Hill v. Gold, A172944

CourtCourt of Appeals of Oregon
Writing for the CourtMOONEY, P. J.
Citation322 Or.App. 324
PartiesClarka HILL and Matthew Gold, individuals, Plaintiffs-Appellants, v. Steven GOLD, as an individual and as Trustee of the Steven L. Gold Revocable Trust; Joseph Gold, as an individual and as Trustee of the Joseph D. Gold Revocable Trust; and Gold Hill Properties, Inc., an Oregon corporation, Defendants-Respondents.
Docket NumberA172944
Decision Date12 October 2022

322 Or.App. 324

Clarka HILL and Matthew Gold, individuals, Plaintiffs-Appellants,
v.

Steven GOLD, as an individual and as Trustee of the Steven L. Gold Revocable Trust; Joseph Gold, as an individual and as Trustee of the Joseph D. Gold Revocable Trust; and Gold Hill Properties, Inc., an Oregon corporation, Defendants-Respondents.

A172944

Court of Appeals of Oregon

October 12, 2022


Argued and submitted June 1, 2021

Washington County Circuit Court 19CV13720; Janelle F. Wipper, Judge.

Helen C. Tompkins argued the cause and fled the briefs for appellants.

Susan K. Lain argued the cause for respondent Gold Hill Properties, Inc. Also on the brief was Hohbach Law Firm LLC.

Matthew J. Yium and Foster Garvey PC fled the brief for respondents Steven Gold and Joseph Gold.

Before Mooney, Presiding Judge, and Pagán, Judge, and DeVore, Senior Judge. [*]

1

[322 Or.App. 325]

2

[322 Or.App. 326] MOONEY, P. J.

This appeal involves a dispute between Clarka Hill and Matthew Gold (plaintiffs) and Steven Gold and Joseph Gold (individual defendants) who are siblings that own equal shares in Gold Hill Properties, Inc. (GHP), a closely-held family corporation. Plaintiffs appeal from the general judgment and money award that required the sale and purchase of their respective interests in GHP.

Plaintiffs initiated a shareholder proceeding when they filed a complaint in the circuit court for declaratory relief and other remedies under ORS 60.952(1). The complaint alleged deadlock and oppression and sought various declarations and remedies under ORS 60.952(2) that would provide relief from the deadlock and order the sale of GHP stock.[1] In response, GHP filed an ORS 60.952(6) notice of election to purchase each plaintiffs respective 25 percent interest in GHP[2] Because the parties did not agree to the fair value of those interests or to the purchase terms, those issues were determined by the trial court under ORS 60.952(5)[3]

3

[322 Or.App. 327] by operation of ORS 60.952(6Xf), upon GHP's application for a stay under ORS 60.952(6)(f).[4]

The trial court conducted a valuation trial and, thereafter, made findings and concluded that the fair value of each plaintiffs 25 percent interest in GHP was $437,600. It ordered plaintiffs to sell, and GHP to purchase, those interests at that price on certain terms over a period of time. Plaintiffs appeal from the general judgment and money award that required the sale and purchase of their respective interests in GHP to GHP on those terms.

Plaintiffs raise four assignments of error. We begin by rejecting the third assignment concerning the "Hill house," described below, without discussion, and also reject the fourth assignment, generally claiming an unfair result, because that assignment does not comply with the requirements of ORAP 5.40. With respect to the first assignment, that GHP was without authority to elect to purchase plaintiffs' interests, we conclude that the election was authorized and that the trial court did not err in accepting that election. As to the second assignment, challenging the trial court's calculation of fair value, we conclude that the court's consideration of fair market value as evidence of fair value and its

4

[322 Or.App. 328] application of a marketability discount in calculating fair value on this record was not error. Therefore, we affirm.

I. STANDARD OF REVIEW

The question whether GHP had the authority to make an election under ORS 60.952(6) and whether the trial court properly accepted GHP's election is a question of law that we review for legal error.

Our standard of review for factual issues in judicial valuation proceedings is that we do not reexamine any fact tried by the factfinder-whether a jury or the court- unless there is no evidence to support that fact. Or Const, Article VII (Amended), § 3; ORS 19.415(1); see G. I. Joe's, Inc. v. Nizam, 183 Or.App. 116, 122, 50 P.3d 1282 (2002) (concluding that judicial appraisal proceedings are legal, rather than equitable, and applying the Article VII (Amended), § 3, standard). Plaintiffs argue that "this is an extraordinary case due to complexities of the corporate transactions and related corporate finance," and they ask us to conduct de novo review of the trial court's factual findings on the question of fair value. But this is not an equitable case, and de novo review is not available. ORS 19.415(3)(b). In any event, the presumption against the exercise of discretion to conduct de novo review has not been overcome because this is not an "exceptional" case for purposes of ORAP 5.40(8)(c). Therefore, we review the court's calculation of fair value for any evidence to support the court's finding.

