M Life Ins. Co. v. SAPERS & WALLACK INS.
| Decision Date | 01 February 2001 |
| Docket Number | No. 99CA0847.,99CA0847. |
| Citation | 40 P.3d 6 |
| Parties | M LIFE INSURANCE COMPANY, a Colorado corporation, Petitioner-Appellant, v. SAPERS & WALLACK INSURANCE AGENCY, INC., Respondent-Appellee. |
| Court | Colorado Court of Appeals |
Jean E. Dubofsky, P.C., Jean E. Dubofsky, Boulder, CO; Yu Stromberg, Cleveland, P.C., Frederick Y. Yu, Michael M. Schmidt, Karen L. Allison, Denver, CO, for Petitioner-Appellant.
Faegre & Benson, LLP, Michael S. McCarthy, Jeanne M. Coleman, Christopher P. Beall, Denver, CO, for Respondent-Appellee. Opinion by Judge NIETO.
Petitioner, M Life Insurance Company (M Life), appeals a judgment determining the fair value of M Life shares owned by Sapers & Wallack Insurance Agency, Inc. (S & W), which was entered pursuant to the Colorado Dissenters' Rights statute, § 7-113-101, et seq., C.R.S.2000. M Life also appeals the order assessing it for the fees and expenses S & W incurred for counsel and experts. We dismiss the appeal as it relates to the fees and expenses of counsel and experts, affirm the judgment in part and reverse it in part, and remand with directions.
S & W was a Class A shareholder of M Life. In 1996, M Life implemented a merger with another corporation. As a result, issued and outstanding shares of M Life were converted into shares of the new entity. S & W dissented, thus triggering the provisions of §§ 7-113-101 to X-XXX-XXX. M Life petitioned the trial court to determine the fair value of S & W's shares. The court did so, and this appeal followed.
M Life asserts three contentions of error: First, the trial court erred by failing to recuse itself after issuing an order that included unfavorable references to certain of M Life's witnesses, and drew unfavorable conclusions from M Life's failure to produce certain documents. Second, the trial court erred in its determination of "fair value" for S & W's shares of stock. Third, the trial court erred by ordering M Life to pay S & W's fees and expenses incurred for counsel and experts.
M Life first contends that the trial judge erred by failing to recuse himself because of alleged bias and prejudice which M Life asserts is evident from the order granting S & W's motion to compel and for sanctions. Specifically, M Life argues that findings of fact contained in the order dated June 29, 1998, demonstrated the trial judge's prejudice and prevented him from fairly considering the evidence in the case. M Life also asserts that the trial court erred by denying its motion to reconsider the order for sanctions. We do not agree.
Disqualification of a judge in a civil case is controlled by C.R.C.P. 97. That rule provides, in pertinent part,
The critical test is whether the supporting affidavits establish facts from which it may reasonably be inferred that the judge is prejudiced or biased. In deciding the motion, the judge must accept the affidavits as true. However, mere opinions or conclusions unsupported by facts are not sufficient. The judge must determine if the facts presented support a reasonable inference of actual or apparent bias or prejudice. If such showing is made, the judge must disqualify himself or herself from the case. Goebel v. Benton, 830 P.2d 995 (Colo.1992).
The question whether a judge should be disqualified from a civil case is a matter within the discretion of the trial court, Wright v. District Court, 731 P.2d 661 (Colo. 1987), and that decision will not be disturbed on appeal unless it constitutes an abuse of discretion. In re Marriage of Mann, 655 P.2d 814 (Colo.1982).
"The general rule of law is that what a judge learns in his judicial capacity is a proper basis for judicial observations, and that the use of such information is not the kind of matter that results in disqualification." Smith v. District Court, 629 P.2d 1055, 1057 (Colo.1981). Legal rulings on issues appropriately before the trial court are not grounds for recusal. Holland v. Board of County Commissioners, 883 P.2d 500 (Colo.App.1994).
Here, the trial court entered orders regarding discovery violations and sanctions. M Life asserts that the trial court's findings of fact contained prejudicial statements which undermined the trial court's ability to render a fair and impartial decision in this case. Specifically, the trial court's order found that M Life had permitted its experts to make "false and misleading representations," which resulted in "material prejudice" to S & W. M Life argues that these findings constituted prejudgment of its expert witnesses' credibility, and prejudgment of the significance of documents that were later used at trial.
