Maddox v. Norman

NO. 83--141
IN THE SUFREME COURT OF THE STATE OF MONTANA
1983

FAYE ANN PrlADDOX,
Plaintiff and Appellant,

FRANK A. N O ~ ~ I A NJR. , and GLORIA E .
,
NORMAN I & NORMAN RANCIJES INC. ,
Defendants and Respondents.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas Olsen, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Berg, Coil, Stokes & Tollefsen; Ben Berg,
Eozeman, 14ontana

For Respondents :

Moore, Rice, O'Connell & Refling; Ferry J. Moore,
Bozeman, Montana

Submitted on Briefs: May 26, 1383

Decided r
SEP -8

Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiff appeals from the judgment of the Eighteenth
Judicial District Court, Gallatin County, ordering her to
transfer to Norman Ranches, Inc. her 75 shares of stock in
that corporation in return for $20,000 and 20 acres of land.
We affirm in part, reverse in part, and remand for further
proceedings.
The issues are:
(1) Should the District Court have appointed a receiver
to liquidate the corporate assets and distribute the
proceeds ?
(2) Did the District Court have power to compel
plaintiff to sell her stock?
(3) Were the findings of the District Court supported
by substantial evidence?
The Norman family ranch was incorporated in 1961. No
assets were transferred to the corporation until December 20,
1963, when Frank Norman, Sr. (Frank Sr.) deeded approximately
1140 acres of land to the corporation. The ranch belonged to
and had been operated by the Norman family for nearly 100
years. Frank Sr., who died July 28, 1980, was the father of
defendant Frank Norman, Jr. (Frank J r , plaintiff Faye
Maddox (Faye), and T. Donald Norman (Donald) . Donald was
originally a plaintiff in this action, but after settling
with defendants was dismissed as a party. Frank Jr. 's wife,
Gloria Norman (Gloria), is also a defendant.
Originally, Frank Sr. held 997 of 1000 outstanding
shares of Norman Ranches stock, and Frank Jr., Donald and
Gloria each held one share. In 1970 Frank Sr. gave an
additional 410 shares to Frank Jr., 75 shares to Faye, and 74
shares to Donald. At the same time, Frank Sr. executed a
contract to sell his remaining 438 shares to Frank Jr.
Those shares were transferred to Frank Jr. on February 13,
1980, after the purchase price had been fully paid. At the
commencement of this action, ownership of Norman Ranches was:
Frank Norman, Jr. 849 shares
Gloria Norman 1 share
Faye Maddox 75 shares
T. Donald Norman 75 shares
Faye and her husband lived and worked on the Norman
ranch in 1946 and 1947, but in 1948 left the ranch and the
state because they "couldn't make a living." Frank Sr. moved
to Bozeman in 1968 and to Lacey, Washington in 1974. Faye
testified that Frank Sr. was not involved in the ranch
operation after leaving the ranch in 1968, but Frank Jr.
testified that Frank Sr. continued to control the operation,
returning in the summers to do light work and otherwise
phoning weekly to discuss ranch decisions. Although after
1974 Frank Sr. and Faye both lived in Washington and had
"very close contact," Faye was not informed until 1979 that
her father had given her 75 shares of corporate stock.
Beginning in 1978, the ranch affairs were handled by a
new accountant and a new attorney. Frank Jr. and Gloria
testified they had previously depended on the corporation
accountant to prepare tax returns and the corporation
attorney to prepare and mail the required notices. Faye,
however, did not receive any notice regarding corporate
matters. When Frank Jr. and Frank Sr. applied for a
corporation loan in 1970, Faye was listed on the application
as a shareholder. In November, 1979 Faye received her first
annual shareholders' meeting notice. In 1979 and each
successive year, she attended annual corporation meetings.
No separate corporate records were kept by defendants
prior to 1978. No separate journals, ledgers, balance sheets
or bank accounts were prepared or maintained. On advice of
the new accountant in 1978, a separate corporate checking
account was established and separate corporate accounting
mechanisms were adopted. The new accountant testified that a
very thorough ledger had been kept in which all transactions
were posted, but this ledger did not distinguish corporate
from personal transactions. This ledger was not introduced
at trial by either party. The accountant did testify there
had been no apparent attempt to conceal any financial
matters. However, no records were introduced at trial to
account for corporate transactions from 1970 to 1978.
In 1970 the Federal Land Bank loaned Norman Ranches
$80,000 to pay for cattle, land and operating expenses.
Proceeds of the loan were in part applied to repay the
balance of a loan used to purchase the "Gervais" section.
Title to this parcel of land passed to Frank Jr. rather than
to the corporation. Frank Jr. testified that the corporation
had merely loaned him that amount, but no evidence of such a
loan was presented. Corporate lands originally were subject
to a mortgage on the $80,000 loan, although they were later
released from the mortgage. Loan payments were not in
default, but it was not shown if payments were made with
Frank Jr.'s personal funds or with corporate funds. Most of
the balance of the $80,000 was used to purchase yearling
heifers in Frank Jr. 's name. From 1971 to 1979 calves were
sold and proceeds were deposited in the account of Frank Jr.
and Gloria, or Frank Sr. No showing was made of
reimbursement to the corporation for the money used to
purchase the yearling heifers.
Beginning in 1966, corporate lands were farmed by Frank
Jr. under a 1/3 - 2/3 crop share agreement. From its 1/3
