State v. Wagner

• Decision Date: 23 February 1951
• Docket Number: No. 35221,35221
• Parties: , 23 A.L.R.2d 762 STATE v. WAGNER et al.
• Court: Minnesota Supreme Court

Page 676

46 N.W.2d 676

233 Minn. 241, 23 A.L.R.2d 762

STATE v. WAGNER et al.

No. 35221.

Supreme Court of Minnesota.

Feb. 23, 1951.

Syllabus by the Court

1. The words 'full and true value,' as used in M.S.A. § 291.23, should not be construed to mean 'market value' in cases where no standardized market for the particular kind and quantity of property being valued is shown to exist, but they should instead be construed to mean a fair value determined by reference to all relevant facts in evidence.

2. Considering all relevant facts in evidence bearing on the value of a large block of corporate stock, Held that the trial court's finding of value was supported by the evidence.

Cummins, Cummins & Hammond, St. Paul, Joseph E. Rapkin, Milwaukee, Wis., for appellants.

J. A. A. Burnquist, Atty. Gen., Joseph S. Abdnor, Sp. Asst. Atty. Gen., for respondent.

LORING, Chief Justice.

Else Froedtert Lyng, a resident of Minnesota, died testate March 2, 1943. The inventory of assets in her estate included 97,823 shares of common stock of the Froedtert Grain & Malting Company, Inc., then the second largest malting company in the world. At the time of decedent's death the Froedtert company had approximately 420,000 shares of common stock outstanding, so that decedent's shares represented about 23.29 percent of the total number of shares outstanding. On the same date, decedent's brother, Kurtis R. Froedtert, owned approximately 184,302 shares of common, so that his holdings represented approximately 43.86 percent of the Froedtert common stock. The remaining 32.85 percent of the Froedtert stock was divided among numerous smaller shareholders.

August 12, 1943, appraisers, appointed under the provisions of M.S.A. § 525.331, filed an inventory and appraisal of the property in decedent's estate. This appraisal fixed the value of the 97,823 shares of Froedtert common stock at $8 1/2 per share. The commissioner of taxation in Minnesota filed objections to this appraisal under the provisions of § 291.21. January 6, 1948, after several intermediate hearings and orders, the probate court of Hennepin county fixed the value of the Froedtert stock at $8 1/2 per share, thus affirming the appraisal filed on August 12, 1943. The commissioner then petitioned for a redetermination and reassessment of the inheritance tax assessed by the probate court's order of January 6, 1948. March 17, 1948, the probate court denied the commissioner's petition. The commissioner then took an appeal from the probate court's order, and a trial De novo was had in the district court for Hennepin county. September 13, 1949, the district court reversed the probate court's order and determined the value of the Froedtert stock to be $11 1/8 per share. The executors of Mrs. Lyng's estate then moved for amended findings of fact and conclusions of law or for a new trial. This motion was in all respects denied, and the case is here on appeal from the district court's order denying the executors' motion for a new trial.

The principal question presented for decision here is whether there is sufficient evidence to support the district court's finding that the value of each of these shares of Froedtert common stock was $11 1/8 rather than $8 1/2 or some other amount. This question presents the problem of how the value of corporate stock is to be determined for inheritance tax purposes.

1. The pertinent statutory provision here is M.S.A. § 291.23, which states:

'Every inheritance, * * * upon which a tax is imposed under this chapter shall be appraised at its Full and true value immediately upon the death of decedent, * * *.' (Italics supplied.)

The statutory definition of 'full and true value' is found in § 272.03, subd. 8, which states:

"Full and true value' means the usual selling price at the place where the property to which the term is applied shall be at the time of assessment; being the price which could be obtained at private sale and not at forced or auction sale.'

None of the terms used in our case law to interpret or paraphrase the words 'full and true value' are very helpful in giving these words any new content or added precision. It has been stated that 'full and true value' means 'appraised money value.' In Re Estate of Bigelow, 199 Minn. 239, 242, 271 N.W. 459, 460. In two cases, it was stated that our inheritance tax is imposed upon the 'clear value' of the property. State ex rel. Hilton v. Probate Court, 143 Minn. 77, 80, 172 N.W. 902, 903; State ex rel. Smith v. Probate Court, 139 Minn. 210, 166 N.W. 125. With reference to our general property tax provisions relating to assessment of real estate, the inverted terms 'true and full value' ¹ have been held to mean market or sales value as distinguished from cost price or intrinsic value. State v. Penn Mut. Life Ins. Co., 198 Minn. 115, 269 N.W. 37; Kalscheuer v. State, 214 Minn. 441, 8 N.W.2d 624.

