Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Kern County No. S-1500-CV256135, Richard J. Oberholzer, Judge.
Thomas Anton & Associates, Thomas J. Anton and Stephen P. Wainer, for Plaintiffs and Appellants.
Noriega & Bradshaw, Eric Bradshaw and Donald C. Oldaker, for Defendant and Respondent.
OPINION
HILL, J.
Plaintiffs sued defendant for damages, to enjoin defendant from continuing to operate the convenience store owned by the corporation in which plaintiffs and defendant were shareholders, and to dissolve the corporation. On defendant’s motion, the court stayed the dissolution and ordered an appraisal of the value of plaintiffs’ shares of the corporation, to allow the corporation or defendant to buyout plaintiffs’ interest if either chose to do so. After a trial of the issues other than valuation, the court awarded plaintiffs damages only on their claim that defendant took an unauthorized broker’s commission on the purchase of the store; on their other claims for damages, based on allegations defendant forged documents in order to take over operation of the store, the court concluded plaintiffs had not proved they were damaged by defendant’s conduct. The court ordered that the corporation be dissolved or bought out in accordance with the appraisal; it denied injunctive relief as moot, in light of its ruling on the dissolution and buyout.
Subsequently, the court determined the value of plaintiffs’ shares based on the appraisal. It entered judgment awarding the damages previously determined, setting the value of plaintiffs’ shares, permitting the corporation or defendant to buy plaintiffs’ shares for the stated amount, and ordering that, if the corporation or defendant did not timely tender payment, the corporation be wound up and dissolved.
Plaintiffs appeal, contending they were improperly denied damages and injunctive relief, and the court should have modified the appraised value of their shares by excluding certain expenses from the computation.
FACTUAL AND PROCEDURAL BACKGROUND
In 2002, plaintiff Bhajan Khatkar and defendant, Balbir Dhillon, discussed buying a convenience store and owning it through a corporation in which they would share ownership 50/50. The parties purchased the convenience store. In August 2002, Taft Outpost Corporation, Inc. (the corporation) was formed and articles of incorporation were filed with the Secretary of State. Share certificates were issued, through which plaintiffs (husband and wife) acquired 50 percent of the shares, defendant acquired 9 percent of the shares, and five others acquired the remaining 41percent of the shares. Plaintiffs conducted the day-to-day operations of the store, for which they were paid a salary of $6,000 per month.
On May 31, 2005, Khatkar and defendant orally agreed that defendant would purchase the assets of the corporation and take over operation of the store. On June 1, 2005, defendant began to run the store, with help from plaintiffs. Believing defendant did not intend to complete his purchase of the business, on August 5, 2005, plaintiffs came to the store and took back possession and operation of the store with the assistance of local police. In the meantime, on August 4, 2005, defendant, purporting to act as the sole director of the corporation, held a director’s meeting with his attorney present; he removed plaintiffs from their offices (president and secretary) and appointed new officers for the corporation. On August 10, 2005, defendant came to the store with a copy of the bylaws and a copy of the minutes of the August 4, 2005, director’s meeting, and, with the assistance of local police, resumed possession and operation of the store; he had the locks on the store changed.
On August 12, 2005, plaintiffs filed this action, seeking damages for breach of fiduciary duty and constructive fraud, involuntary dissolution of the corporation, declaratory relief, injunctive relief, and an accounting. They alleged that defendant forged plaintiffs’ signatures on a credit application and a California Resale Certificate for the Board of Equalization; they also alleged defendant failed to disclose to plaintiffs a $51,000 broker’s commission he received on the purchase of the corporation’s land, which he obtained by representing to plaintiffs that the purchase price for the property was $51,000 higher than it actually was. The complaint alleged defendant wrongfully removed plaintiffs from their positions as president and secretary of the corporation by holding a director’s meeting without giving notice to plaintiffs, who were directors of the corporation. Plaintiffs sought and obtained a temporary restraining order.
On October 12, 2005, defendant filed a motion to stay the dissolution proceedings and to appoint an appraiser pursuant to Corporations Code section 2000 to ascertain the value of plaintiffs’ shares of the corporation so that defendant or the corporation could buyout plaintiffs’ shares; the motion was based on the representation that the holders of 50 percent of the shares of the corporation had elected to purchase, or have the corporation purchase, plaintiffs’ shares. The court granted the motion, staying the dissolution and allowing the parties time to agree upon an appraiser. The court subsequently appointed William Reddington as the appraiser, to “ascertain[] the fair liquidation value of plaintiffs’ 100 shares” of the corporation.
All further statutory references are to the Corporations Code unless otherwise indicated.
On January 13, 2006, the court denied plaintiffs’ request for a preliminary injunction enjoining defendant from continuing to operate the convenience store, and instead appointed Khatkar and a third person (Kenneth Byrum) to serve on the board of directors with defendant.