share of the crop, the corporation was responsible for
payment of real estate taxes on corporate land, 1/3 of the
seed grain planted, 1/3 of the fertilizer, 1/3 of the weed
control, and all material for repair or construction of
fences. In addition to providing the balance of seed,
fertilizer and weed control, Frank Jr. as lessee provided all
machinery for cultivation and harvesting. He was required to
deliver all grain to the elevator. No showing was made that
the corporation received its share of hay or grain. Frank
Jr. kept no separate records of corporate shares of grain or
hay. Proceeds from the sale of crops were deposited to the
personal account of Frank Jr. and Gloria, or Frank Sr. From
1966 to 1977 no money was deposited in any corporate account.
No amounts were entered in any separate ledger for grain or
hay production under the crop share agreement. A summary of
net lease income, based upon estimates prepared by the
corporation's accountant in 1979, showed the corporate net
lease income for that period as $76,744 or $48,257, depending
on tax treatment.
Further, two houses on a portion of the ranch known as
the "Gray place" were rented beginning about 1977. Rent
income was deposited in Frank Jr. ' s account. No showing was
made that the corporation received any of the rent income.
Faye attended the December 6, 1979 annual shareholders'
meeting for Norman Ranches. At the meeting, Faye demanded
an accounting for the income and expenses of the corporation
from its beginning to date. At the February 1, 1980 meeting,
Faye and Donald each received certificates representing their
shares. The summary of net lease income was presented for
examination and Frank Jr. briefly described the nature and
cost of various corporation improvements. Faye's attorney
requested that a detailed written statement be submitted and
that defendants provide a detailed written accounting for the
$80,000 loan proceeds. No accounting was made. At the next
annual meeting on April 2, 1981, Faye requested and it was
agreed that an appraisal be made of the corporate ranch
property, the Gervais section and items of equipment and
machinery belonging to Frank Jr. The appraisal valued the
ranch property and improvements at $640,000, the Gervais
section at $l6O,OOO, and items belonging to Frank Jr. at
$46,008. The appraisal detailed the character and use of
ranch lands. Based expressly upon present agricultural use
and inclusion in the ranch unit, the appraiser set per-acre
values for each type of ranch land. The appraisal was not of
the corporation as a whole, but included primarily the ranch.
None of the corporate liabilities or other assets were
mentioned. In fact, the overall financial position of the
corporation has not been established.
The parties met on September 30, 1981 to discuss
settlement of the dispute and possible purchase of
plaintiffs' shares by the corporation. An agreement was
reached by which defendants agreed to pay $175,000 for the
150 shares owned by Faye and Donald. The payment was
contingent upon defendants obtaining financing within 30
days. They could not, and the agreement lapsed.
Plaintiffs filed suit on November 2, 1981. Plaintiffs
alleged misapplication and waste of corporate funds in that
Frank Jr. and Gloria had used corporate assets for "personal
benefit and gain." Plaintiffs asked the Court to appoint a
receiver to liquidate the corporate assets and distribute the
proceeds. On November 24, 1981, a hearing was held to allow
defendants to show cause why a receiver should not be
appointed. The Court issued findings and conclusions on
December 30, 1981, finding that defendants' conduct "in the
past disposition of the corporate share of hay and grain
crops and the proceeds of calves and cattle constitutes a
possible misapplication and waste of corporate assets." The
Court conditionally accepted ("unless evidence indicates
otherwise") the $175,000 settlement figure as fair value of
plaintiffs' 150 shares. The Court allowed the parties until
July 12, 1982 to reach a purchase agreement, otherwise a
receiver would be appointed.
At a second hearing on August 2, 1982 the parties sought
court approval of a new settlement agreement between
defendants and plaintiff Donald. Faye was not involved in
the agreement. The Court had ordered that any transaction
involving corporate assets must have prior court approval.
The settlement agreement provided that Donald would transfer
his 75 shares to the corporation in return for $20,000 and 20
acres of land. The agreement was negotiated for Donald by
his son Ted Norman, to whom Donald had given power of
attorney. A prior offer of $30,000 had been rejected. After
hearing testimony that the agreement was fair, reasonable,
and voluntarily and knowingly entered into, the Court
approved the agreement and dismissed Donald as a party.
At a third and final hearing on December 7, 1982, the
Court heard defendants' motion to amend the findings and
conclusions of December 30, 1981. Defendants presented
evidence that the $175,000 settlement agreement had been
contingent upon defendants obtaining financing. Defendants
also presented evidence of specific 20-acre tracts comparable
in value and aesthetics to the tract conveyed to Donald.
Faye presented evidence of tracts valued around $87,500, half
the $175,000 settlement agreement. In findings and
conclusions dated December 30, 1982, the Court found that the
$175,000 agreement had been contingent upon financing and
"was nullified" by unavailability of financing; that
defendants had settled with Donald, but Faye had refused the

