On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Ocean County, Docket No. C-195-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman and Gilroy.
In this dissenting shareholder action, plaintiff Arlene Markind filed a complaint seeking a determination of the fair value of her interest in Holiday Medical Center, Inc. (HMC), pursuant to N.J.S.A. 14A:11-7(2). We previously reversed the trial court's July 16, 2007 order that determined Markind's interest at $80,000 and remanded for the court to address four issues. Holiday Medical Center, Inc. v. Weisman, No. A-0078-07 (App. Div. July 10, 2008). On remand, the trial court entered an order on June 1, 2009, supported by a written decision that increased the value of Markind's interest in HMC to $97,441.10, but otherwise reaffirmed its prior determinations. It is from this order that Markind appeals. We affirm and remand for further proceedings consistent with this opinion.
Because the procedural history and statement of facts leading to the remand were discussed at length in our prior opinion, it is unnecessary for us to detail them here. Rather, the following summary will place this opinion in context.
HMC owned and operated a nursing home facility under the name of "Medicenter Nursing and Rehabilitative Care Center" (Medicenter). Markind owned a 5% interest in HMC. HMC's shareholders elected to be taxed under Subchapter S of the Internal Revenue Code. In 2004, because of significant operational losses, HMC's directors determined that it would be in the best interest of the corporation's shareholders to sell Medicenter "while the assets retained some value." On November 30, 2004, HMC's directors notified Markind that HMC had entered into a tentative contract to sell Medicenter to a non-profit, private school. The notice advised that HMC anticipated netting $2,000,000 from the sale after paying off the existing mortgage and making a charitable contribution to the school.
On January 7, 2005, HMC's directors sent notice to all shareholders advising that there would be a shareholders' meeting on January 31, 2005, to vote for approval of the contract to sell Medicenter's property to the school for $8,000,000. The notice further provided that:
In addition to the purchase price, the Buyer has agreed to pay the prepayment premium associated with the payment of the mortgage (in the approximate amount of $200,000) and all closing costs. The corporation has agreed to donate any cash proceeds from the purchase price in excess of $2,000,000 to the Buyer as a charitable contribution.
On March 1, 2005, HMC sold Medicenter to the school pursuant to the contract of sale. In accordance with the contract, $3,275,464.87 was deducted from the purchase price to pay off the existing mortgage, and $2,895,060.45 was donated back to the school as a charitable contribution. HMC netted $2,000,000 from the sale. Absent her dissent, Markind was to receive approximately $100,000 from the sale proceeds.
On March 23, 2005, Markind dissented from the sale and demanded payment of the fair value of her shares from HMC. N.J.S.A. 14A:11-2(3). On August 4, 2005, not having received an offer from HMC for the value of her shares, Markind filed a complaint pursuant to N.J.S.A. 14A:11-7(2) naming HMC as an indispensable party plaintiff, and naming HMC's majority shareholders, officers, and directors, together with other entities owned by those parties, as defendants.
On November 18, 2005, the trial court granted defendants' motion for partial summary judgment dismissing the complaint as to the individual defendants, but denied the motion to the extent it sought to insulate the directors from any claims of wrongdoing that might be asserted by HMC.*fn1 Markind filed a motion seeking to enjoin HMC from distributing the sale proceeds without court approval. In opposition to the motion, HMC filed a certification from defendant Barton Weisman, a shareholder and member of the Board of Directors of HMC, dated December 29, 2005, in which he certified that HMC had "distributed a substantial portion of the asset sale proceeds to the non-dissenting shareholders," and that HMC was holding approximately $550,000 in an escrow fund that "will be solely . . . used to pay Arlene Markind for the fair value of her shares in Medicenter, to pay for the cost of the litigation related to Markind's demand for a valuation proceeding, and when necessary, for any ordinary operating expenses incurred by Medicenter." At the hearing on January 6, 2006, after learning that distribution had already been made to all other shareholders of HMC, the trial court suggested, and defendants agreed, that they would make distribution to Markind on the same pro rata basis as HMC had made to the other shareholders. On January 13, 2006, HMC paid Markind $80,000, or 80% of her anticipated share of the sale proceeds.
On October 16, 2006, the court entered an order appointing CBIZ Valuation Group, LLC, (CBIZ) to conduct an independent appraisal of Medicenter. CBIZ issued a report determining the value of the corporation in the alternative: 1) a going concern value of $5,540,000; and 2) a liquidation value of $7,000,000. Following receipt of CBIZ's report, Markind filed a motion for partial summary judgment seeking to have the court accept CBIZ's liquidation value as the value for the real estate, and to appoint an appraiser to determine the value of the nursing home license. HMC filed a cross-motion seeking to have the court adopt CBIZ's going concern value as the fair value of HMC. Both parties also sought awards of counsel fees and costs.
On July 16, 2007, the trial court entered an order supported by an oral decision of June 22, 2007, determining that the proper method of valuing HMC was to value it as a "going concern." Based on the going concern method of valuation, the court concluded that Markind was not entitled to any additional compensation for the fair value of her ...