Jоhn R. BAUR, Appellant, v. BAUR FARMS, INC. and Robert F. Baur, Appellees.
No. 11-0601.
Supreme Court of Iowa.
June 14, 2013.
Rehearing Denied July 15, 2013.
832 N.W.2d 663
CADY, Chief Justice (dissenting). MANSFIELD, J., joins this dissent. HECHT, Justice.
I respectfully dissent. I would affirm the judgment of the district court.
The law properly cloaks judges with a presumption that they acted properly in the imposition of a sentence in a criminal case when faced with a claim that they used an improper sentencing consideration. State v. Formaro, 638 N.W.2d 720, 724 (Iowa 2002). This strong and venerable presumption is overcome only by proof that an improper consideration was used by the court. See id. (indicating an abuse of discretion will not be found unless the reviewing court is able to discern the decision was exercised on grounds that were clearly untenable).
When, as in this case, the judgment or sentence imposed by the district court was within the scope of discretion, the presumption of legality should shield the sentencing judge from an inference that an improper sentencing consideration could have been used. The invocation of a right under the Fifth Amendment by a defendant at the time of sentencing in response to an inquiry by the sentencing court about any criminal conduct committed by the defendant during the pendency of the case can become the basis of an inference of retaliatory sentencing, but it can also be a proper penological sentencing consideration. Cf. State v. Iowa Dist. Ct., 801 N.W.2d 513, 527-28 (Iowa 2011). Yet, the imposition of a sentence by the court, following the invocation of the right, that merely falls within the high range of discretion does not establish proof of retaliation. The invocation, instead, remains an uncertain factor in the sentence.
In this case, the district court said it imposed a higher number of community service hours as a part of the deferred judgment granted to the defendant because it felt the higher amount of community service hours was proper, not because it wanted to retaliate against the defendant for refusing to admit or deny any drug use. The defendant was unemployed at the time of sentencing, in possession of a firearm at the time of arrest, and rebuked all inquiries by the judge about his current use of drugs. There was simply no direct evidence of retaliation. Instead, it would appear the court wanted to make a very lenient form of punishment, which provides offenders with an opportunity to avoid the heavy burden of a record of a criminal conviction, more meaningful to the offender to better promote successful rehabilitation.
Without direct evidence of a retaliatory motive by the sentencing judge, the presumption of legality must prevail. The district judge deserves such a result, as does the time-honored presumption given by the law to judges in the performance of their work.
MANSFIELD, J., joins this dissent.
David L. Charles of Crowley Fleck PLLP, Billings, Montana, and Mark McCormick of Belin McCormick, P.C., Des Moines, for appellees.
HECHT, Justice.
A minority shareholder of a family farm corporation sued the corporation and its majority shareholder, who served as a director and officer of the corporation. The minority shareholder alleged illegal, oppressive, malicious, and fraudulent acts by the majority shareholder had resulted in waste of the corporation‘s assets and constituted a breach of fiduciary duty. The minority shareholder requested dissolution of the corporation or payment of the fair value of his ownership interest. The district court dismissed the action at the conclusion of the minority shareholder‘s presentation of evidence in a bench trial. The minority shareholder appeals, contending the district court erred in dismissing the action. We reverse and remand with instructions.
I. Factual and Procedural Background.
Baur Farms, Inc. (BFI) is a family farm corporation formed in 1966 by brothers Merritt and Edward Baur. At the time of its organization, the corporation took ownership of 1736 acres of land previously farmed by the brothers as partners. Two thousand four hundred fifty shares of stock were issued at the outset, with 1262 allocated to Edward and 1188 allocated to Merritt. Merritt, Edward, Merritt‘s son, Jоhn (Jack), and Edward‘s son, Robert (Bob), were among the original directors of the corporation.