same settlement offer; that Faye's stock, being "closely
held, seldom sold, [and] unlisted," was difficult to value,
but that the settlement wit11 Donald was a "strong indication"
of the fair market value of the stock. The Court found two

specific tracts comparable in value and aesthetics to

Donald's tract, and found that a settlement similar to
Donald's was an equitable resolution for Faye. Finally, the
Court found that although defendants' conduct was not per
forma as to corporate law or the corporation's by-laws, "its
informality was not oppressive toward the plaintiff, nor was

she defrauded." Furthermore, the Court did not "find the
misapplication of this personal-ranch corporation's assets
nor waste of them." The Court refused to liquidate,
reasoning that the "prodigal in this instance must defer to
the one who stayed at home, built the ranch, worked with the
father and struggled to a successful ranch unit. " The Court
ordered that Faye transfer her 75 shares of stock to Norman
Ranches in exchange for $20,000 and a 20-acre tract of land
comparable to that received by Donald Norman. Plaintiff
appeals.

Plaintiff in substance argues that upon a bare showing
of misapplication or waste of corporate assets, the District
Court is required by section 35-1-921, MCA to appoint a
receiver to liquidate the corporate assets and distribute the
proceeds. Plaintiff maintains that because such a showing
was made, the District Court erred in refusing to appoint a
receiver. We do not agree.
The Montana Business Corporation Act provides that
"[tlhe district courts shall have full power to liquidate the
assets and business of a corporation . . . when . . . the
corporate assets are being misapplied or wasted." Section
35-1-921 (1)(a)(iv), MCA. The comments on the statute suggest
that this section was intended to clarify the dissolution
powers of the district courts:

"Cases differ as to whether a court has power on
petition of a sFarxolder to d i s m a x lae
-t
for deadlock, fraud or mismanagement, in the
absence of a statute giving the court such a power.
"When there is a statutory grant of such a power
there are still two factors with which one seeking
dissolution must contend: (1) Courts have tended to
construe the statutes as discretionary rather than
mandatory, even though the language of the
particular statute may appear to make it mandatory.
(2) Courts have tended to look beyond the language
of the statute and into the equities of the
situation.

"This section provides discretionary authority to
the district court to liquidate the assets and
-

business of a corporation upon the petition of a
shareholder. .
.." Official Comment, Annot. to
section 35-1-921, MCA (emphasis added).
These comments indicate the drafters of the statute intended
to remove existing uncertainty about whether the courts have
any dissolution powers and to allow discretionary exercise of
those powers. The statute is clearly couched in permissive
language. To require dissolution on a showing of bare
statutory grounds would be manifestly unjust, because it
would dictate the harsh remedy of dissolution regardless of
the facts of the case or the consequences.
Liquidation is an extraordinary remedy and the power of
the court to appoint a receiver must be exercised with
extreme caution. Thisted v. Tower Management Corp. (1966),
147 Mont. 1, 14, 409 P.2d 813, 821. Traditionally,
liquidation has been viewed as a remedy of last resort. This
view was restated in State ex rel. Iverson v. District Court
(1965), 146 Mont. 362, 406 P.2d 828:
"The demand of any party for appointment of a
receiver is generally very carefully considered by
 the courts, for this is a 'drastic' remedy which
deprives the lawful owner of property the right to
manage and control his own interests. As a result,
. . . power to appoint a receiver is to be
exercised sparingly and not as of course. A strong
showing should be made and even then the authority
must be exercised with conservation and
caution ... [citations omitted] The general
rule is also stated that if the desired outcome may
be achieved in any other way, rather than through
the appointment of a receiver, then this course
should be followed." Iverson, 146 Mont. at 371,
406 P.2d at 832-33, quoting Brown v.
Erb-Harper-Rigney Co. (1913), 48 Mont. 17, 27, 133
P. 691, 694.
See also OINeal, Close Corporations S9.27 (Supp. 1982); 19
C.J.S. Corporations §I454 (Supp. 1979).
We hold that section 35-1-921, MCA is permissive rather
than mandatory, and that district courts are empowered, but
not required, to liquidate when corporate assets have been
rr~isappliedor wasted.
As noted in the Official Comment to section 35-1-921,
MCA, courts look beyond the statutory criteria and "into the

equities of the situation." This Court has held that "in
addition to the bare statutory requirements, there is a
further burden of proving equitable grounds for dissolution."
FOX v. 7L Bar Ranch Co. (1982), Mont . , 645 P.2d
929, 935, 39 St.Rep. 862, 871. We reaffirm that holding. In

- we
Fox, affirmed the dissolution of a close corporation,
finding that deadlock and oppression, two of the statutory
grounds, were present and that the equities clearly favored
dissolution. We emphasized that the dissolution issue is to
be decided on a case-by-case basis. In affirming
dissolution, - held there was no adequate alternate remedy:
Fox
"As we have stated, technical satisfaction of the
deadlock requirements is not enough to warrant
dissolution. Therefore, regardless of
[plaintiff's] motives for seeking a dissolution,
dissolution could not be ordered absent the
underlying equitable Founds.
"On the other hand, to disallow a division would
greatly harm [plaintiff] by making him the victim
 of corporate formalities. There - - alternative
is no
adequate remedy. - 645 P.2d at 936, 39 St.Rep.
Fox,
at 871-72 (emphasis added) .
The equitable factors found persuasive in Fox were (1)
demonstrated inability of the parties to get along, (2)
reasonable expectations of the shareholders, (3) lack of
disruption of a going business, (4) lack of injury to the
public, (5) harm to shareholders from refusal to liquidate,
and (6) lack of adequate alternative remedies. This list is
not exhaustive, nor is each of these factors necessarily
required in every case. Dissolution actions must be resolved
on a case-by-case basis, balancing the underlying equities
and eschewing rigid, predetermined rules. This approach is
consistent with our prior decisions. As we have noted before
in the corporate dissolution context, " [c]ourts of equity
are not bound by cast-iron rules. The rules by which they
are governed are flexible and adapt themselves to the
exigencies of the particular case." Thisted, 147 Mont. at

We employed essentially the same flexible approach in
Skierka v. Skierka Bros., Inc. (1981), Mont . , 629
P.2d 214, 38 St.Rep. 754. There we affirmed the District
Court's conditional liquidation order, holding that the
Court's finding of oppression was clearly supported by the
evidence and that fraud and mistake were also present.
Applying Thisted, we deferred to the equitable discretion of
the District Court. The equities in Skierka clearly
supported liquidation. There, due to actions of the
controlling shareholder, plaintiff's reasonable expectations
were frustrated, plaintiff was effectively excluded from
corporate management, and the shareholders were unable to get
along. Even though the equities supported the liquidation
remedy, the District Court ordered that liquidation occur
only if the parties failed to agree on a division of the
corporate assets. Skierka, 629 P.2d at 215-17, 38 St.Rep. at
755-58.

