GILBERTSON, Chief Justice.
[¶ 1.] Jay Link petitioned for judicial dissolution of L.S.I., Inc. (LSI). The circuit court denied the petition and granted LSI's petition to buy out Jay's shares at a "fair value." Jay appeals the valuation of his shares, the condition of the payments, and the dismissal of his remaining claims. We affirm in part, reverse in part, and remand. LSI filed a later appeal, challenging the interest awarded on the buy-out. We conclude the circuit court did not issue a final order reviewable on appeal.
[¶ 2.] Jack Link and his sons, Jay and Troy, owned various companies that produced and distributed meat and cheese snacks. Link Snacks, a Wisconsin corporation, was founded and owned by Jack. It is the sole customer of LSI, a South Dakota corporation located in Alpena that produces snack products pursuant to Link Snacks' specifications. L.S.I., Inc.-New Glarus is another Wisconsin corporation that makes products for Link Snacks. Jay was employed at LSI, Link Snacks, and LSI-New Glarus. After years of conflict with Jack and Troy, Jay agreed to terminate his employment with the companies. The parties were unable to negotiate a buy-out of Jay's shares. In September 2005, Link Snacks, Jack, and Troy filed an action in Wisconsin to, in part, enforce buy-out agreements for the Wisconsin companies. The complaint was amended, alleging Jay breached fiduciary duties. Jay filed a counterclaim alleging Jack, Troy, and other officers and directors of the Link companies breached fiduciary duties. On November 17, 2005, Jay filed an action in South Dakota seeking to dissolve LSI and recover damages from LSI directors for breach of fiduciary duties. In March 2006, the South Dakota action was stayed pending disposition of the Wisconsin action. On November 17, 2006, LSI filed an election to purchase Jay's shares under SDCL 47-1A-1434 in an effort to prevent dissolution.
[¶ 3.] As part of the Wisconsin action, the parties entered into a stipulated order regarding appraisal of various Link companies. The agreed appraisal process for Jay's shares involved three appraisers, one selected by Jay, one by the Link companies,
[¶ 4.] After years of discovery and waiting for reports, the Wisconsin court conducted a three-phase jury trial in May 2008. The jury in the Wisconsin action found that Troy and Jay each owned 50% of LSI, making both equal shareholders. The jury also found that Jay had breached fiduciary duties to LSI both while employed and after he had left. The jury found that the four directors sued in the action, two of whom were also LSI directors, had not breached any duties to Jay, but that Jack and Troy had. Finally, the jury found that Jay was not oppressed and the court denied Jay's petition for dissolution of the Wisconsin corporations. Specific performance of the Wisconsin companies' buy-out agreements was ordered. Notably, there was no buy-out agreement for LSI. The Wisconsin court entered a final judgment on October 2, 2008.
[¶ 5.] LSI noticed a hearing to lift the stay in the South Dakota action on October 16, 2008, and to proceed with its election to purchase Jay's shares in LSI. Jay agreed to the stay being lifted but argued the motion to proceed with the election was untimely. The circuit court rejected Jay's argument and set a hearing for May 2009 to determine the "fair value" of Jay's shares under SDCL 47-1A-1434.3.
[¶ 6.] At the hearing, the parties presented extensive expert testimony from the party appraisers and neutral appraiser in the Wisconsin action, in addition to detailed valuation reports. On May 15, 2009, the circuit court issued a Memorandum Decision, in which it found that LSI was a stand-alone corporation, separate from the Wisconsin Link corporations; that the appropriate date for determining the "fair value" of Jay's shares was December 31, 2005; that Jay was entitled to "fair value" of his shares, meaning his proportionate interest in LSI as a going concern without minority or lack-of-marketability discounts; and, that the undiscounted, proportionate "fair value" of Jay's shares in LSI was $16,550,000, thus rejecting Jay's appraiser's opinion. An order was entered adopting the Memorandum Decision on June 5, 2009, and the circuit court ordered further proceedings to determine the terms and conditions for the purchase of Jay's shares. LSI filed a motion with supporting affidavits to pay the fair value in monthly installments over five years with 4% interest commencing on May 15, 2009, the date of the court's valuation. Jay moved for an order to receive a lump-sum payment of the fair value within 10 days with an interest rate of either 12 or 15%, compounded annually and commencing on November 16, 2005.
