Ybarra v. Dominguez Family Enters., A171814

CourtCourt of Appeals of Oregon
Writing for the CourtSHORR, J.
Citation322 Or.App. 798
PartiesMargarita YBARRA, Plaintiff-Appellant, v. DOMINGUEZ FAMILY ENTERPRISES, INC., Defendant-Respondent, and Luis DOMINGUEZ, et al., Defendants.
Docket NumberA171814
Decision Date30 November 2022

322 Or.App. 798

Margarita YBARRA, Plaintiff-Appellant,


and Luis DOMINGUEZ, et al., Defendants.


Court of Appeals of Oregon

November 30, 2022

Argued and submitted May 27, 2021.

Multnomah County Circuit Court 18CV02722 Judith H. Matarazzo, Judge.

Matthew J. Kalmanson argued the cause for appellant. Also on the briefs were Janet M. Schroer and Hart Wagner LLP.

Nicholas A. Kampars argued the cause for respondent. Also on the brief were Wildwood Law Group LLC, Tim Cunningham, and Davis Wright Tremaine LLP.

Before Ortega, Presiding Judge, and Shorr, Judge, and Landau, Senior Judge.

[322 Or.App. 799] SHORR, J.


When a shareholder of a closely held corporation brings a proceeding under ORS 60.952(1) alleging management or shareholder deadlock, corporate waste, or illegal, oppressive, or fraudulent conduct by those in control of the corporation, the corporation or other shareholders can elect to purchase the shares for their fair value. ORS 60.952(6); see also Graydog Internet, Inc. v. Giller, 362 Or. 177, 195-98, 406 P.3d 45 (2017) (describing history and policy underlying election provision). If the parties are unable to reach agreement on the share price and purchase terms, the court determines fair value, "taking into account any impact on the value of the shares resulting from the actions giving rise to [the proceeding]." ORS 60.952(6)(f); ORS 60.952(5)(a)(A).

In this case, the trial court determined, after applying marketability and minority discounts,[1] that the fair value of plaintiffs 7.98 percent interest in defendant Dominguez Family Enterprises, Inc. (DFE) was $927,595. The court then entered a judgment ordering DFE to pay that amount to plaintiff in $25,000 monthly installments. Plaintiff appeals, challenging the trial court's ruling that, absent a showing of oppression, "fair value" means "fair market value," therefore requiring the application of marketability and minority discounts to the value of her shares. As explained below, the disposition of this appeal is, in large part, controlled by our recent opinion in Hill v. Gold, 322 Or.App. 324, __ P.3d__ (2022). Consistent with that case, we agree with plaintiff that the trial court here erred, and we vacate and remand for the court to determine the fair value of plaintiffs shares under the correct legal standard.

We provide a brief summary of the facts and procedural history as context for the reader; a detailed description is unnecessary and unwarranted in this case.

DFE is a closely held family corporation, founded in Hood River in 1986. Today, DFE manufactures and


[322 Or.App. 800] distributes tortilla chips, marketed under the name Juanita's. All of the 10 shareholders are children of DFE's founders. At the time of trial, defendant Luis Dominguez (Dominguez), the president of DFE, owned 83.636 shares, or 28 percent of DFE's outstanding shares. Each of the other shareholders, including plaintiff, owned 23.636 shares, or 7.98 percent of DFE's outstanding shares. All of the shareholders were employees of DFE and members of its board, except for plaintiff, who resigned her position in 2011.

In January 2018, plaintiff filed a complaint against DFE and the other shareholders, which included a claim under ORS 60.952(1) alleging "illegal, oppressive or fraudulent" acts, ORS 60.952(1)(b), and misapplication or waste of corporate assets, ORS 60.952(1)(d).[2] The oppression allegation was based on the following acts: (1) permitting DFE to loan large interest-free sums to other board members without adequate security and without adequate efforts to obtain repayment; (2) permitting DFE to loan large sums to a Washington company without adequate security and without adequate efforts to obtain repayment; (3) authorizing the creation of a new limited liability company, C&H RE Holdings, LLC, in which each shareholder except plaintiff is a member, to hold real properties purchased with company funds; and (4) restricting distributions, even though the company had retained earnings, while providing bonuses to the other shareholders.