The parties in this case have professed to agree that 'full and true value' is the price at which the property to be valued will change hands between a willing buyer and a willing seller, both being well informed of the pertinent facts and neither being under any compulsion to buy or sell. Although this formula has been frequently used by the courts, ² in valuation cases it has also been severely criticized by some legal writers as being singularly unrealistic and unhelpful. ³ What is attempted by application of this formula is, of course, to fix a hypothetical fair market price where no fair market for the particular item of property exists in fact. As Judge Amidon of the court of appeals once stated in North American Tel. Co. v. Northern Pac. Ry. Co., 8 Cir., 254 F. 417, 418:

'The term 'market value,' as the words fairly import, indicates price established in a market where the article is dealt in by such a multitude of persons, and such a large number of transactions, as to standardize the price. Proof of such a market value can only be made by one of the recognized methods of proving the price current in a market. Individual dealings are not competent to prove it. The term is, however, frequently used in a figurative sense, as meaning the fair or reasonable value of the property--that is, such a value as the property would have if it were dealt in according to the practices of a market overt.'

Although this court in State v. Penn Mut. Life Ins. Co., 198 Minn. 115, 269 N.W. 37, 38, held that 'true and full value' means market or sales value as distinguished from cost or intrinsic value, it is obvious from the facts of that case that the court could not have been referring to an actual market value, for, in that case, the court was reviewing a valuation of real estate for which no market existed at the valuation price. The court there stated, 198 Minn. 118, 269 N.W. 38:

'* * * When property does not move, whether from want of willing sellers or willing buyers, its sales value in money must necessarily become much a matter of judgment based upon many factors, whose weight may not influence alike the minds of persons qualified to judge. The one upon whom the duty eventually falls to determine such value must fix it 'at such sum or price as he believes the same to be fairly worth in money."

It is perfectly obvious that where there is no standardized market for a particular kind and quantity of property a reference to the usual selling price or market value is not a reference to the actual price at which it would sell if offered for sale on a given day. It is quite clear that the old jingle which says that 'the value of a thing is the price it will bring' does not state an adequate formula to determine the value of property for all purposes.

It appears to us that the principal error into which the parties here have fallen is one of assuming that the full and true value of the Froedtert stock is to be determined by reference to the price at which the stock would have actually sold on the date of decedent's death. Although both parties have voiced approval of the so-called 'willing buyer-willing seller' formula for determining value, their agreement is more apparent than real. The state's major reliance on the fact that 100 shares of Froedtert stock sold on the New York curb for $11 1/8 per share on the day of Mrs. Lyng's death is indicative that it seeks to value this stock at an actual market value, which may or may not be representative of its full and true value, rather than at a hypothetical fair market value. On the other hand, appellants, while purporting to apply the hypothetical formula, have assumed a hypothetical willing seller, but have refused to recognize the existence of a hypothetical willing buyer. They have done so by resting upon testimony of their witnesses that, with reference to 97,823 shares of Froedtert common stock, no willing buyers existed on the date of decedent's death except as they could have been solicited at considerable expense by use of brokers, investment houses, or other agencies which buy and sell large blocks of stock.

Since the average daily volume of trading in Froedtert common stock over a three-year period immediately preceding Mrs. Lyng's death was small ⁴ in comparison with the total number of shares outstanding, and since only 100 shares were sold on the New York curb the day the died, we should not hold that the market price of $11 1/8 per share for Froedtert stock on the day of Mrs. Lyng's death is to be taken as the sole basis for determining its 'full and true value.' ⁵

Nor can we agree with appellants' contention that the 'full and true value' of this block of stock should be determined by reference to what the entire block actually could have been sold for on the date of decedent's death. The uniform testimony of appellants' witnesses was that this large block of Froedtert stock could actually have been sold only at wholesale prices and that wholesale purchasers would have paid somewhere between $8.25 and $9.25 per share for it. Each broker,...