[¶ 8.] On January 6, 2010, LSI moved the circuit court under SDCL 15-6-60(b) to vacate its award of accrued interest granted pursuant to the December 2, 2009 order. On January 11, 2010, Jay filed a notice of appeal, including the December 2, 2009 order that included the award of interest. Appeal # 25525. The circuit court heard LSI's motion to vacate the award of accrued interest on March 4, 2010, and entered an order denying the motion without prejudice on March 23, 2010. LSI filed a notice of appeal on April 16, 2010, challenging the denial of the order to vacate the award of accrued interest. Appeal #25610. By order of this Court, appeals # 25525 and # 25610 were consolidated.
[¶ 9.] Jay raises the following issues on appeal:
[¶ 10.] LSI raises the following issue on appeal:
[¶ 11.] The parties dispute the standard of review for valuation of shareholder stock bought pursuant to an election under SDCL 47-1A-1434. Jay argues that review should be de novo because it is a mixed question of law and fact. He compares the issue to a review of a circuit court's determination of the fair value of a dissenting shareholder's stock and cites Richardson v. Palmer Broadcasting Co., 353 N.W.2d 374, 378 (Iowa 1984). LSI argues that the circuit court found as a matter of fact that $16,550,000 was the fair value of Jay's shares, and therefore the standard of review is clearly erroneous. LSI cites the following cases to support its position: In re Midnight Star Enter., L.P., 2006 S.D. 98, ¶ 7, 724 N.W.2d 334, 336; Fausch v. Fausch, 2005 S.D. 63, ¶ 11, 697 N.W.2d 748, 753; Priebe v. Priebe, 1996 S.D. 136, ¶¶ 8, 18, 556 N.W.2d 78, 80.
[¶ 12.] We stated in Midnight Star that "[o]ur review of a circuit court's valuation of property is clearly erroneous. Whether the circuit court used the correct method of determining fair market value is a question of law reviewed de novo." 2006 S.D. 98, ¶ 7, 724 N.W.2d at 336 (internal citations omitted) (emphasis added). See
[¶ 13.] In ordering the terms of the payment for Jay's shares, the circuit court was exercising its discretion under the statutes. This Court must determine if the circuit court abused its discretion. DFA Dairy Fin. Serv., L.P. v. Lawson Special Trust, 2010 S.D. 34, ¶ 18, 781 N.W.2d 664, 670 ("If facts plainly exist to warrant equitable relief and no facts exist to disentitle a party to such relief, then a court is not free simply to ignore the remedy in the name of discretion.") (citing Adrian v. McKinnie, 2002 S.D. 10, ¶ 9, 639 N.W.2d 529, 533).
[¶ 14.] The dismissal of claims is a question of law. We review questions of law de novo. McGregor v. Crumley, 2009 S.D. 95, ¶ 15, 775 N.W.2d 91, 95.
[¶ 15.] 1.
[¶ 16.] SDCL 47-1A-1434.4 provides that "the court ... shall ... determine the fair value of the petitioner's shares as of the day before the date on which the petition ... was filed." This Court has not had an opportunity to review a circuit court's "fair value" determination under this statute. No definition of the term is provided. The Legislature could have put a definition in the "General Provisions" section of South Dakota's Business Corporation Act, SDCL 47-1A-140, but did not. Instead, a definition of "fair value" was provided as it related to statutes governing appraisal rights. SDCL 47-1A-1301(4).
[¶ 17.] Although the determination of fair value in Olsen is informative, it is not controlling because the purposes and policies in that case differ from elections to buy out a shareholder in a dissolution case. The purpose of dissenters' rights statutes is to protect minority shareholders. Olsen, 2001 S.D. 16, ¶ 16, 621 N.W.2d at 617. In this case, Jay owned 50% of the stock, making him an equal owner as opposed to a minority shareholder. Also in contrast to dissenting shareholders, petitioners for dissolution who are being bought out are
[¶ 18.] However, some of the same principles from dissenting-shareholders cases still apply. For instance, the corporation (or in some cases, existing shareholders) will increase its control or ownership in the corporation when it buys out a shareholder. The shares are not being bought by a third party. This makes application of a "fair market value" determination inappropriate because the economic reality is that the shares are not being bought on the market. In Olsen, we rejected the Bank's assertion that "fair value" was analogous with "fair market value." Id. ¶ 17, 621 N.W.2d at 617. Our definition of "fair value" in Olsen was the "value of those shares as a proportionate interest in the business as an entity, in other words as `a going concern.' ... An appraisal proceeding must focus [on] ... the stock only as it represents a proportionate part of the enterprise as a whole." Id.