Pursuant to ORS 60.952(6), DFE filed a notice of election to purchase plaintiffs shares for a total payment of $900,000.[3] Plaintiff did not respond; DFE thereafter filed a motion to stay the proceeding and for the court to conduct a fair value hearing.[4] ORS 60.952(6)(e), (f). The court granted the stay and allowed plaintiffs discovery requests limited to


[322 Or.App. 801] a copy of DFE's general ledger for the years 2015, 2016, and 2017; complete information on rental income and expenses relating to properties held by C&H RE Holdings, LLC; and information on the disposition of any net rental income from properties held by C&H RE Holdings, LLC, including any cash held by that company. It also allowed the corporate deposition of Dominguez "limited to discovery of matters related to [plaintiffs] claim that bonuses paid to the shareholder employees were in the nature of dividends." The court further ruled, on DFE's motion, that plaintiffs direct and derivative claims, as alleged in the complaint, were "subsumed within her claim for oppression, waste, and fraud under ORS 60.952(1)" and that any impact on the value of plaintiffs shares resulting from the actions that gave rise to the ORS 60.952(1) proceeding would be taken into account in determining the fair value of plaintiffs shares.

At the fair value hearing, plaintiff argued that "discounts for lack of marketability or for lack of control shall not be applied to determine fair value" for purposes of ORS 60.952(6). DFE, on the other hand, took the position that, "[w]here a company elects to purchase a shareholder's shares in response to a lawsuit such as this, when the plaintiff cannot prove oppressive conduct, the application of both [marketability and minority] discounts is appropriate." As the trial court later described it, "DFE's trial position was that 'fair value,' as opposed to 'fair market value,' should only be applied when oppression of a minority shareholder is established and that when no oppression is shown discounts for marketability or minority should be applied."

Three witnesses testified: Linebarger, plaintiffs valuation expert; Sickler, DFE's valuation expert; and Dominguez. Linebarger's analysis focused on the "income"


[322 Or.App. 802] approach to business valuation; she calculated the value of plaintiffs 7.98 percent interest in DFE at $2,252,000, applying no discounts. Sickler based his opinion on fair market value-meaning "the hypothetical value between a hypothetical buyer and a hypothetical seller. The price that would be paid between those two parties." Sickler's "valuation opinion" of plaintiffs interest was $836,000, after applying both minority and marketability discounts.[5]

In its findings of fact and conclusions of law, the court held that "to justify the exclusion of discounts the plaintiff must demonstrate oppressive conduct," explaining that it was required to consider, as part of fair value, "'any impact on the value of the shares resulting from the actions giving rise to' plaintiffs claim" (quoting ORS 60.952(5)(a)(A)). Finding based on the evidence presented and the applicable case law that none of the conduct plaintiff alleged in her complaint was oppressive, the court thus concluded that marketability and minority discounts applied.

Using Sickler's method of analysis with two adjustments, the court determined that the fair value of plaintiff s interest in DFE was $927,595, which included a marketability discount of 27 percent and a minority discount of 26 percent (applied to nonoperating assets).[6] It thereafter entered a general judgment and money award consistent with that determination, setting out payment and interest terms, and ordering plaintiff to relinquish her shares to DFE.

On appeal, plaintiff raises a single assignment of error, specifically, that "[t]he trial court erred when it ruled that, absent a showing of oppression, 'fair value' means 'fair market value,' and then applied minority and marketability discounts to the value of plaintiffs snares." She argues that the legislature, in enacting ORS 60.952, intended to incorporate the meaning of "fair value" from then existing case law-in her view, "the proportionate interest in


[322 Or.App. 803] the corporation as a going concern, without application of minority or marketability discounts." In short, in plaintiffs view (1) the court erred in ruling that it was required to apply the discounts in the absence of oppression and (2) minority or marketability discounts are never appropriate in determining fair value under ORS 60.952. Plaintiff thus requests that we vacate the...

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