Merritt eventually transferred his stock to his sons, Jack and Dennis. Edward transferred his stock to his son, Bob. Initially, Jack worked on the farm, but eventually he left to pursue a legal education and a successful business career. Dennis also worked for the farm until health issues prevented him from continuing. Dennis‘s son, James, later began working for the corporation and eventually became the manager of its farming operations.
The original corporate bylaws included restrictions on transfers of the company‘s stock and established a stock redemption price of $100 per share. The bylaws were amended in 1984 to include a buyout provision. Under this provision, a shareholder wishing to sell his shares must first offer to sell them to the corporation or the other shareholders. If a different price is not agreed upon, the purchase price of the stock is set at the “book value per share оf the shareholders’ equity interest in the corporation as determined by the Board of Directors, for internal use only, as of the close of the most recent fiscal year.” The 1984 amendment established a book value of $686 per share.1
Jack had received the bulk of his shares through gifts from Merritt in the 1970s and ‘80s. On Merritt‘s passing in 1989, Jack inherited twenty-four additional shares from Merritt‘s estate, bringing his total ownership to 644 shares. As the executor of the estate, Jack asserted a value of $300 per share for the BFI stock in the probate inventory.2
Jack has wished to sell his shares of stock in the corporation since the early 1990s. He has not, however, tendered them for sale to the corporation or other shareholders under the buyout provision of the bylaws. He continues to believe his shares are worth more than their “book value ... as determined by thе Board of Directors, for internal use only, as of the close of the most recent fiscal year.” BFI3 retained counsel in the 1990s to handle negotiations regarding a possible purchase of Jack‘s stock. Jack and BFI communicated their respective views of the value of Jack‘s interest on several occasions over a period of years, but a price was never agreed upon. Jack also had conversations with James about Jack‘s interest in selling his shares. James suggested the value of Jack‘s shares should be discounted because they represented a minority interest in the closely held corporation and because of the potential tax consequences attending the corporation‘s liquidation of assets in funding any proposed buyout.
In late 1992, at the request of Jack and Bob, BFI‘s counsel estimated with the assistance of accountants the book value of Jack‘s shares at $331,228.52, or approximately $514.33 per share. BFI‘s counsel subsequently communicated to Jack the corporation‘s offer to purchase his shares for $261,464, or approximately $406 per share. Jack rejected the offers, questioning the apparent discount claimed by BFI for his minority interest and believing the offers were based on a substantial undervaluation of the company‘s farm real estate.
After various intervening conversations, Jack hired counsel in 1995 and obtained a new appraisal of the real estate. Armed with the new appraisal, Jack‘s counsel urged a new valuation of BFI and proposed a value of Jack‘s shares of approximately $600,000, or $931.68 per share. Bob rejected this new proposed valuation, contending it was based on an excessive appraisal of the real estate. Bob responded in the spring of 1996 with a new valuation of BFI, estimating the value of Jack‘s holdings at $398,418, or approximately $618.66 per share before any minority discount.
Negotiations continued as Jack countered а few months later with a proposed valuation of $500,000 for his shares, or approximately $776.40 per share. No agreement on a sale price was reached, however, and the discussions stalled for several years.
Jack again expressed interest in selling his shares at a 2002 BFI board meeting.
Jack commissioned a new appraisal of the corporation‘s land in 2006 and urged the establishment of an updated value for his interest in BFI. A few months later, James communicated to Jack a proposed valuation of $4.88 million, which assumed land valued at $1500 per acre.4 Again negotiations stalled because of differences of opinion on land values and on whether a minority discount should be used in calculating the value of Jack‘s shares.
Jack reopened the communications prior to a 2007 meeting of the board, proposing a new valuation of BFI at $7,400,000, which assumed $3000 per acre as the value of the corporation‘s farm real estate. Based on that proposed valuation, Jack offered to sell his shares for $1,825,000, or approximately $2833.85 per share. At the 2007 board meeting, Jack moved again for dissolution of the corporation or, alternatively, for BFI‘s purchase of his shares at their fair market value. Both motions failed again.
