from the District Court of Burleigh County, South Central
Judicial District, the Honorable Sonna M. Anderson, Judge.
Michael J. Geiermann, Bismarck, ND, for petitioner,
appellant, and cross-appellee Elyse Puklich.
R. Dreyer (argued), Jeffrey R. Underhill (appeared), and Eric
G. Nasstrom (on brief), Minnetonka, MN, for respondent,
appellee, and cross-appellant Blayne Puklich.
Elyse Puklich appeals, and Blayne Puklich cross-appeals, from
a district court judgment awarding Blayne Puklich $6, 012,
230. The award includes the value of Blayne's interest in
an automobile dealership, the value of Blayne's interest
in a real estate partnership, and damages arising from
Elyse's breach of fiduciary duties. We reverse in part
and affirm in part.
Elyse and Blayne Puklich are siblings who held ownership
interests in a closely-held corporation, Puklich Chevrolet,
Inc. ("PCI"), a limited partnership, B&E
Holdings, LLP ("B&E"), and a closely-held
corporation, B&E Bismarck Limited ("Limited").
PCI operates an automobile dealership in Bismarck. B&E
owns, and leases to PCI, the real estate upon which the
dealership is operated. Limited operates a reinsurance
business to which PCI allocates a portion of premiums paid by
automobile purchasers for extended warranties, credit and
disability life insurance, and contractual liability
On November 21, 2013, Elyse initiated this action to dissolve
B&E. Blayne responded and asserted his own claims,
including a request that the district court compel Elyse to
buy his interest in PCI and seeking an award of damages for
breach of fiduciary duties.
A trial was held in late November and early December 2017. On
June 28, 2018, the district court issued findings of fact,
conclusions of law, and ordered the entry of a judgment. The
judgment dissolved B&E, compelled Elyse to purchase
Blayne's interest in B&E for $2, 940, 660, and
compelled Elyse to purchase Blayne's 19 percent ownership
interest in PCI for $2, 622, 000. The judgment also awards
Blayne $300, 000 for Elyse's breach of a fiduciary duty
owed to Blayne with respect to B&E. Finally, the judgment
provides an award of $149, 570 to Blayne for Elyse's
breach of her duty of loyalty and fair dealing in winding up
Limited. The judgment was entered on July 30, 2018.
Elyse appeals the district court's valuation of B&E,
the valuation of PCI, and the failure to reduce the value of
Blayne's interest in PCI and B&E by the amount of
dividends and distributions made to Blayne subsequent to the
valuation dates used by the court. Elyse also challenges the
determination she breached her fiduciary duty to B&E and
the reciprocal award of $300, 000 in damages to Blayne, the
determination Elyse had breached her fiduciary duty to Blayne
as a minority shareholder of PCI, the award of $149, 570
related to the winding up of Limited, and several specific
findings of fact. Blayne's cross-appeal alleges the court
should have determined Elyse breached her fiduciary duties to
Blayne, PCI, and Limited by terminating Limited and starting
a new reinsurance company, the court erred in valuing damages
for Elyse's breach of fiduciary duties to Limited, the
court failed to find a breach of fiduciary duties with regard
to a real estate transaction in Valley City, and the court
abused its discretion in denying Blayne recovery of his
The district court valued B&E as of November 21, 2013,
the date Elyse initiated her petition to dissolve B&E.
The court valued PCI as of January 8, 2014, the date of
Blayne's first response to Elyse's action. Blayne did
not seek a buyout of his interest in PCI until he amended his
pleading in June 2016.
Elyse challenges the district court's valuation of
B&E and PCI. She separately argues that regardless of the
accuracy of the court's valuation of B&E and PCI, the
court should have reduced the value of Blayne's interest
in the two entities by distributions made to Blayne from the
entities subsequent to the valuation date. She has not
otherwise challenged the valuation dates used by the court.
Valuation is a question of fact. See, e.g.,
Schultz v. Schultz, 2018 ND 259, ¶ 14, 920
N.W.2d 483 (valuation of property in divorce proceedings is a
question of fact); Fahey v. Fife, 2017 ND 200,
¶ 8, 900 N.W.2d 250 (valuation of an estate's
property is a finding of fact). A district court's
findings on valuation of property will not be reversed unless
they are clearly erroneous. Schultz, at ¶ 14. A
finding of fact is clearly erroneous under N.D.R.Civ.P.
