appraisal used the numbers as a posited of its to whether, assets ascertain using those num- bers, the could a elect certain tax treatment of the merger transaction. The never the took tax elec- appraisal tion and therefore never in used numbers a manner that their acceptance reflected thereof. us, however,
This does not convince that it was for error to the court admit the appraisal part Medwig’s as of Mr. report that Medwig’s or Mr. testimony, to extent it relied on the appraisal, Manufacturers’ was also inadmissi- again, ble. Once the Company’s being we view objection more properly weight addressed to be accorded Medwig’s its testimony than to admissibility. recognize question and do not of Penn- propriety
sylvania
general
law’s
that an
requirement
expert witness
record. Common
base his
on facts of
testimony only
wealth v.
Paskings,
Col
(1972);
Pa.
The rule that restricts the basis an expert’s opinion for facts record is properly grounded view while expert may particular expertise an judging have matrix, consequences upon attendant certain factual or therefor, thereof, the causes or significance he cannot expert concerning base those judgment conjecture However, Hand, courts have now supra. facts. Collins v. where the recognize there are situations begun not expert is upon by of factual material relied source is nevertheless but admitted and/or admissible evidence expert. It conjecture of mere product *19 expert reasonably type the of source material the rather Thus, many expert opinion. on in his rely forming would to begun permissi- their as the courts have to liberalize view general excep- The testimony. of underpinnings expert ble in Federal that set forth recognized tion that has been is of 703: Rule Evidence in the upon by experts of relied type reasonably
If upon or forming opinions in inferences field particular in or not be admissible subject, the facts data need evidence. of in a number applied
This
has now been
exception
Thomas, 444
In
v.
Pennsylvania cases.
Commonwealth
436,
(1971),
Supreme
permitted
Court
Pa.
The other area which reports of on the permitted testify time basis experts domain pro- the area of eminent evidence is others matters, have been experts In valuation ceedings. such testify permitted of appraisals performed by basis who are not others called to to their testify appraisals. Supreme explained The Court and applied principle Pittsburgh Outdoor Advertising 440 Pa. Corp. Appeal, (1970), as follows: remaining argument pressed Outdoor the in-
competency testimony the Authority’s valuation expert. is premised This on the witness’ reliance on the appraisal report qualified written of a firm in engineering determining the value repro- billboards based on depredation. duction cost less No copy report had Outdoor, furnished to been no representative firm engineering was called as a witness. aby expert use testifying valuation of facts and
figures from derived others and of which he himself does personal knowledge not have occurs and is not frequently require a new To development. personal direct knowl- *20 edge by expert the witness of element every going to up appraisal make an figure would be to the require impossible. may That there hearsay be some evidence comprised opinion within evidence is The undeniable. components however, an expert’s opinion, of go weight, to admissibility. not also Company,
See B.P. Oil Inc. v. Delaware County 549, Board Assessment Appeals, Pa.Commw. (1988). A.2d not
Pittsburgh Outdoor does stand alone. In McCor- Evidence, mick on the author notes valuation proceed- that area, are ings expert another like medical where testimony, is growing experts there trend valuation allowing toward to on basis of not testify facts within their personal knowledge Cleary, and outside the record. McCormick on Evidence, (3d 1984). 39 n. 3 ed. §
The Company attempts distinguish to such cases first noting are that decided under the Eminent Domain they Code, which an specically expert testify allows as opinion bases his both and the record. within without opinion not the Pittsburgh being We do read Outdoor as provision portions The upon Code. solely based quoted above reveal that the court found the opinion expert figures on derived a valuation “facts and reliance of cases. practical necessity such from others” testify- argues that such cases the also reports of other experts relying upon were ing valuation fully thus could experts judge identical valuation However, in they on relied. reliability reports which expert Outdoor testifying itself valuation Pittsburgh firm as to opinion report engineering his of an based opin- reproduction property being costs of the valued. an was himself testifying expert ion does not state that the It did could costs. engineer reproduction who or calculate not expert the valuation perhaps was indeed because he engaged calculating reproduction himself costs engineer as to such costs. qualified relied on the data of a has Outdoor Moreover, rule Pittsburgh we note equally applied by the Court to been Commonwealth regarding of an the value testimony property owner City Harris Redevelopment Authority of thereof. YWCA, (1979). v. burg 44 Pa.Commw. qualified express owner is deemed to be Since an though opinion property, as to the of his or her even value as independent qualifications he or has no a valuation she Outdoor Pittsburgh expert, applicable the court found on the express opinion allowed the owner to her court specifically basis of material outside the record. The Outdoor rule did Pittsburgh rejected argument that the owner, expert not in valua because the otherwise apply *21 matters, qualified judge was to reliability tion not Id. at 299, at 1345. on which she relied. 