Shortly thereafter, Jack filed suit against Bob and BFI, alleging they had engaged in fraud, illegality, and oppressive conduct, and that Bob had breached his fiduciary duty as a director and officer of the corporation. The district court granted summary judgment for Bob and BFI on the ground that the specific alleged acts of oppression had occurred outside the applicable five-year statute of limitations. Jack appealed, and the court of appeals reversed and remanded for trial. Baur v. Baur Farms, Inc., No. 09-0480, 2010 WL 447063 (Iowa Ct.App. Feb. 10, 2010).
BFI immediately filed another motion for summary judgment. They asserted that although the court of appeals had concluded certain of the alleged acts of oppression had occurred within five years of the commencement of the action and were not barred by the statute of limitations, the court had not adjudicated BFI‘s claims that as a matter of law their alleged actions had not constituted fraud, illegality, or oppression. The district court denied this second motion for summary judgment, concluding the previous decisions of the district court and court of appeals supported a finding that fact questions remained regarding Jack‘s allegations of fraud, illegality, and oppression.
The case was tried to the court sitting in equity. At the close of Jack‘s evidence, Bob and BFI moved for a “directed verdict.” The district court made a brief record in which the court expressed its view that Jack had presented no evidence Bob or BFI had acted fraudulently, illegally, or oppressively and stated that the evidence did not indicate the “offered price or the amounts proposed by the corporation [we]re either above or below ... book value as determined by standard accounting procedures.” The court granted BFI‘s motion and dismissed the action.
Jack filed a motion pursuant to
BFI moved to dismiss the appeal, contending the notice of appeal was untimely because Jack‘s rule 1.904(2) motion did not address questions of fact and challenged only the district court‘s determination that the defendants were entitled to judgment as a matter of law. We ordered the jurisdictional issue submitted along with the other issues raised in this appeal.
II. Scope of Review.
This case was tried in equity. Our review of the merits of Jack‘s claim of minority shareholder oppression is therefore de novo. See Lange v. Lange, 520 N.W.2d 113, 115 (Iowa 1994).
III. Discussion.
A. Jurisdiction. We first address the jurisdictional issue BFI raised in its motion to dismiss this appeal. As we have already noted, the district court entered its ruling on BFI‘s motion to dismiss Jack‘s case on March 2, 2011. Jack filed a post-trial motion under
Here, the district court granted judgment for BFI at the close of Jack‘s case, stating “[t]he сourt cannot and does not find that the inability of these parties to reach an agreement regarding a purchase price constitutes oppressive conduct under these circumstances.” BFI views the ruling as a determination that—as a matter of law—Jack‘s evidence failed to engender a fact question on his oppression claim. Characterizing Jack‘s rule 1.904(2) motion as a “rehash of a legal issue,” BFI contends the motion failed to extend the deadline for filing a notice of appeal. We disagree. The district court‘s ruling sustaining BFI‘s motion after Jack rested is in our view ambiguous. It could be read as an expression of a finding of fact. See Batliner v. Sallee, 254 Iowa 561, 563, 118 N.W.2d 552, 553 (1962) (following motion “for directed verdict” in bench trial, trial court‘s determination that the plaintiff “failed to carry his burden of proof” on contributory negligence gave it “the appearance of having been a decision on the facts“). Yet, the ruling did not separately find the facts in writing and state conclusions of law as required by
Jack‘s rule 1.904(2) motion requested a finding on whether Jack had established oppression by showing BFI had denied him a return on his equity interest in the company while insisting upon a buyout price based on a large discount for his minority interest. Given that Jack‘s rule 1.904(2) motion requested the court make, enlarge, or amend findings of fact, we cannot conclude the motion was improper. See In re Marriage of Okland, 699 N.W.2d at 266-67. Accordingly, we conclude Jack‘s notice of appeal was timely and that we have jurisdiction in this appeal. See Beck, 376 N.W.2d at 596.
B. Merits of the Oppression Issue.
1. Contentions of the parties. Jack contends the district court erred in failing to find oppression and failing to order either dissolution or a buyout of his shares at fair market value. Specifically, Jack argues BFI‘s failure to provide a return on his shareholder equity interest over the years and its refusal to offer a price for his shares fairly approximating their true value5 constitutes shareholder oppression under Iоwa‘s business corporations statute. BFI counters that Jack has presented no
2. Relevant statutory provisions and interpretation. Iowa‘s Business Corporations Act (IBCA) provides that a district court may dissolve a corporation in several types of proceedings, including one initiated by a shareholder alleging “[t]he directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent.”
the case of the shareholder-director-officers refusing to declare dividends, but providing high compensation for themselves and otherwise enjoying to the fullest the “patronage” which corporate control entails, leaving minority shareholders who do not hold corporate office with the choice of getting little or no return on their investments for an indefinite period of time or selling out to the majority shareholders at whatever price they will offer.
Id. at 380 (citing Baker v. Commercial Body Builders, Inc., 264 Or. 614, 507 P.2d 387, 392 (1973)).6
3. Overview of alternative standards for evaluating minority shareholders’ claims of oppression. Other jurisdictions have developed several sometimes overlapping standards for evaluating minority shareholders’ claims of oppression in closely held corporations. Some have concluded oppression is “burdensome, harsh and wrongful conduct” or “a visible departure from the standards of fair dealing and a violation of fair play on which every shareholder who entrusts his money to a corporation is entitled to rely.” Fix v. Fix Material Co., 538 S.W.2d 351, 358 (Mo.Ct.App.1976) (quoting White v. Perkins, 213 Va. 129, 189 S.E.2d 315, 320 (1972)); see also Skierka v. Skierka Bros., Inc., 192 Mont. 505, 629 P.2d 214, 221 (1981); Jorgensen v. Water Works, Inc., 218 Wis.2d 761, 582 N.W.2d 98, 107 (1998). Other courts have linked oppression to the derogation of the fiduciary duty “of utmost good faith and loyalty” owed by shareholders to each other in close corporations. Balvik, 411 N.W.2d at 387; see also Maschmeier, 435 N.W.2d at 380; Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 328 N.E.2d 505, 515 (1975); Baker, 507 P.2d at 394.
A third approach, now perhaps the most widely adopted, links oppression to the frustration of the reasonable expectations of the corporation‘s shareholders. See 2 F. Hodge O‘Neal & Robert B. Thompson,
Courts applying the reasonable expectations standard have granted relief when the effect of a majority shareholder‘s conduct is to deprive a minority shareholder of any return on shareholder equity. See, e.g., Bonavita v. Corbo, 300 N.J.Super. 179, 692 A.2d 119, 125 (1996) (explaining corporation‘s no-dividend policy meant that only actively employed shareholders would receive corporate benefits); Ford v. Ford, 878 A.2d 894, 904 (Pa.Super.Ct.2005) (explaining expectation of lifetime employment was unreasonable but minority shareholders had reasonable expectation of receiving “some benefit from their minority shares“).
4. Oppression arising from transfer price restrictions. Some courts have declined to enforce transfer price restrictions determined by formulas producing transfer prices so small in relation to the true value of the shares as to make the restrictions unconscionable or oppressive. See, e.g., Palmer v. Chamberlin, 191 F.2d 532, 541 (5th Cir.1951) (explaining in dictum that court would not enforce a transfer restriction if it concluded the price was so small in relation to true value as to make the arrangement unconscionable or oppressive); New England Trust Co. v. Abbott, 162 Mass. 148, 38 N.E. 432, 434 (1894) (“[S]pecific performance of an agreement to convey will not be refused merely because the price is inadequate or excessive. The difference must be so great as to lead to a reasonable conclusion of fraud, mistake, or concealment in the nature of fraud, and to render it plainly inequitable and against conscience that the contract should be enforced.“); In re Estate of Mihm, 345 Pa.Super. 1, 497 A.2d 612, 613 (1985) (affirming trial court‘s refusal to grant specific performance of an agreement obligating a deceased shareholder‘s estate to sell to the corporation for $475,000 a one-third interest in a family corporation when deceased‘s interest had increased in value to $1,800,000); cf. Swanson v. Shockley, 364 N.W.2d 252, 256 (Iowa 1985) (declining to enforce previously repealed transfer restriction that would have allowed plaintiff to purchase defendant‘s stock at eight percent of market value as restriction would have given plaintiff windfall and provided “no reasonable way for defendant to dispose of his stock“).