[¶ 19.] Although the definitions of "fair value" provided by SDCL 47-1A-1301(4) and Olsen are not controlling, it is appropriate in this case to draw from them for guidance, as the circuit court did. This approach is supported by the comments to the Model Business Corporation Act (MBCA). The MBCA comments, on which SDCL ch. 47-1A is based, note that § 14.34 "does not specify the components of `fair value,' and the court may find it useful to consider valuation methods that would be relevant to a judicial appraisal of shares under section 13.30."
[¶ 20.] Jay argues a non-marketability discount inappropriately tainted the valuation process.
[¶ 21.] After hearing expert testimony regarding the valuation and the process by which the amount was determined, the circuit court accepted the valuation of Jay's shares in LSI at $16,550,000, as reached by a majority of the appraisers. LSI's appraiser and the neutral appraiser testified that this amount was the value of Jay's shares without regard to discounts. In its Memorandum Decision, the circuit court stated that he specifically rejected Jay's appraiser's opinions as to valuation. The court noted:
The circuit court therefore provided other reasons why it rejected Jay's appraiser's higher valuation besides a discount. Additionally, the circuit court accepted the higher dollar amount of the majority appraisers' valuation, not the lower $11,200,000 amount which they said included discounts. Furthermore, the decrease from the neutral appraiser's initial report was not a discount. The decrease was due to further discussion and consideration of LSI's high customer concentration, which is one of many factors the appraisers considered in reaching the final opinion on the fair value of Jay's shares. In looking at the entire appraisal process, to which Jay agreed, and the many factors of the business that had to be considered, this decrease was not a discount.
[¶ 22.] The circuit court determined that it would be "unjust and inequitable" to apply a discount for either non-marketability or lack-of-control of shares. A non-marketability discount is applied when shares lack a ready and available market based on the theory that the shares have less value than stock that is easily liquidated. Olsen, 2001 S.D. 16, ¶ 25, 621 N.W.2d at 619. It is not relevant that the petitioning shareholder would have had a difficult time liquidating their shares as that was never their intent. Under SDCL 47-1A-1430, a petitioning shareholder was trying to have the corporation dissolved. A buy-out election is a way for remaining shareholders or the corporation to stop that dissolution. Because LSI elected to purchase Jay's shares, a discount for non-marketability is inapplicable as LSI elected to be a ready market for the shares. "A lack of marketability discount is inapposite when a corporation elects to buy out a shareholder who has filed for dissolution of a corporation."
[¶ 23.]
[¶ 24.] Jay argues SDCL 47-1A-1434.6 presumes a lump-sum payment. It provides in part, "The purchase ordered pursuant to § 47-1A-1434.4 shall be made within ten days after the date the order becomes final." However, SDCL 47-1A-1434.4 provides in part, "Upon determining the fair value of the shares, the court shall enter an order directing the purchase upon such terms and conditions as the court deems appropriate, which may include payment of the purchase price in installments, if necessary in the interests of equity[.]" (emphasis added). Jay argues LSI has not overcome the "presumption."
[¶ 25.] The circuit court rejected Jay's argument that SDCL 47-1A-1434.6 created a presumption. We agree. The language of SDCL 47-1A-1434.4 permits a court, in its discretion, to allow payments in installments if necessary in the interests of equity. These statutes must be read together. See Peterson, ex rel. Peterson v. Burns, 2001 S.D. 126, ¶ 32, 635 N.W.2d 556, 568. In doing so, a plain reading of the statutes does not support a presumption of a lump-sum payment. Furthermore, following basic principles of statutory construction, the circuit court fulfilled the plain-language requirements of the statute. The circuit court reviewed financial evidence, including affidavits, submitted by LSI that supported its argument that it did not have the sum of the purchase price of Jay's stock readily available and could not get a loan for the amount.