The trial court's decision to impose sanctions for discovery violations was predicated upon a finding that M Life had violated discovery rules and ignored disclosure deadlines. These findings were necessary for resolution of the motions pending before the court. The court made it clear in comments during the hearing that it was only deciding the discovery issues, and was not deciding on the admissibility or relevance of the material.
A review of the motion to disqualify and the supporting affidavits, which we must accept as true, does not reveal facts from which it may reasonably be inferred that the judge was biased or prejudiced. See Zoline v. Telluride Lodge Ass'n, 732 P.2d 635 (Colo.1987)
.
The findings that M Life considers prejudicial reveal that the judge was displeased by the manner in which M Life was conducting discovery. However, the findings were based on the motions filed and the arguments of counsel; they cannot be fairly read as showing bias or prejudice. Accordingly, we conclude that the trial court's refusal to disqualify itself was not an abuse of discretion. See In re Marriage of Mann, supra. Further, discovery sanctions are ordinarily within the discretion of the trial court and will not be reversed absent a finding of abuse of that discretion. J.P. v. District Court, 873 P.2d 745 (Colo.1994). There is support in the record for the imposition of sanctions against M Life. Therefore, the trial court did not abuse its discretion by imposing sanctions against M Life or by denying M Life's motion to reconsider this ruling.
M Life next contends that the trial court erred in determining the fair value of S & W's shares. Specifically, M Life asserts that the court erred by including going concern value and by failing to apply minority and marketability discounts. M Life also argues that the court's determination of fair value was arbitrary because its findings do not adequately explain how the value was determined. We agree with M Life only on the issue of a marketability discount, and as to that issue remand with directions.
The trial court's task in this action was to determine the fair value of S & W's shares.
"Fair value," with respect to a dissenter's shares, means the value of the shares immediately before the effective date of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action except to the extent that exclusion would be inequitable.
Section 7-113-101(4), C.R.S.2000. The term "fair value" used in the dissenters' rights statute connotes a broader approach to valuation than does the term "fair market value."
The determination of fair value will depend on the particular circumstances of the corporation involved. Walter S. Cheesman Realty Co. v. Moore, 770 P.2d 1308 (Colo.App.1988). In determining fair value, the court must consider all relevant value factors, the most important of which are market value, investment or earnings value, and net asset value. WCM Industries v. Trustees of Wilson Trust, 948 P.2d 36 (Colo.App.1997).
The determination of fair value is not susceptible to an analysis by any precise mathematical formula. Certain approaches to valuation may not be appropriate in a particular case, and therefore, the weight to be given to each value factor depends upon the facts and circumstances of each case. The court may assign as much or as little weight to each factor as it determines to be appropriate. Pioneer Bancorporation, Inc. v. Waters, 765 P.2d 597 (Colo.App.1988). This is a factual determination, and the trial court's findings of fact will not be disturbed unless clearly erroneous. Walton v. State, 968 P.2d 636 (Colo.1998).
M Life first argues that its unique corporate structure and bylaws preclude consideration of going concern value in the determination of fair value. It asserts that the trial court's determination that fair value must include going concern value was wrong as a matter of law. We do not agree.
M Life was an agent-owned reinsurance company. Its Class A shareholders were all life insurance agents (agent/shareholders). The Class A agent/shareholders owned seventy-five percent of M Life but elected only two of its seven directors. Each Class A shareholder, including S & W, owned ten shares of Class A stock. These ten shares were issued in a series that tracked the reinsurance issued by M Life on life insurance policies sold by the agent/shareholders through other life insurance companies. M Life only issued reinsurance policies on life insurance policies sold by its agent/shareholders through other life insurance companies. The agent/shareholders did not receive commissions for the sale of reinsurance by M Life.
M Life also issued Class B stock. The Class B shareholders owned twenty-five percent of M Life but elected five of the seven directors. All the Class B stock was owned by an organization known as M Financial. The owners of M Financial founded M Life.
M Life divided its reinsurance policies into groups referred to as "genera...
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