Other courts adjudicating the enforceability of transfer restrictions have declined enforcement of transfer prices that are so low in relation to the fair value of the shares as to constitute unreasonable restraints on alienation. See, e.g., B & H Warehouse, Inc. v. Atlas Van Lines, Inc., 490 F.2d 818, 826-27 (5th Cir.1974) (applying Delaware law and concluding requirement shares be sold to corporation at set price equivalent to one-fifth of market price could not be applied to shares not voted in favor of the restriction); Systematics, Inc. v. Mitchell, 253 Ark. 848, 491 S.W.2d 40, 43 (1973) (explaining agreement requiring resale to corporation at twenty
While courts often confront shareholder claims of oppression when parties have failed completely to plan for the resolution of their faltering relationships, they must also be prepared to resolve cases like this one in which the shareholders have adopted a buyout remedy but are unable to agree on its implementation. Here we look for guidance to the decisions of courts that have considered whether a shareholder‘s petition for dissolution of a corporation triggers a buy-sell provision and whether the buyout formula in the provision should control the remedy. Some jurisdictions address these questions under statutory schemes requiring courts’ consideration of preexisting transfer price restrictions but denying their enforcement when they would produce an unreasonable result under the circumstances. See, e.g.,
In the absence of statutory guidance, courts in other jurisdictions have applied a similar common law standard denying enforcement of unreasonable transfer price restrictions. The decisions of these courts apply equitable considerations in permitting minority shareholders to petition for relief under involuntary dissolution statutes despite preexisting transfer price agreements. See, e.g., In re Involuntary Dissolution of Villa Maria, Inc., 312 N.W.2d 921, 923 (Minn.1981); Anderson v. Clemens Mobile Homes, Inc., 214 Neb. 283, 333 N.W.2d 900, 903–04 (1983).
5. Oppression standard in Iowa.
a. General transfer restrictions. The IBCA includes a share transfer provision allowing the imposition, through articles of incorporation, bylaws, or shareholder agreements, of restrictions on the transfer of a corporation‘s shares. See
b. Transfer price restrictions, fair value, and reasonable expectations. The IBCA makes no express mention of the enforceability of restrictions setting transfer prices or formulas. See
The general assembly, in adopting the IBCA, has codified a “fair value” principle as an alternative to other dissolution remedies. A corporation or its shareholders may elect, upon initiation of dissolution proceedings, to purchase the shares of the petitioning shareholder at the “fair value of the shares.”
We read these statutory provisions as extensions of the principle that every shareholder may reasonably expect to share proportionally in a corporation‘s gains. See, e.g., Burton v. Exxon Corp., 583 F.Supp. 405, 418 (S.D.N.Y.1984) (“[S]tockholders are owners of the corporation and expect to share in its profits.“); Michaud v. Morris, 603 So.2d 886, 888 (Ala.1992) (“Certain basic expectations of investors are enforceаble in the courts, and among those is a right to share proportionally in corporate gains.“); Baker, 507 P.2d at 397 (explaining shareholders have “a legitimate interest in the participation in profits earned by the corporation“). When this reasonable expectation is frustrated, a shareholder-oppression claim may arise. See Stefano, 705 P.2d at 446 n. 3; Maschmeier, 435 N.W.2d at 380; 7L Bar Ranch, 645 P.2d at 933-34; Brenner, 634 A.2d at 1029; Kemp & Beatley, 473 N.E.2d at 1179; Meiselman, 307 S.E.2d at 563-64.