II. BACKGROUND

As noted earlier, GHP is owned in four equal shares by the plaintiffs and individual defendants, who are siblings. GHP owns farmland that it leases to a related family business-Gold Hill Enterprises, Inc. (GHE)-which is owned by the individual defendants-Steven and Joseph. GHE operates a wholesale nursery business on the property it leases from GHP. Plaintiffs-Clarka and Matthew-have no ownership interest in GHE.

The Gold family has been in the wholesale nursery business in Washington County since 1965 when the siblings' grandfather and his two sons started the business.

5

[322 Or.App. 329] The business was incorporated in the early 1970s and although the corporate structure and ownership interests have changed over the years, it has remained a family-owned nursery business. Each of the four siblings continues to own a 25 percent interest in GHP and serves on the GHP board of directors. Steven and Joseph each own 50 percent interests in GHE, and they serve on GHE's board of directors. Steven is president of both GHP and GHE.

In 2007, Clarka Hill and her husband, Jim Hill, obtained a loan from, and executed a lease agreement with, GHP so that they could build a house on the land leased from GHP. The terms of the agreement included an annual rental rate of $1 for a term of 99 years. The house was built, but the loan was not yet paid off, and the Hills no longer lived at the house by the time the complaint in this case was filed.

There were concerns raised in 2015 about whether the rent paid by GHE to GHP for the farm property on which GHE operates its nursery business was too high and whether that arrangement would pass IRS scrutiny should GHP or GHE be audited. A comparative study of rental rates was done, which yielded a broad range of rates in the area. The following year, GHP and GHE executed a "Farm Lease and Maintenance Agreement." Under its terms, GHE agreed to pay $530,879.28 per year as rent for a term of 10 years and to pay a separate maintenance fee. Subsequently, the parties entered into an amended lease agreement which reduced the annual rent to $483,879.00 for a term of 10 years, beginning January 1, 2018.

In 2018, GHP and GHE hired a new accounting firm to advise both companies on financial and tax matters. In October of that year, a certified public accountant from that firm, David Buck, sent the individual defendants a letter expressing his concern that GHP and GHE could be audited by the IRS and that there could be tax-related consequences if the rent paid by GHE were above fair market value. Buck ultimately recommended that a rent study be performed by "an independent expert."

The individual defendants presented Buck's letter to GHP's board of directors, including plaintiffs, and recommended that they proceed with a new rent study. Plaintiffs

6

[322 Or.App. 330] opposed obtaining a new rent study, and the individual defendants favored getting one, resulting in an impasse. The GHP deadlock in this case was triggered by that disagreement.

After GHP became deadlocked, plaintiffs offered to sell 100 percent of their respective 25 percent interests in GHP to GHP, to the individual defendants, or to both, for $1 million each with a requirement that the buyer purchase the Hill house for $750,000, less the outstanding loan balance owed GHP. Upon receipt of that offer, future GHP board meetings were canceled, and the individual defendants held an emergency meeting, exclusive of plaintiffs, to consider plaintiffs' offer.

On January 24, 2019, corporate counsel for GHP sent plaintiffs a letter stating that "GHP and/or Steve and/ or Joe do intend to purchase" their shares, but that the terms of the offer were "not acceptable." The letter invoked GHP's stock purchase agreement (SPA) which, given the disagreement about purchase price, required a neutral arbitrator to determine the fair market value of the shares. Appraiser Daniel Gilbert was engaged to "perform a limited appraisal of a 25.0% interest" in GHP Among other things, Gilbert concluded that the fair market value of a 25 percent interest in GHP was $437,600, after applying a 22 percent marketability discount.

On March 25, 2019, plaintiffs filed the underlying action in this case when they filed their complaint alleging deadlock and oppression. Importantly, plaintiffs did not and do not dispute that the filing of that complaint constituted the filing of a proceeding under subsection (1) of ORS 60.952. GHP and the individual defendants filed timely buyout notices under ORS 60.952(6). Plaintiffs sent a new offer to sell their respective GHP shares to GHP or to the individual defendants for $800,000 each. That offer was not accepted, and the parties were unable to agree to price and terms. GHP then applied for a stay under ORS 60.952(6)(f), which triggered a stay of plaintiffs' claims and shifted the court's role and focus to that of determining fair value and terms of sale under ORS 60.952(5).

7

[322 Or.App. 331] At the valuation trial, plaintiffs presented evidence of the value of GHP's real property, equipment, and other...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT