JOHN MUNSHOWER, APPELLANT,
v.
LYNDA J. KOLBENHEYER AND DOVE CREEK CO., INC., APPELLEES
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Munshower appeals a judgment determining the fair value of his closely held corporation shares, which included a 20% lack of marketability discount and withheld funds pending further proceedings. The court affirmed the discount and fee denial but found error in the amount withheld in escrow, requiring remand to release the excess amount.
The court affirmed the application of the 20% marketability discount as appropriate for closely held shares, affirmed the denial of fees since no fraudulent or illegal conduct was shown, but found error in the amount withheld in escrow—the court abused its discretion by withholding more than the amount initially claimed in the defendants' notice.
[1] A discount for lack of marketability is properly factored into the "fair value" calculation of closely held corporation shares because such shares cannot be readily sold…
[2] A breach of a shareholder agreement, without more, is not an illegal act for purposes of awarding attorney's fees and expert witness fees in a corporate dissolution proce…
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Join FLexlaw to unlock all legal intelligence“a discount for lack of marketability is properly factored into the equation because the shares of a closely held corporation cannot be readily sold on a public market”
Establishes the legal basis for applying the marketability discount to closely held shares
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Join FLexlaw to unlock all legal intelligenceMunshower sought fair value for his shares in a closely held corporation. The trial court applied a 20% lack of marketability discount based on expert…
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SHEVIN, Judge.
John Munshower appeals a Final Judgment As To The Fair Value of Shares of a closely held corporation, determining the value of Munshower’s stock, imposing a lack of marketability discount of 20% on the value, and withholding sums pending further proceedings. Defendants, Linda J. Kolbenheyer and Dove Creek Company, Inc. [“defendants”], cross appeal the judgment. We affirm.
Munshower’s first exception to the order is that the court erred in applying a lack of marketability discount to the corporation’s value.
We disagree. As this court has done in the past, we rely on New York case law as persuasive in this matter. See Poe & Assoc., Inc. v. Emberton, 438 So. 2d 1082 (Fla. 3d DCA 1983); Williams v. American Crafts, Inc., 129 So. 2d 165 (Fla. 3d DCA 1961); see also Denmark v. Ridgell Furniture Co., 117 Fla. 244, 157 So. 2d 489 (1934).
In determining the “fair value” of Munshower’s shares, as required by section 607.1436(1), Florida Statutes (1997), “[a] discount for lack of marketability is properly factored into the equation because the shares of a closely held corporation cannot be readily sold on a public market.” Blake v. Blake Agency, Inc., 107 A.D.2d 139, 486 N.Y.S.2d 341, 349 (1985); Hall v. King, 177 Misc.2d 126, 675 N.Y.S.2d 810 (N.Y.Sup.Ct.1998).
Although Munshower’s expert opined that a discount was inapplicable in this case, the defendants’ expert testified extensively as to the propriety of applying a lack of marketability discount to the shares’ value.
Thus, we find the trial court’s conclusions were supported by the evidence presented and there is no basis to disturb the findings or the valuations.
We also find no error in the trial court’s denial of Munshower’s request for attorney’s fees and expert witness fees.
Section 607.1436(5), Florida Statutes, provides, in pertinent part, that a court may award a petitioner for corporate dissolution attorney’s fees and expert witness fees if the court finds that the corporate directors acted in a fraudulent or illegal manner. § 607.1430(3)(b), Fla. Stat. (1997). In this case the court properly found “that Defendants did not act fraudulently or illegally, that the parties were represented by counsel and followed counsel’s advice, which had an arguable basis in law and in fact....” Munshower premises his fee claim on Kolbenheyer’s breach of the shareholder agreement.
However, the breach of a shareholder agreement does not result in criminal penalties. See, e.g., Jones v. Braxton, 379 So. 2d 115 (Fla. 1st DCA 1979)(decision to breach contract is not an illegal act). ‘We view an illegal act as one being subject to criminal penalties.” Gates v. Chrysler Corp., 397 So. 2d 1187, 1190 (Fla. 4th DCA 1981).