[¶ 26.] Jay also argued that LSI was judicially estopped from raising financial hardship as a reason for needing to pay in installments. The circuit court held that judicial estoppel was not applicable:
We agree with the circuit court that judicial estoppel is not applicable. The circuit court correctly determined that LSI's financial status at the time of the order was relevant to the terms of the payments but not to the valuation of Jay's shares.
[¶ 27.] The MBCA's corresponding comments state that "in determining whether installment payments are `necessary in the interests of equity,' the court should weigh any possible hardship to the purchaser against the petitioner's interest in receiving full and prompt payment of the value of his or her shares." The circuit court did not abuse its discretion in
[¶ 28.]
[¶ 29.] SDCL 47-1A-1434.4 provides in part:
(emphasis added). Like payment in installments, the circuit court enjoys discretion in ordering the provision of security.
[¶ 30.] The December 2, 2009, order stated that "the order does not create or grant a security interest in any of LSI's assets to or for the benefit of Jay Link, who upon sale of shares will become an unsecured creditor of LSI." While the parties submitted briefs to the circuit court regarding proposed terms of the payment, the court did not make reference to the issue of security in its Memorandum Decision, from which LSI prepared the order.
[¶ 31.] The comments to MBCA section 14.34, from which SDCL 47-1A-1434.4 was adopted, state that "before ordering payment in installments, the court should be satisfied with the purchaser's ability to meet the scheduled payments and to provide such security as the court deems necessary." Unlike its discussion on the order to make installment payments, the circuit court did not provide any analysis or reasoning as to why it did not grant security. We are therefore unable to review the court's reasoning for its decision. Jay has brought forth sufficient evidence to raise the issue of security. Moreover, at oral argument Jay's counsel indicated that Jay is ready to transfer his LSI shares. Circumstances have therefore changed since this matter was last available for the circuit court's consideration. We remand on this issue and direct the circuit court to enter findings on the issue of security for the debt owed to Jay.
[¶ 32.]
[¶ 33.] As part of the Wisconsin action, Jay alleged breach of fiduciary duty claims against Jack, Troy, two other LSI directors, John Hermeier and Larry Jarvela, and two directors in other Link companies. Using separate jury forms for each director, the Wisconsin jury found that Hermeier and Jarvela had not breached any fiduciary duties owed to Jay. In the South Dakota action, Jay alleged that Jack, Troy, and two LSI directors residing in South Dakota, Terry Smith and Doug Walz, had breached fiduciary duties owed to Jay as a shareholder.
[¶ 34.] LSI argues Jay's dismissed claims are barred by collateral estoppel and res judicata.
Id. (citing Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1, 104 S.Ct. 892, 894 n. 1, 79 L.Ed.2d 56 (1984)); see also Christians, 2001 S.D. 142, ¶ 46, 637 N.W.2d at 387.
[¶ 35.] LSI first invokes collateral estoppel, or the issue preclusion effect of res judicata. Collateral estoppel "prevents relitigation of issues that were actually litigated in a prior proceeding." Dakota, Minn. & E. R.R. Corp. v. Acuity, 2006 S.D. 72, ¶ 13, 720 N.W.2d 655, 659. LSI argues that collateral estoppel prohibits Jay from litigating the breach of fiduciary duties claims in South Dakota. The breach claims allege that Smith and Walz, as LSI directors, went along with Jack and Troy's "scheme" to force Jay out of LSI and accept less than fair value for his various Link ownership interests "in violation of their fiduciary duties." LSI notes that Jay has not alleged that Smith or
[¶ 36.] Issue preclusion, or collateral estoppel, is not appropriate to bar Jay's claims in this case. "Issue preclusion only bars `a point [that] was actually and directly in issue in a former action and was judicially passed upon and determined by a domestic court of competent jurisdiction.'" Robnik, 2010 S.D. 69, ¶ 18, 787 N.W.2d at 775 (emphasis added) (citing Sodak Distrib. Co. v. Wayne, 77 S.D. 496, 502, 93 N.W.2d 791, 794 (1958)). The issue whether Smith and Walz breached fiduciary duties when they allegedly took actions to "go along with [Jack and Troy's] scheme" to force Jay out of the Link enterprises was not litigated as part of the Wisconsin trial. Smith and Walz were not parties in the Wisconsin action, and therefore the issue could not have been actually and directly in issue in that action. Therefore, we conclude that Jay's claims against Smith and Walz were not barred by collateral estoppel.