The equities in this case do not support plaintiff's
contention that liquidation of Norman Ranches is the proper
remedy. Plaintiff claims to have established statutory
grounds for dissolution, but has not demonstrated underlying
equities which demand the harsh liquidation remedy. Even
assuming misapplication or waste, the record contains
substantial evidence in support of the trial court's refusal
to liquidate. Norman Ranches appears to be a solvent and
going business. Frank Jr. and Gloria would be unjustly
harmed by liquidation of assets they have worked long and
hard to improve. Together they own over 90% of the corporate
shares. Moreover, liquidation would not be likely to benefit
Faye in a manner consonant with her apparent expectation to
get her money out of the corporation quickly. She clearly
does not wish to remain in Montana and participate in the
ranch operation. The parties are clearly unable to work
together. Liquidation of ranch property might take years and
might yield a much less satisfactory result than other
available remedies. Alternative remedies exist which would
resolve the dispute without the adverse consequences
liquidation promises to all concerned. Finally, Faye
requested in open court a remedy other than dissolution.
We will not disturb the trial court's determination of
the dissolution issue unless it is "clearly erroneous."
Skierka, 629 P.2d at 222, 38 St.Rep. at 764. We affirm the
District Court's refusal to liquidate the assets of Norman
Ranches, Inc.
 Plaintiff challenges the power of the District Court to
compel her to sell her stock. She argues that the sole issue
before the District Court was whether to dissolve the
corporation, but that the Court, in an effort to compromise,
imposed an unwanted agreement upon the parties. We reject
this argument.

Our prior decisions have recognized the general
equitable powers of district courts over disputes arising
among shareholders of close corporations. Thisted, 147 Mont.
at 14-15, 409 P.2d at 820-21; Skierka, 629 P.2d at 221-22, 38
St.Rep. at 764; - 645 P.2d at 936, 39 St.Rep. at 871-72.
Fox,
In Thisted, we recognized that power to choose from a broad
range of equitable remedies is necessary to resolve disputes
of this nature: "[bly [their] very nature, intracorporate
problems arising in a close corporation demand the unusual
and extraordinary remedies available only in a court of
equity." 147 Mont. at 14, 409 P.2d at 820.

Accordingly, a court sitting in equity is empowered to
determine the questions involved in a case and "do complete
justice. " Sawyer-Adecor International, Inc. v. Anglin

(1982) Mont. , 646 P.2d 1194, 1202, 39 St.Rep.
1118, 1127; Link v. State (1979), 180 Mont. 469, 483, 591
P.2d 214, 222. This includes the power to fashion an
equitable result. Rase v. Castle Mountain Ranch, Inc.

(1981), Mont. , 631 P.2d 680, 687, 38 St.Rep. 992,
1000.
Plaintiff argues that the District Court converted this
action to dissolve and liquidate a corporation into something
akin to specific performance of a contract contrived by the
Court. We do not agree. Although the District Court may
have improperly relied upon the settlement figure reached by
defendants and Donald, as determinative of the value of
plaintiff's 75 shares, the District Court did not make a
contract for the parties. Plaintiff cites Horst v. Staley
(1936), 101 Mont. 543, 54 P.2d 876, for the rule that courts
may not make contracts for the litigants. But in Horst the
dispute was whether the parties had made a certain agreement.
Plaintiff claimed they had; defendant denied that any
agreement had been reached. In attempting to compromise the
positions of the parties, the trial court disregarded the
allegations and the parties' proof and created an agreement
with terms midway between the parties' positions. Horst, 101
Mont. at 548-49, 54 P.2d at 878. Here, plaintiff asked the
District Court to order the stock sale. The Court simply
assigned a value to the shares that was unsatisfactory to the
plaintiff. Although plaintiff's argument begins with the
assertion that the District Court is powerless to compel the
stock sale, her argument does not address that issue.
Instead, it is aimed at undermining the District Court's
valuation of her stock. The District Court did not impose a

"contrived" contract upon the plaintiff.
Although this Court has never ruled directly upon the
question, the decisions of other jurisdictions have
recognized and approved the fashioning of equitable remedies
less drastic than dissolution, including but not limited to
ordered sales of stock at a fair price. Fix v. Fix Material
Co., Inc. (Mo. 1976), 538 S.W.2d 351, 357; Baker v.
Commercial Body Builders, Inc. (Or. 1973), 507 P.2d 387,
395-96; Alaska Plastics, Inc. v. Coppock (Alaska 1980), 621
P.2d 270, 274-75. In Coppock, the plaintiff sought
dissolution but the trial court ordered defendants to
purchase plaintiff's shares. The Alaska Supreme Court
summarized the case law on this issue and restated the
rationale supporting the fashioning of equitable remedies
less drastic than liquidation:
"Liquidation is an extreme remedy. In a sense,
forced dissolution allows minority shareholders to
exercise retaliatory oppression against the
majority. Absent compelling circumstances, courts
often are reluctant to order involuntarv 1