403 A.2d sources Pittsburgh Outdoor and We find that the rationale cases, rationale of Federal general similar as well as the 703, argue forcefully Rule of for the admission Evidence Mr. on the asset the Com- Medwig’s testimony valuation partial his reliance on the Manufactur- pany’s despite stock admitted into evidence appraisal ers’ was appraisal. calculations, Medwig’s Mr. only as an exhibit to written since those calculations included a reference to the apprais Thus, al. it was admitted only provide the court awith complete copy the source of some of the figures underly ing Medwig’s Mr. calculations. See N.J. Sports Exposi & Cariddi, tion v. Authority 127, N.J.Super. 395 A.2d (1978), aff'd, N.J. (1980). We also note that the appraisal carries its own “circum- guarantee stantial of trustworthiness” to the extent that it prepared by professional appraisal company one that the Company itself chose appraise its assets. It is also that Mr. important Medwig did not rely exclusively on the Manufacturers’ appraisal of the subject assets. He compared placed the values by the appraisal with the values actually received a sale of such assets consummated after shortly merger. Having so, done Medwig Mr. found that the Manufacturers’ values were conservative when compared to the values received for such assets in an Thus, actual sale. Medwig’s use of the appraisal numbers was based not appraisal but also on his own confirmation of their reliability.
Moreover, it is clear that stock any expert valuation need qualified be to do appraisal his own of each of a corporation’s assets in order to place a value on the stock. Such an expert will quite commonly on “facts rely figures” provided other experts reaching ultimate valuation determination. The crucial point that the court (or be informed jury) fully that these facts were fact the partial for expert’s basis opinion. adverse party then has the opportunity, did, as the Company here present its own countervailing facts and figures and/or expert testimony to convince the factfinder that the weight given be to the other side’s expert should testimony little or none.
Here, although the trial court largely credited Mr. Med- wig’s analysis that the asset of the stock should be $38.00, the court reduced its reliance on that value to sixty-five percent (65%), thereby taking cognizance of the possible effect quality adversarial of the testimony *22 had We find no error have on the valuation number. might approach. this in
D. Failure Trial Court to Tax Asset Valua- Effect
tion objections The last to the Company’s specific trial refus trial court’s determination focuses on the court’s alleged writing up consider the tax effect of certain al to stated, Simply alleges the Company’s Company the assets. appellees the higher if its assets have value would really them, Company then in the event the sold these assign value, Company their also and realized would assets on the sale. The higher liability incur a tax tax potential liability that this should considered argues Al Company’s reduce the overall value assets. court did not address this though specifically trial Medwig’s it did Mr. asset opinion, accept contention its valuation, effecting. which not include tax did in this argument regard its supports any expert regard- reference to on its own behalf testimony assets, up of tax a write but ing propriety effecting O’Connor court rather reference to comment valuing one factor considered in that tax liabilities are to be Appeal, case. O’Connor rights in a stock dissenters’ 292, 304 O’Connor 698. not read the Pa. at A.2d at We do being to tax at all passing court’s reference liabilities The O’Con- here. to the directed issue under consideration nor court was referring generally perti- clearly find valuing of actual stock. We nence tax liabilities provides guidance in the as to nothing opinion effect of a potential assigning tax question whether assets than book value higher corporation’s fact, In valuing the stock. thereof should be considered in any reported issue have found no reference case. Pennsylvania has us to of this issue led independent analysis
Our Mr. accepting court not err that the trial did conclude Medwig testified that since Medwig’s testimony. valuation of the stock was to be made on going concern *23 basis, and the assigning a higher value to the assets was therefore an really assessment of their true an business, operating it would be unrealistic to consider any higher might tax that be incurred as a result of this higher value. This is so because such a tax would liability only actually be incurred in the event of a liquidation of the business wherein the higher value was realized. Since the valuation not predicated on liquidation, consideration of the tax effect of a liquidation was unwarranted.