[¶ 37.] LSI next argues that the claim preclusion effect of res judicata prevents litigation of Jay's alleged breach of fiduciary duty claims.
Barnes v. Matzner, 2003 S.D. 42, ¶ 16, 661 N.W.2d 372, 377 (emphasis in original).
[¶ 38.] Jay argues that res judicata, or claim preclusion, does not apply because neither Smith nor Walz were named parties in the Wisconsin action. LSI contends the Wisconsin court would have had personal jurisdiction over Smith and Walz under Wisconsin's long-arm statute.
[¶ 39.] We agree with LSI. A party must have had a "full and fair opportunity to litigate the issues in the prior proceeding" in order to invoke the claim preclusive effect of res judicata. Robnik, 2010 S.D. 69, ¶ 20, 787 N.W.2d at 775 (citing People ex rel. L.S., 2006 S.D. 76, ¶ 22, 721 N.W.2d 83, 90). Jay had a full and fair opportunity to litigate the issue of breach of fiduciary duties by Smith and Walz as LSI directors in the Wisconsin action. Jay could have sued them as part of his counterclaim along with the other LSI directors. Jay argues that jurisdiction in Wisconsin over Smith and Walz was uncertain. However, no attempt was made to bring them in that action and Jay does not offer a credible explanation as to why he did not sue them in Wisconsin. Nor does Jay offer an explanation as to why he did not pursue the claims against Smith and Walz in the South Dakota action. Other than filing the complaint, Jay took no steps regarding these claims and made no requests of the circuit court. Thus, we affirm the circuit court's dismissal of the claims with prejudice because they are barred by res judicata.
[¶ 40.]
[¶ 41.] The December 2, 2009 order that Jay appealed contained the award of interest. In March 2010, the circuit court denied a motion filed by LSI under SDCL 15-6-60(b)(2) and (b)(3) to set aside Jay's award of accrued interest in the December 2009 order based on newly discovered evidence and fraud, misrepresentation, or other misconduct by Jay. The circuit court denied the motion without prejudice.
[¶ 42.] Neither party raised the question of the circuit court's jurisdiction to entertain the motion that is now on appeal to this Court. Although the jurisdiction of the circuit court to address the motion is questionable, we do not reach the issue.
While denying the motion, the circuit court's decision essentially defers ruling on the issue until after the appeal has run its course.
[¶ 43.] SDCL 15-26A-3 limits our appellate jurisdiction by allowing appeals only from a final order or judgment. Jacquot v. Rozum, 2010 S.D. 84, ¶ 12, 790 N.W.2d 498, 502. We have recognized the United States Supreme Court's standard that generally a final decision is "one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midcom, Inc. v. Oehlerking, 2006 S.D. 87, ¶ 15, 722 N.W.2d 722, 726 (citing Budinich v. Becton Dickinson & Co., 486 U.S. 196, 199, 108 S.Ct. 1717, 1720, 100 L.Ed.2d 178 (1988)). The circuit court did not enter a final order from LSI's motion to vacate because it was denied without prejudice. Nor did the circuit court consider the merits of LSI's motion. It made clear it was waiting for the decision from the initial appeal to be released before making a determination on LSI's motion. Therefore, whether the circuit court had jurisdiction or not, it did not enter a final order. Accordingly, we do not address the merits of LSI's argument on appeal.
[¶ 44.] We affirm the circuit court on the valuation of Jay's shares, the order to pay Jay the fair value of his shares in monthly installments over five years, and the dismissal of Jay's breach of fiduciary duty claims. We reverse on the issue of security and remand for the circuit court to enter findings. Finally, we remand for the circuit court to consider LSI's motion to vacate the award of accrued interest on the merits.
[¶ 45.] KONENKAMP, ZINTER, MEIERHENRY, and SEVERSON, Justices, concur.
Id. (citing Pioneer Ins. Co. v. Gelt, 558 F.2d 1303, 1312 (8th Cir.1977)). We do not address whether Menno State Bank applies in this case because the circuit court here did not make a ruling on the merits of LSI's motion. Even if it had ruled favorably on LSI's motion, this Court received no remand request.