dissolution. [citations omitted] As a result,
courts have recognized alternative remedyes based
upon their inherent equitable powers. Thus in
Baker, interpreting a statute substantially similar
to AS 10.05.540, the court authorized numerous
alternative remedies for oppressive or fraudulent
conduct by the majority. Among those would be:
'An order requiring the corporation or a
majority of its stockholders to purchase
the stock of the minority shareholders at
a price to be determined according to a
specified formula or at a price
determined by the court to be a fair and
reasonable price.' (footnote omitted).
Baker, 507 P.2d at 396. The same court applied
that remedy in Delaney v. Georgia-Pacific Corp.,
278 Or. 305, 564 P.23 277, 288-89 (1977)
Coppock, 621 P.2d at 274-75 (emphasis added).
."
The Court found however that the stock purchase remedy was
not appropriate under the facts of that case.
The stock purchase remedy was applied in Delaney, where
the Oregon court found that remedy appropriate in light of
" 'the facts of the case and the nature of the problem
involved. . .' " Delaney, 564 P.2d at 288, quoting Baker, 507
P. 2d at 395. The case was remanded for a proper
determination of value. These cases clearly support the
power of the District Court on appropriate facts to order the
purchase or sale of minority shares. We are persuaded by the
rationale and holdings of these decisions. Plaintiff has not
cited, nor does our independent research disclose, any
authority to the contrary. Indeed, the cases cited do not
seriously question that courts have such power, only whether
its exercise is appropriate in the particular case.
We hold that the District Court had power to order the
purchase and sale of Faye's stock.
 Plaintiff and defendants are clearly unable to cooperate
in the management of Norman Ranches. It does not appear from
the record that Faye desires any participation in the ranch
operation. Faye asked the District Court to award her money
and land in exchange for her shares. She has not expressed
any desire to remain a shareholder or participate in the
ranch operation, except insofar as necessary to withdraw her
share from the corporation. Norman Ranches appears to be a
successful family ranch and, barring dissolution, is likely
to remain so. The stock purchase by defendants allows Faye
her rightful share of the corporation. It also allows the
ranch to continue operating without unfair interruption. It
allows defendants to enjoy the rightful fruits of their
labors on the ranch while still allowing a full accounting
for corporate funds. In short, the stock sale remedy answers
the equities and demands of the case. We affirm the District
Court's use of the stock sale remedy in this case.

The final issue is whether there was substantial
evidence to support the findings of the District Court upon
which judgment was entered ordering Faye to transfer her 75
shares of stock in return for $20,000 and 20 acres of land.
The record does not show all assets and liabilities of the
corporation. While the District Corut found that corporate
assets were appraised at $640,000, the record shows that this
value is limited to the corporate real property. The record
does not disclose the net value of the corporation. Section
35-1-812(6) (c), MCA, in providing a method for dissenting
shareholders to force a purchase of shares, requires as a
part of the value determination that the corporation provide
a balance sheet showing assets and liabilities. Such
information is no less crucial in the present case.
 Determination of the assets of the corporation also
requires an accounting by Frank, Jr. for corporate funds from
1970 to the date of valuation. No accounting is shown of
corporate rental income, lease proceeds or loan proceeds.
Liabilities of the corporation, if any, must also be shown by
appropriate evidence. It may be that defendants have some
claim in that regard for labor and improvements.
Next, we note that the District Court relied upon
defendant's settlement with Donald as determinative of the
value of Faye's shares, rejecting the earlier $175,000
valuation by agreement. While the $175,000 agreement lapsed
for lack of financing, it does not eliminate that agreed
value as a factor to be considered in determining share
value. Defendants argue that reliance on Donald's settlement
to determine value was proper, relying on cases treating
arms-length transactions in the normal course of business as
the basic criterion of market value. The record raises a
question as to whether or not the settlement with Donald was
an arms-length transaction, since it involves a participant
in the court action. It appears that the agreed value of
$175,000 for all the shares or $87,500 for Faye's shares was
evidence which should have been considered by the District
Court.
Finally, the record fails to show the value of the 20
acres of land ordered to be exchanged. The initial appraisal
was based upon a value per acre for an operating 1,140-acre
ranch. That appraisal expressly stated that the values were
applicable only under the existing program of farm use and
were invalid for use in connection with any other appraisal.
As a result, the record fails to show the value of the 20

acres which the defendant proposed to transfer along with
$20,000 to Faye and also fails to show the value of the lands
which Faye proposed to be transferred to her at a value of
$87,500. On further consideration, the District Court should
require appropriate evidence to establish the value of any
land which is ordered to be exchanged.
The case is remanded for further proceedings consistent
with this opinion.

We concur:
S'\