Given this testimony by a qualified expert, and the O’Connor court’s admonition that valuation in fact be done basis, on a going concern we find that the trial court’s rejection of the Company’s argument on tax effecting is supported by competent and substantial evidence of record. Thus, we will not the trial disturb court’s ruling on this ground.
III. Intervention Mr. and Wurzburger Wurzburger,
Morrow & Keough, Inc. The Company’s last issue on appeal concerns the trial court’s grant decision to the petition of Mr. Wurzburger and his wholly owned corporation, Wurzburger, Morrow & Keough, Inc., to intervene in these proceedings as dissent- ing gravamen shareholders. The of the Company’s argu- ment is that these shareholders did not comply with the requirements of Section 515 for perfecting rights as a dissenting shareholder. begin with a summary requirements of Section
515. In order perfect right appraisal of the fair value of stock and the payment value, of that Section 515 first requires that a dissenting shareholder make written objection to the proposed corporate action from which shareholder dissents prior to the commencement of the voting of the shareholders on such action. Section 515 next requires that the dissenter not vote favor of such action and, (20) within after twenty days the shareholder vote thereon, make written demand on the corporation for pay- of his/her shares. Such written fair value ment of the of the shares be made for all uniformly must demand owner, a share- i.e. is the beneficial such shareholder which he not all of the shares as to some but holder cannot dissent B. The statute Pa.Stat.Ann. beneficially owns. § stating any requirements mandatory makes these then objection does not file written who shareholder con- to have presumed” is “conclusively fair value demand withdraw corporate may action proposed sented Id. consent. corporation’s with the such consent B 1515 C. 1515 & § after twenty days requires also that within
The statute for payment makes written demand the shareholder shares, tender the certificates of his he shall fair value *24 notation for corporation those shares to the representing 1515 I. Id. demand has been made. thereon that the § B and of Section of C requirements the sub-sections Unlike 515 states Section requirement this invariable. option the “shall at comply a shareholder’s failure this section un- rights his under corporation terminate the good for and suffi- competent jurisdiction less a court of direct.” Id. cause shown shall otherwise cient slight to a variation case, Company In consented this settling separate In a of the statute. requirements on the against shareholders brought dissenting lawsuit Agree- and Stipulation executed Company, Company Wurzburger, ment, Wurzburger Mr. to which both provided as and which Keough, parties & Inc. were Morrow follows: (the “Record the record date holder of as of
Any Stock of the shareholders Date”) meeting special for the (the Meet- “Special September held on Glosser to the objection filed either a written ing”) timely who has the fair value for payment demand Merger or written provisions with complies shares and who of his Corporation Business Pennsylvania 5151 of the Section the fair to receive (the “PBCL”), shall entitled Law 515 of Section value, in accordance with as determined PBCL, of all shares as to objection which such or submitted, demand was except that the issue of whether holders accepted beneficial who have payment part for their shares are or are not entitled to fair receive determined accordance with Section 515 for shares as they to which have not accepted payment shall not be affected this settlement agreement and shall be decid- appraisal ed proceeding. plain meaning of this agreement is that although Section 515 B requirements waived & C’s of both objection
written written demand for payment of fair value, allowing suffice, either to it did not waive Section 515 I requirement of tender for notation. Compa- This the intended ny upon to insist and there nois evidence of record that the Company ever waived it. Wurzburger
Both Mr. and his corporation objected proposed merger of the Company writing prior to the September 12th shareholder vote and thus fulfilled this aspect of their perfecting dissenting shareholder rights. However, neither ever tendered its share certificates for notation under Section 515 I. Company argues omission is fatal. It notes that the
persuasively statute allows the option unilaterally terminate these shareholders' dissen- ters’ rights. Wurzburger corporation and his counte- that, rargue decided, as the trial court have they shown “good cause” to be excused from this requirement. Wurz- *25 burger any explanation does not offer for he why did not I comply with Section 515 and his testimony, although equivocal, somewhat does indicate that he was aware of the Rather, I requirement. “good Section 515 the cause” that Wurzburger posits and that the trial court consist- accepted shareholder, ed in the one solely dissenting fact that other Yuhas, also did allegedly not tender his shares for notation and the has him yet decided to afford dissenting rights. shareholder At oral argument the intervene, petition to counsel for the its Company justified compared Wurzburger treatment of Mr. Yuhas as to Mr. stating that took Yuhas’ lack the account of Mr. of in sophistication granting rights, him dissenters’ while it felt Wurzburger, that Mr. a stockbroker for and his years, well corporation were aware of what needed to done to be perfect rights. their requirement “good excusing for a share- cause” tendering