We adopt today a reasonableness standard for the adjudication of minority shareholder claims of oppression in Iowa. This standard comports with principles announced in our earlier decisions protecting the interests of minority shareholders in closely held corporations. Management-controlling directors and majority shareholders of such corporations have long
The determination of whether the conduct of controlling directors and majority shareholders is oppressive under
c. Application of reasonable expectations standard in this case. Jack has not worked for and has drawn no salary from BFI for approximately fifty years. He—like the other BFI directors—received $5000 per year for his service as an officer and member of the corporate board prior to 1997. But in 1997, Jack was removed as an officer and the annual compensation for his service and that of the other directors was reduced to $250. Over the nearly twenty years as Jack negotiated unsuccessfully for the sale of his shares, the appraised value of BFI‘s assets increased between fivefold and sevenfold to approximately $6 million.7 BFI, however, has never paid a dividend and, given the nature of its business and the variability of its cash flow, might never do so.
Jack confronts obvious practical problems as a minority shareholder seeking a remedy under the bylaw buyout provision. Despite his persistent efforts over more than two decades, he has not been able to sеll his stock at a mutually agreed upon price. The book value option is similarly problematic from Jack‘s perspective. BFI calculated and the shareholders ratified a 1983 year-end price per share of $686 at its 1984 meeting. That valuation approved in 1984 has never been formally revisited or revised. The language of the book value buyout provision fails to address several important questions: (1) whether book value must be set by express resolution of the BFI board or may be determined from an inspection of the books of the corporation without formal action by the directors or shareholders; (2) whether annual determination of the book value for purposes of the bylaw provision was intended; and (3) whether the board, when setting the book value under the provision, must use asset values that are reasonably related to “actual” or “fair market” values and be based on generally accepted accounting principles.
BFI has not adjusted many оf the asset values on its internal financial statements since at least 1989, and we find no corporate resolution in the record affirming that the values have not changed or should not change to accurately reflect the economic
Where stock transfer restrictions have provided for purchase by a corporation at book value, some courts have concluded the restrictions may be enforced if the value has been determined in accordance with generally accepted accоunting practices. See, e.g., Schaffer v. Below, 278 F.2d 619, 625 (3d Cir.1960). See generally 12 William Meade Fletcher, Fletcher Cyclopedia of the Law of Corporations § 5460.50, at 169 (2012 rev. vol.) [hereinafter Fletcher]. Significant discrepancies between market value and book value have cast doubt on the enforceability of provisions requiring transfers at book value. See, e.g., Whitman v. Whitman, 34 Wis.2d 341, 149 N.W.2d 529, 532 (1967) (explaining book value of close corporation is not any arbitrary value that may be entered on books but is value predicated on market value of corporation‘s assets); see also Piedmont Publ‘g Co. v. Rogers, 193 Cal.App.2d 171, 14 Cal.Rptr. 133, 140-42 (1961); Corbett v. McClintic-Marshall Corp., 151 A. 218, 222-23 (Del.Ch.1930); Hollister v. Fiedler, 22 N.J.Super. 439, 92 A.2d 52, 56-57 (1952). Courts will thus consider whether the accounting methods used in establishing book value are fair and equitable to all the parties involved,
With these authorities and principles in mind, we consider the evidence of oppression in thе record here. Because BFI is a closely held corporation, Jack has no access to an active market in its shares that might allow his realization of a return on his equity position. See, e.g., Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law 230-31 (1991) (noting “the lack of an active market in shares” prohibits close-corporation shareholders from creating “homemade dividends” by selling stock); Moll, 60 Wash. & Lee L. Rev. at 860 (explaining “there is no liquid market that allows for the realization of capital appreciation” in case of close corporation). The negotiations for the sale of Jack‘s stock to the other shareholders at a mutually agreed upon price have been unavailing. Without ready access to an active market, Jack has effectively been