Thus, the denial of fees here was appropriate.
Addressing the part of the final judgment withholding in escrow a portion of the value payment to Munshower, we find error only in the amount withheld. The court had authority to consider the amount Munshower owed Dove Creek as a setoff to Munshower’s award. See Martin Co. v. Commercial Chemists, Inc., 213 So. 2d 477 (Fla. 4th DCA 1968), cert. denied, 225 So. 2d 523 (Fla.1969).
The court, however, abused its discretion in withholding an amount much greater than the Defendant’s Notice of Claim asserted that Munshower owed. On remand, the amount exceeding the debt initially requested by the Defendant’s Notice of Claim shall be released to Munshower and the remaining amount of approximately $67,000, plus the interest thereon, shall continue to be held in escrow by Munshower’s lawyer pending further proceedings on the Notice of Claim.
After careful consideration of the issues raised on the appellee’s/defendant’s cross-appeal, we hold that no reversible error has been demonstrated; and accordingly, affirm. Also, for the most part, these issues were previously considered and decided by this court by the denial of certiorari on the merits.
Based on the foregoing, we affirm the judgment as modified, and remand with directions.
Affirmed as modified and remanded.
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G & G Fashion Design, Inc. v. Garcia, 870 So. 2d 870 (Fla. 3d DCA 2004)…rm’s length transaction would offer for petitioners’ interest in the company as an operating business. Matter of Seagroatt Floral Co., Inc., 78 N.Y.2d 439, 445, 576 N.Y.S.2d 831, 583 N.E. 2d 287 (1991) (citations omitted); Munshower v. Kolbenheyer, 732 So. 2d 385, 386 (Fla. 3d DCA 1999)(looking to New York case law as persuasive on issues regarding valuation of closely held corporations). Determining what an arm’s length purchaser of an interest in a closely held corporation would offer is “not an exact sci…
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ERP v. ERP, 976 So. 2d 1234 (Fla. 2d DCA 2008)…nerally accorded discretion to the trial court to determine, based upon the evidence and circumstances presented, whether a marketability discount should be applied in the valuation of a closely held corporation. See, e.g., Munshower v. Kolbenheyer, 732 So. 2d 385, 386 (Fla. 3d DCA 1999); see also Cox Enters., Inc. v. News-Journal Corp., 469 F. Supp. 2d 1094, 1108 (M.D.Fla.2006) (“The court in Munshower merely determined ... that courts may apply a lack-of-marketability discount when valuing shares in a close…
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Cima Cap. P'rs, LLC v. PH Cellular, Inc., 69 So. 3d 293 (Fla. 3d DCA 2010)…ly held corporations have no recognized or standard market value and in order to effect a sale thereof, prospective purchasers usually look into the financial status, management and background of [*295] such corporation.”); Munshower v. Kolbenheyer, 732 So. 2d 385 (Fla. 3d DCA 1999) (looking to New York law to determine the “fair value” of closely held corporate shares); London v. Metropolitan Dade Co., 280 So. 2d 714 (Fla. 3d DCA 1973) (finding that consideration of cash value of taxpayers’ stocks in a close…
Previewing 3 of 6 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Denmark v. Ridgell Furniture Co., 117 Fla. 244 (Fla. 1934)
- Gates v. Chrysler Corp., 397 So. 2d 1187 (Fla. 4th DCA 1981)
- Williams v. Am. Crafts, Inc., 129 So. 2d 165 (Fla. 3d DCA 1961)
- Feagin v. State, 438 So. 2d 1082 (Fla. 1st DCA 1983)
- The Martin Co. v. Commercial Chemists, Inc., 213 So. 2d 477 (Fla. 4th DCA 1968)
- Jones v. Braxton, 379 So. 2d 115 (Fla. 1st DCA 1979)
- Martin Co. v. Commercial Chemists, Inc., 225 So. 2d 523 (Fla. 1969)
- Yates v. City of FT. Lauderdale, 225 So. 2d 523 (Fla. 1969)