52(a), if it is not supported by any evidence, if, although
there is some evidence to support the finding, we are left
with a definite and firm conviction a mistake has been made,
or if the finding is induced by an erroneous conception of
the law. See Tornabeni v. Creech, 2018 ND 204,
¶ 22, 916 N.W.2d 772. A district court's finding is
not clearly erroneous if it represents a choice between two
permissible views of the evidence and the finding is based
either on physical or documentary evidence, or inferences
from other facts, or on credibility determinations.
Schultz, at ¶ 14. A district court's
valuations are presumed by this Court to be correct, and a
valuation within the range of evidence presented to the court
is not clearly erroneous. Id. at ¶¶ 14,
Both parties provided the district court with expert opinions
on the value of B&E, and the court adopted Blayne's
expert's valuation. Elyse argues the court erred in
adopting Blayne's expert's valuation of real estate
owned by B&E because Blayne's expert valued the real
estate as a fee simple estate, rather than a leased fee
estate, and ignored the leases that provide PCI with use of
the property. Real estate value was then used by a second
expert to determine the value of the partnership.
The district court recognized that Blayne's expert had
valued the real property as a fee simple estate and that the
expert had not considered the leases providing PCI with use
of the property. However, the record also includes evidence
that the leases were not "arm's-length" leases
and the rent payable under the leases could be increased.
Blayne's expert considered the rent that could be
generated from market value leases and testified that if the
leases reflected market value, the leased fee estate and the
fee simple estate would be equal. Because there is evidence
in the record supporting the court's finding regarding
the value of the real estate held by B&E, we are not left
with a definite and firm conviction a mistake has been made,
the finding was not induced by an erroneous conception of the
law, and the court's finding was not clearly erroneous.
Elyse also argues the district court erred in rejecting the
application of a minority discount and lack of marketability
discount to Blayne's partnership interest.
"Discounts for a minority interest and for lack of
marketability are conceptually distinct." Estate of
Fleming v. Comm'r of Internal Revenue, 74 T.C.M.
(CCH) 1049 *7 (T.C. 1997). A minority discount reflects the
minority interest holder's inability to compel
liquidation and thereby realize their respective portion of
the net asset value. Id. A discount for lack of
marketability recognizes the lack of a ready market for an
ownership interest. Id.; see also S. Hess,
Annot., Use of Marketability Discount in Valuing
Closely Held Corporation or Its Stock, 16 A.L.R.6th 693
§ 2 (2006). The application and appropriate amount of a
minority discount and a lack-of-marketability discount are
questions of fact. Estate of Fleming, at *7.
Elyse sought and was granted dissolution of B&E under
N.D.C.C. § 45-20-07, which provides for the liquidation
of the partnership assets, payment of the partnership debts,
and the distribution of the surplus to the partners pursuant
to their respective ownership interests. Because the
dissolution of B&E results in the liquidation of its
assets, the district court's rejection of the application
of a minority discount and discount for lack of
marketability, was not clearly erroneous.
Elyse argues the district court erred in its valuation of PCI
by accepting the valuation provided by Blayne as a penalty
for Elyse's breach of a fiduciary duty and by rejecting
the use of valuation discounts. The court concluded as
V. Blayne's Count IV, that Elyse breached her duty of
good faith and fair dealing in attempting to unfairly oppress
Blayne as a minority shareholder in an effort to buy out his
shares of PCI at below fair market value is proven. The Court
award[s] no specific damages for the breach, but determines
that the fair market value of Blayne's 19 percent
ownership in PCI is $2, 622, 000. Elyse shall pay Blayne the
sum of $2, 622, 000 for his 19 percent ownership interest in
Puklich Chevrolet, Inc.
findings of fact, the district court found as follows:
177. The Court finds that Elyse has taken calculated steps in
the past few years to force Blayne to sell his interest to
her and to reduce any funds owing to Blayne from the
business. The Court will not discount ...