precluded from capturing the increased value of his shares because BFI has retained and reinvested its revenue in the company over the years rather than paying out dividends. See 1 O‘Neal & Thompson § 3:4, at 3-21 to 3-23 (explaining that “[b]y declaring no dividends at all ... majority shareholders may force a minority shareholder to sell the minority interest at considerably less than its actual value” and “[e]ven if the minority shareholder is in a sufficiently strong position to hold onto stock during a dividend squeeze, the [squeezed shareholder] is still deprived of any return on the investment during the years that dividends are withheld“); cf. id. at 3-44 to 3-45 (noting “[t]he judicial focus has been on the special nature of close corporations and how dividend withholding and other actions might frustrate the reasonable expectations of participants“). As a minority shareholder and nonofficer, Jack will remain effectively precluded from capturing any return on his shareholder equity for as long as the board concludes income distributions are inappropriate. See, e.g., id. at 3-30 to 3-31 (“Many plausible reasons exist why funds possibly available for distribution as dividends should be prudently retained by the corporations and the courts permit the directors wide latitude in making the decision.” (citing cases)); see also Ziegeldorf, 554 N.W.2d at 892 (noting practice of declaring dividends in closely held corporation dependent on factors difficult to predict).
As a minority shareholder, Jack also lacks voting power to force the board of directors to set a book value that is reasonably related to the fair value of the company‘s assets. Cf. Horne v. Drachman, 247 Ga. 802, 280 S.E.2d 338, 340-41 (1981) (examining agreement requiring parties revise buyout price yearly and providing CPA shall revise price if no price set after thirteen months); McBride v. Pennant Supply Corp., 253 Ill.App.3d 363, 191 Ill.Dec. 457, 623 N.E.2d 1047, 1050 (1993) (examining agreement providing that if annual net worth determination was not accomplished within thirty days of notice of discharge, accountant regularly employed by corporation must prepare a statement of net worth); Maschmeier, 435 N.W.2d at 382-83 (examining agreement requiring stock buyout price be agreed upon at annual meeting or, in the event of disagreement, appointment of committee of appraisers to determine value); In re Estate of Mihm, 497 A.2d at 614 (referring to agreement requiring arbitration if shareholders could not set value). Yet, we believe the record is not adequate to deter-
Because the district court‘s ruling effectively terminated the trial before BFI presented its evidence bearing on the fair value of Jack‘s equity interest and because the district court failed to make the customary fact findings on the question normally filed as a consequence of a bench trial, we conclude the prudent course requires a reversal of the judgment of dismissal and a remand for further proceedings. This dispositional alternative is appropriate here not only because the truncated proceedings in the district court prevеnted the full development of the record necessary to establish the fair value of Jack‘s stock on de novo review, but also because the court‘s conclusions of law were not separately stated as required by
Although we have defined the legal standard for adjudicating Jack‘s claim of oppression, we express no view on the question of whеther the last position taken by BFI during negotiations on the price offered for Jack‘s interest in the corporation was outside the range of fair value and incompatible with the reasonable expectations of a shareholder in Jack‘s position under circumstances including a history of no return on shareholder equity during the several decades of the corporation‘s existence.
IV. Scope of Remand and Instructions.
The district court shall take whatever additional evidence is required for the proper development of the record from which the fair value of Jack‘s equity interest may be determined. If, after taking any additional evidence bearing on this question and applying the reasonable expectation standard set forth above, the district court finds BFI acted oppressively under the circumstances, the court, sitting in equity, has considerable flexibility in resolving the dispute. See
V. Conclusion.
For the reasons stated above, we conclude the district court erred in dismissing Jack‘s oppression claim. We reverse the district court‘s ruling and remand for further proceedings consistent with this opinion.
REVERSED AND CASE REMANDED WITH DIRECTIONS.
All justices concur except APPEL and MANSFIELD, JJ., who take no part.