holder from his/her appears shares Sec- tion 515 I appellate is not defined our It has case law. been only opinions. construed twice in recorded trial court In v. Hamberg Pittsburgh Western Land P.L.J. Corp., (1966), court held that where a shareholder had tendered his three late shares and there was no days showing thereof, prejudice corporation as a result the lack of precise compliance Section 515 I would not with operate to deny rights. shareholder his dissenters’ hand, Wholesalers, Id. On the other re In Associated Inc., (1966), 35 D. & the court Section C.2d construed 515 I’s as good requirement imposing cause on the share- holder the of demonstrating legal equitable burden some or reason or him why deny it would be unfair unjust rights despite non-compliance. dissenters’ his Since the Id. provided explana- shareholders in case no Wholesalers tender, tion they for had failed to the court denied why them rights. dissenters’ is on agree the burden the shareholder to
show he should be afforded dissenters’ why rights. provides corporation statute “option” terminating rights. shareholder’s If the exercise of is to option questioned, showing the shareholder has the burden of as why. good requirement We also view cause shown focussing on whether ex properly there was a reasonable planation failure to or other comply why for the reason corporation’s of the shareholder’s dissenters’ termination rights unwarranted, preju was and not whether there was dice to the there corporation. prejudice Whether corporation case, only be relevant such Ham- may where minimus deviation berg, there a de technical I from the 515 that had no effect on requirement Section *26 208 therefore, court, determines that and the corporation
the ignored. that the deviation be requires justice substantial the case here. That is not
Here, never ten- Wurzburger corporation and his have offer no for their failure explanation their shares and dered they that have been treated They posit only to do so. agree we the Mr. Yuhas. While unfairly vis-a-vis all of its fairly to deal with obligation has an corporation I, under Section 515 exercising option its shareholders dissenter by listed as a mere fact that Mr. Yuhas was the not does not establish Wurzburger was Company the while circumstance, conclude In such a “good cause”. his Wurzburger corpo- affording trial court erred exclud- must be dissenting rights. They shareholder ration on remand. this proceeding ed from Cross-Appeal IV. from the trial appeal
Appellees/cross-appellants appraised that interest on the court’s determination (8%), eight percent run at the rate of which stock should rate. prudent to investor’s stipulated be parties of interest should be the proper rate contend that They on its borrow currently paid by average rate stipulated This rate was be ings. 11.3%. must cross-appeal that the initially argues
The Company must, course, untimely. it because was quashed outset, at the since to this contention full consideration give Mur cross-appeal. our over impacts upon jurisdiction it 509, 340, 344, 468 A.2d Brong, v. Pa.Super. phy (1983). cross-appeal timeliness of the pertinent
The facts in a appeal timely filed its are as follows. Appellate to Rule of 1987. Pursuant July fashion on had then 903(b), appellees/cross-appellants Procedure July cross-appeal. file their On within which days pre- appellee/cross-appellants for 1987, Pittsburgh counsel byit courier and transmitted Appeal a Notice of pared filing for with County in Cambria their local counsel *27 required by of the trial court as is Rule of prothonotary copies Procedure 905. also served Appellate They on Company, judge Notice counsel for the the trial and the original appeal trial court administrator. The notice of was receipt package never filed. The courier’s indicates that the counsel, containing by it was received local but local counsel explanation can offer no for happened what doc- simply ument thereafter. It was lost. 7, 1987, August Pittsburgh appel-
On counsel for from lees/cross-appellants docketing received statement filing this Court. It did not reflect the of a cross-appeal. noting Counsel addressed a letter to this Court the omission appellate positing on the docket and cross-appeal perhaps timely the notice thereof had not been transmitted of the trial court. Counsel prothonotary apparently did not then check the trial court docket make sure his client’s Notice of had in fact been filed. Appeal 7,1987,
On November when the filed its brief Court, page this the cover indicated that there was a cross-appeal. appel- This court contacted counsel for lees/cross-appellants inquire why cross-appeal as to no 24, 1987, on appeared this Court’s docket. On November filed a Petition to appellees/cross-appellants Filing Allow Cross-Appeal Nunc Pro Tunc in this Court. We remanded the Petition to the trial court for initial determination of whether the late should filing permitted under ratio- Commonwealth, 256, nale of Bass v. 485 Pa.
