Idaho Supreme Court - Spring Case Review - Business Cases (2017)

2017 Fourth District BarSpring Case Review

Business Cases

March 22, 2017

Wendy Gerwick CoutureAssociate Professor of Law

University of Idaho

Non-Profit Corporate Governance Breach of Fiduciary Duty Fair Value of Minority Shares Recovery of Deficiency

X

Kemmer v. Kemmer, 161 Idaho 463 (Dec. 30, 2016) (Justice Burdick).

President/Senior Pastor: Tapani

Secretary/Treasurer:K. Kemmer

Directors:SmithD. KemmerDolph




President/Senior Pastor:Newman





President/Senior Pastor:Newman

BYLAWSReplacing vacancy in senior pastorate requires majority vote of voting membership




Directors:SmithD. Kemmer (oral)Dolph (by action)





Idaho Nonprofit Corporation ActI.C. § 30-30-607. Resignation of directors(1) A director may resign at any time by

delivering written notice to the board of directors, its presiding officer or to the president or secretary.

. . .





Idaho Nonprofit Corporation ActI.C. § 30-30-607. Resignation of directors(1) A director may resign at any time by

delivering written notice to the board of directors, its presiding officer or to the president or secretary.

. . .

Supreme Court:• MAY do so at any time• BUT exclusive means is by written notice




Directors:SmithD. Kemmer Dolph

Unilaterally called a Special Meeting of the membership to elect new slate of directors:

SmithNewmanMiller




Directors:SmithD. Kemmer Dolph

Unilaterally called a Special Meeting of the membership to elect new slate of directors:

SmithNewmanMiller

Idaho Nonprofit Corporation Act§ 30-30-502. Special meeting(1) A corporation with members shall hold a special meeting of members:

(a) On call of its board or the person or persons authorized to do so by the articles or bylaws; or

(b) Except as provided in the articles or bylaws of a religious corporation if the holders of at least ten percent (10%) of the voting power of any corporation sign, date and deliver to any corporate officer one (1) or more written demands for the meeting describing the purpose or purposes for which it is to be held.


Non-Profit Corporate Governance Breach of Fiduciary Duty Fair Value of Minority Shares Recovery of Deficiency

X

Prehn v. Hodge, 161 Idaho 321 (Dec. 8, 2016) (Justice W. Jones).

The Source Store, LLC

Prehn Bandak Brown & Claiborne

HodgeManaging Member




The Source, LLC

HodgeManaging Member &

Majority Owner

Brown & Claiborne





The Source, LLC

HodgeManaging Member &

Majority Owner

Brown & Claiborne

• Idaho Uniform Limited Liability Company Act: managers owe company & its members duties of care and loyalty

• LLC Operating Agreement: Hodge owed duty to company & its members to “exercise reasonable skill, care and business judgment”

• Court’s Order of Dissolution: all members required to participate & cooperate “in a manner which is fully transparent, accountable, fair & equitable to all members”


Non-Profit Corporate Governance Breach of Fiduciary Duty Fair Value of Minority Shares Recovery of DeficiencyX

Wagner v. Wagner, 160 Idaho 294 (Apr. 27, 2016) (Justice Horton).

Wanooka Farms, Inc.

Majority Minority

Wanooka Farms, Inc.

Majority Minority

I.C. § 30-29-1434. Election to purchase in lieu of dissolution(4) If the parties are unable to reach an agreement as provided for in subsection (3) of this section, the court, upon application of any party, shall . . . determine the fair value of the petitioner's shares as of the day before the date on which the petition under section 30-29-1430(2), Idaho Code, was filed or as of such other date as the court deems appropriate under the circumstances.


Wanooka Farms, Inc.

Majority Minority


Gives courts the flexibility & discretion to consider all relevant facts & circumstances of the particular case


Wanooka Farms, Inc.

Majority Minority


FN6. “The outcome of this trial brings to mind the acronym ‘GIGO’ or ‘garbage in, garbage out.’ . . . The quality of a court’s factual findings can be no better than the quality of the evidence the parties provide to it.”


Wanooka Farms, Inc.

Majority Minority



Wanooka Farms, Inc.

Majority Minority


Court has discretion to pick another date.


Wanooka Farms, Inc.

Majority Minority


• Discount for Lack of Corporate Control (DLOC)

• Discount for Lack of Marketability (DLOM)


Non-Profit Corporate Governance Breach of Fiduciary Duty Fair Value of Minority Shares Recovery of DeficiencyX

AgStar Financial

AgStar Financial v. Northwest Sand & Gravel, 2017 WL 727771 (Feb. 24, 2017); AgStar Financial v. Gordon Paving, 2017 WL 752327 (Feb. 27, 2017) (Justice J. Jones).

Gordon Paving

$9MM

Promise to repay

AgStar Financial


Gordon Paving

$9MM

Promise to repay

Gordon Paving’s Real Property

Gordon Paving’s Personal Property

AgStar Financial


Gordon Paving

$9MM

Promise to repay



Guarantors

Guarantee


I.C. § 6-108. Deficiency judgments--Amount restrictedNo court in the state of Idaho shall have jurisdiction to enter a deficiency judgment in any case involving a foreclosure of a mortgage on real property in any amount greater than the difference between the mortgage indebtedness, as determined by the decree, plus costs of foreclosure and sale, and the reasonable value of the mortgaged property, to be determined by the court in the decree upon the taking of evidence of such value.

AgStar Financial


Gordon Paving

$9MM

Promise to repay



Guarantors

Guarantee



“Where a secured creditor who holds more than one source of security for the same debt seeks a deficiency judgment after having foreclosed on mortgaged real property and obtained title to such real property by credit bid in the foreclosure sale, the Court should utilize equity powers to consider the debt satisfied where the reasonable value of the real property is litigated and determined to be substantially greater than the debt.”



“Where a secured creditor who holds more than one source of security for the same debt seeks a deficiency judgment after having foreclosed on mortgaged real property and obtained title to such real property by credit bid in the foreclosure sale, the Court should utilize equity powers to consider the debt satisfied where the reasonable value of the real property is litigated and determined to be substantially greater than the debt.”

Dissent

Thank you!Wendy Gerwick Couture

Associate Professor of LawUniversity of Idaho

[email protected]

mailto:[email protected]

Idaho Supreme Court - Spring Case Review - Business Cases (2017)

Law

Transcript of Idaho Supreme Court - Spring Case Review - Business Cases (2017)