may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
John M. Diebold, et al.,
James R. Diebold,
Granite Holding Corporation, et al.,
Filed June 10, 1997
Yellow Medicine County District Court
File No. C993103
Robert James Wyatt, P. O. Box 846, Sheridan, WY 82801-0846 (for respondents)
Stephen Torvik, 221 North First Street, Montevideo, MN 56265 (of counsel for respondents)
Mary R. Vasaly, Richard G. Wilson, Maslon, Edelman, Borman & Brand, 3300 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 (for appellant)
James R. Anderson, P. O. Box 1196, Marshall, MN 56258 (of counsel for appellant)
Considered and decided by Parker, Presiding Judge, Toussaint, Chief Judge, and Harten, Judge.
This appeal is from the district court's valuation of the shares of a closely held corporation. Alternatively, appellant contends that under agency law, respondent settled her claims prior to the court's valuation hearing. We affirm.
The parties were unable to mediate an agreement, and on December 2, 1994, the district court ordered the sale of the Granite Falls Bank, the sole asset of Granite Holding Corporation. Paul Olander, an expert appointed by the court to handle the sale, appraised the bank's value at $2,210,000. On February 1, 1996, the district court approved a purchase offer for the appraised value.
The parties were unable to apportion the sale proceeds, and plaintiffs moved the district court for a determination of the fair value of their shares. On March 27, 1996, prior to the time that motion was to be heard, plaintiffs John and Jay Diebold negotiated with James Diebold and executed a memorandum of agreement. John Diebold signed Janet Diebold Scott's name to their agreement. Janet Diebold Scott was aware of the motion hearing scheduled for that day, but was not aware that settlement negotiations would precede the hearing. Following her custom, she did not attend the hearing. When Scott learned of the settlement, she immediately repudiated it and retained her own counsel. The district court ruled in its September 3, 1996, order that John and Jay Diebold were bound by their settlement, but Janet Diebold Scott was not.
James Diebold owned all 677 shares of the preferred stock. Of the 1,271 shares of common stock, James owned 497 and John, Jay, and Janet each owned 258. In the October 31, 1996, order, the district court found the value of each preferred share was its par value of $387.50 and the value of each common share was $1,639, the remaining equity divided by the number of outstanding shares.
An agency relationship is "the fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act."
Church of the Nativity v. Watpro, Inc., 491 N.W.2d 1, 5-6 (Minn. 1992) (quoting Restatement (Second) of Agency § 1). There must be evidence of the principal's consent to the agency. A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285, 290 (Minn. 1981).
John Diebold testified that he mistakenly thought he was authorized to settle Scott's claims on the basis of two written proxies she had executed. James Diebold also relies on these proxies as evidence of John's authority to settle Scott's claims. A review of the proxies shows they were voting proxies and that the second was limited to a corporate meeting scheduled for July 21, 1994, and revoked all previous proxies. James points to no other written authority, and the proxies provide no support for his agency argument.
James also relies on correspondence written by Scott's counsel during the earlier mediation sessions in response to James' insistence that she attend those sessions. He argues that the assurance by Scott's counsel that John could negotiate on her behalf is evidence of his authority to settle her claims at the March 1996 hearing. However, John's actual or implied authority had to come from Scott as principal, not from her counsel. See id. Alternatively, James argues that Scott's failure to clarify or limit her counsel's statements gave John apparent authority to settle her claims.
Apparent authority is that authority which a principal holds an agent out as possessing, or knowingly permits an agent to assume. The doctrine is based on the conduct of the principal, not the conduct of the agent.
Foley v. Allard, 427 N.W.2d 647, 652 (Minn. 1988).
The district court, as finder of fact, was not required to draw the inferences from counsel's statements or Scott's conduct that James urges. Instead, the district court relied on her practice of always making herself available by telephone during negotiations and her immediate repudiation of the settlement as evidence that she did not consent to allow John to settle her claims. The district court's finding is supported by the record.
2. James also argues that the district court's valuation of his preferred shares was an error of law. The district court concluded:
Where all stock in the Granite Falls Bank is being transferred to a single buyer pursuant to a court ordered sale, and without particular regard to the number or nature of the share, the preferred shares have no extrinsic value beyond par value.
James claims that the district court erred by considering the effect of the court-ordered sale on the value of his shares. He relies on Minn. Stat. § 302A.473, subd. 1(c) (1996), which defines fair value as
the value of the shares * * * immediately before the corporate action referred to in section 302A.471, subd. 1.
He contends that under section 302A.473 the court was required to determine the value his preferred shares would have had prior to the court-ordered sale of the bank. He argues that prior to any judicial intervention, his preferred shares were at least as valuable as the common shares because they had voting rights and dividend preferences.
James' argument is misplaced. The district court was exercising its equitable jurisdiction in an action for judicial intervention brought under Minn. Stat. § 302A.751 (1996). Accordingly,
[t]he purchase price of any shares so sold shall be the fair value of the shares as of the date of the commencement of the action or as of another date found equitable by the court * * *.
Minn. Stat. § 302A.751, subd. 2 (1996) (emphasis added). James' argument applies to an action brought under section 302A.471. That limitation does not apply to an action for judicial intervention under section 302A.751. See id.; accord Pedro v. Pedro, 463 N.W.2d 285, 288 (Minn. App. 1990), review denied (Minn. Jan. 24, 1991).
Minn. Stat. § 302A.751 provides the flexibility for a trial judge to exercise a broad grant of equitable authority. "The courts should be left with as much flexibility as possible to provide an adequate remedy for the case before them."
Pedro, 463 N.W.2d at 288 (citation omitted).
If the parties, in a case of judicial intervention,
are unable to agree on fair value * * * the court shall determine the fair value of the shares under the provisions of section 302A.473, subd. 7 * * *.
Minn. Stat. § 302A.751, subd. 2. We note the statute specifically refers to subdivision 7 and not to subdivision 1, relied on by James to limit the time of the court's valuation. Under Minn. Stat. § 302A.473, subd. 7 (1996),
[t]he court * * * shall determine the fair value of the shares, taking into account any and all factors the court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit to use * * *.
This court recognized the broad discretion of a district court to determine fair value:
No method is recommended because the different methods of measuring value (market, book, replacement, capitalization of earnings, etc.) are neither right nor wrong, but merely appropriate in different situations.
Spinnaker Software Corp. v. Nicholson, 495 N.W.2d 441, 444 n.1 (Minn. App. 1993), review denied (Minn. Mar. 30, 1993).
The district court was not obligated to adopt James' pro rata share value. The district court relied on the appraisal opinion of Olander that used par as the value of the preferred shares. The court also relied on recent statements of James assigning par value to his preferred shares. These included the amended articles that set par value at $387.50, his recent buyout offer that used par value for the preferred shares, a recent dividend determined on the basis of par value for the preferred shares, and the use of par to value the preferred shares in the estate tax return of the parties' father.
The record supports the district court's determination of fair value, and James has failed to establish that the court abused that exercise of discretion.