(1979), permits appeals filing which late where the late is “non-negligent caused and the happenstance” appeal time, very reducing then filed within a short thus any possible prejudice to the other side. 1988, hearing the trial court held a January
On Petition, filing found that the cause of the late non-neg- was ligent granted the Petition. On happenstance January 15, 1988, appellees-cross/appellants filed their Notice of Appeal. cross-ap- renewed its contention that the Quash
peal quashed by filing should be a Motion panel. Motion referred to this Decision on the was Court. allowing court abused its discretion find that the trial We and, therefore, it. quash will appeal this late-filed progeny the Bass decision and its reviewed recently C.K., 369 535 A.2d Pa.Super. In re Interest of great at (1987). repeat analysis any We need sum, although concluded that Bass was here. In length Commonwealth, in this binding precedent unquestionnably cited limited. and cases exceedingly Id. scope its therein.5 justifi- offered no factual have
Appellees/cross-appellants *28 There no fraud or break- filing. late was cation for their which are system, in of the court processes down Id.; appeal. of a late for the allowance traditional bases Goddard, 551, Pa. 333 A.2d 460 Penn Power Co. v. West (1975). non-negligent happenstance also no 909 There was occurred in filing appeal, following shortly by the file the Notice of omission to simple There was Bass. and a unexplained by appellees/cross-appellants, Appeal, 1987, for when, 7, counsel August on follow-up failure to cross-ap- no on notice that was appellees/cross-appellants until court. It peal had been docketed took finally appellees/cross-appellants 1987 that November. and to cross-appeal of their the status action to ascertain it. There is no resemblance accept this court to petition applying cases or those few these facts to those Bass must 4, Thus, the cross-appeal supra.6 footnote Bass. See quashed. be by Court on several applied the Commonwealth has been
5. Bass Rev., See, Comp. 74 e.g., Perry Unemployment Bd. v. occasions. each, 388, (1983). non-negligence of In 1342 Pa.Commw. 459 A.2d filing was clear. counsel in late appel- post-submission communication permitted 6. In court, they argue sentence that the fourth lees/cross-appellants to this “appears" apply instant Appellate Procedure 905 of Rule late-filing cross-appeal. That permit of this and would situation mistakenly appel- appeal filed in an is "If a notice of sentence states court, incorrect office within filed in an or is otherwise late immediately stamp it with the system, shall judicial the clerk unified which entered the clerk of the court receipt transmit it to date of and from, filing fee upon payment of an additional appealed order
211 if to decide otherwise that we were further note court’s affirm the trial nevertheless we would quashal, as to the trial court provides 515 award. Section interest find to be fair may as the court such interest shall award This provision circumstances. under all the equitable in the trial discretion to vest a broad has construed been interest. See O'Con any denial of court, including even the (statute 298, A.2d at 701 304 Appeal, nor 452 Pa. at inequitable situa except where of interest requires award be done several exists; may of interest computation tion trial employed by could of which techniques, any one case Pennsylvania in the court). note that We also to dissent payable of interest addressing the rate directly Corp., Laughlin re & Steel In Jones shareholders, ing (1984), affirmed the trial 477 A.2d Pa.Super. investor” “prudent interest court’s award of based to the dissen standard, compensation this to be fair finding stock from of the fair value of their deprivation ters for the Id., Pa.Superior Ct. at merger. the effective date Studios, City also Universal See A.2d at 537. Co., (Del.1975) Inc. v. Francis I. DuPont & investor rate accepts prudent (Supreme Court of Delaware interest). Thus, no error in the trial we would find interest court’s award. cross-appeal quashed. *29 Disposition
IV. 30, 1987 is court’s final decree dated June The trial to Intervene of grants it the Petition reversed insofar as Keough, Inc. The Wurzburger, Morrow & Wurzburger and the date appeal filed in the trial court on notice of shall be deemed originally filed." portion rule Appellees/cross-appellants this of this contend they accept cross-appeal served their Notice their because allows us to administrator, required judge as is Appeal and the court of on the trial Presumably appellees/cross-ap- Appellate Rule of Procedure 906. filing be a of the notice pellants have us construe this to would judicial system. another office of the pursuant to Rule is that service Our short answer to this contention filing pursuant to Rule 905. 906 is not 212 results insofar as it final decree is also reversed
trial court’s
The case
assigned to market value.
weight being
no
from
includes the
of
which
for a recalculation
value
is remanded
in manner
to market
weight
of some
value
assigning
and for
or modifica-
opinion
clarification
consistent with
may
The court
opinion.
in footnote 3 of this
as directed
tion
it deems
points
on these
such additional evidence
receive
respects
final decree is in all other
The court’s
necessary.
relinquished.
is
affirmed. Jurisdiction
statement.
POPOVICH,
dissenting
files
J.
POPOVICH,
dissenting statement:
Judge,
from a trial court’s determina-
reviewing
appeal
When
under
515 of the
corporation
of a
tion of the value
§
515,
Law,
scope
our
15 Pa.S.A.
Corporations
Business
§
an ascertainment
whether
encompasses only
review
competent
supported by
court are
of the trial
findings
Ap-
facts.
credibility
do not review
evidence. We
279,
O’Connor, 444 Pa.
206, 208,
A.2d
280
283
peal of
Upon
A.2d 694.
Appeal,
also O'Connor
(1971).
See
his decision
review,
judge
I
find that the trial
based
would
his discretion
and did
abuse
upon credible evidence
company’s
market
to consider the
value
deciding not
of this
under the circumstances
factor
stock as a valuation
Industries, Inc.,
Pa.Super.
Spang
case. See In re
discretion
(1987) (trial
within its
court was
As evi- competent substantial there disregarded where at which conclusion that support dence to the stock’s gauging all reliable trading is not at stock is 135. Opinion at Majority concern value.” going intrinsic Pa.Super. Corp., Steel Laughlin In re & Jones See Johnson Matter Endicott In the (1984); 103, 338 N.E.2d 585, 376 N.Y.S.2d Bade, 37 N.Y.2d Corp. v. 6, 304 287, 292 n. 452 Pa. Appeal, (1975); O'Connor *30 court observed (1973). 694, Instantly, n. 6 A.2d held controlling group corporation’s 50-60% stock, traded, the stock thinly albeit publicly, and the buy-out per stock offer of share was considerably $20.00 higher than the share market per value. Based upon $14.00 facts, those the trial court determined that the market value of the corporation “did not reflect its true value.” Trial Industries, Opinion Court at 3. As stated in Spang 91, A.2d at trial court may reject any factor which he “[t]he Thus, believes to be unreliable.” I am convinced the trial court sub judice acted well within its discretionary powers.
Presently, the trial court was not the only participant who market rejected value as an accurate corporate indicator of worth. The appellants’ buy-out offer of per share $20.00 for a stock which the market valued at per share $14.00 was, fact, potent acknowledgment by appellants that the trial court was correct evaluating market value I unreliable. am any unable find abuse of discretion in the court’s decision when the appellants admit that freely the market grossly undervalued the corporation’s stock. Therefor, I must dissent from portion of the majority’s decision which remands the case with instructions “to in- clude market value in its valuation considerations to a degree consistent with this opinion.” Majority Opinion at 192.
Joseph DeGenova, Appellants, N. DeGENOVA and Rita
v. ANSEL, Amalgamated David G. M.D. and Life Company.
Insurance Superior of Pennsylvania. Court
Argued June 1988.
Filed Dec. 1988.