In August 2006, the issues other than the appraisal were tried to the court. After submission of posttrial briefs, on November 15, 2006, the court issued its decision. On the first cause of action for breach of fiduciary duty, the court concluded that, prior to the formation of the corporation, the seller of the convenience store property offered to sell the property for $800,000; defendant, acting as real estate agent for the purchasers, asked the seller to increase the price to $850,000 so defendant could receive a commission of $51,000 without disclosing to plaintiffs that the commission was not being paid by the sellers. The court awarded plaintiffs damages of $51,000 on the first cause of action. As to the remaining claims in the first cause of action and the claims in the second and third causes of action (breach of fiduciary duty and constructive fraud), the court stated “plaintiffs [had] not carried their burden of proof to show a financial damage to warrant judgment.” On the fourth cause of action for dissolution, the court ordered that the corporation be dissolved, or in the alternative, that defendant purchase plaintiffs’ shares in the corporation pursuant to the appraisal. On the fifth cause of action for declaratory relief, the court concluded that plaintiffs had not proven they were illegally removed from the business; plaintiffs did not prove “that any party had a legal right to be the on-site operator of a business that was allegedly operating as a corporation, but without having properly complied with corporate laws.” The court denied plaintiffs’ request for injunctive relief, because “the matter is moot in light of the court’s ruling on the Fourth Cause of Action.”
After the appraisal report was submitted, plaintiffs filed objections to it. Defendant moved to confirm the appraisal; after briefing by the parties, submission of plaintiffs’ own appraisal report, and response by the court-appointed appraiser, the court entered an “order confirming appraisal, and judgment.” With one modification based on erroneous information provided to the appraiser, the court confirmed the appraisal and found that the fair value of plaintiffs’ shares of the corporation was $132,842. The court ordered that defendant or the corporation pay plaintiffs that sum within 30 days in return for plaintiffs’ share certificates; if payment was not timely delivered, the court ordered the corporation to be wound up and dissolved. The judgment awarded plaintiffs $51,000 on the first cause of action, and nothing on the other nondissolution causes of action.
DISCUSSION
I. Failure to Award Damages Based on Forgery of Documents
Plaintiffs assert the trial court’s finding that they failed to prove they suffered damage as a result of defendant’s forgery of documents is not supported by substantial evidence. They contend the court found defendant forged their signatures on the corporation’s bylaws and, despite evidence that defendant used the forged bylaws to deprive plaintiffs of their employment at the convenience store; it awarded them no damages for their lost salary. They contend the loss of their salary was a result of the forgery of the bylaws and they should have been awarded damages for that loss.
“Where findings of fact are challenged on a civil appeal,” they are reviewed to determine “‘whether there is any substantial evidence, contradicted or uncontradicted,’ to support the findings below. [Citation.]” (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.) The evidence must be viewed “in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court. [Citations.]” (Ibid.)
There are no express findings by the court; neither party requested, and the trial court did not issue, a statement of decision. (Code Civ. Proc., § 632.) After the trial of the issues other than valuation, the court issued its November 15, 2006, “Decision and Judgment,” setting out its rulings on each cause of action in the complaint with an explanation of its reasoning. After the hearing on plaintiffs’ challenges to the appraisal report, the court issued a document that combined an order addressing the appraisal issues and a judgment on the entire action. Plaintiffs primarily base their argument that the court’s denial of damages is unsupported on “findings” contained in the November 15, 2006, written decision.
The court later clarified that this was not a final judgment, despite the caption.
“[T]he trial court’s written opinion … does not serve the function of finding.” (Canepa v. Sun Pacific, Inc. (1954) 126 Cal.App.2d 706, 714.) It may not be used to impeach the trial court’s findings and judgment, but it may be used to explain the basis of the trial court’s decision. (Carroll v. Puritan Leasing Co. (1978) 77 Cal.App.3d 481, 492 (Carroll).)
“The general rule is that in the absence of a statement of decision in a court trial, the reviewing court must conclude that the trial court made all findings necessary to support the judgment under any theory which was before the court. [Citations.] However, this rule is merely a corollary of the general rule that a judgment is presumed to be correct and must be upheld in the absence of an affirmative showing of error. This presumption applies only on a silent record. [Citations.] In contrast, ‘When the record clearly demonstrates what the trial court did, we will not presume it did something different.’ [Citation.] Thus, even in the absence of a statement of decision, we are not compelled to resort to a presumption if the record adequately demonstrates the legal theory the court applied.” (Border Business Park, Inc. v. City of San Diego (2006) 142 Cal.App.4th 1538, 1550 (Border).)
The appellate court may look to the judgment itself or to items such as the reporter’s transcript or a memorandum opinion to determine the basis of the trial court’s ruling. (Border, supra, 142 Cal.App.4th at p. 1550; Carroll, supra, 77 Cal.App.3d at p. 491.) An earlier expression of opinion, oral or written, may not be used to impeach the judgment, however, because prior to issuing a statement of decision and judgment the court retains the right to review its intended decision and make changes to it, or “enter a wholly different judgment than that announced. [Citation.]” (In re Marriage of Ditto (1988) 206 Cal.App.3d 643, 646-647; Taormino v. Denny (1970) 1 Cal.3d 679, 684.) Thus, the factual “findings” contained in the November 15, 2006, decision cannot be used to impeach the judgment. The decision may be used, however, to explain the legal theory on which the judgment is based.
A. Corporate formation documents
On the second and third causes of action, and on first cause of action other than the claim for broker’s fees, the court awarded no damages. The November 15, 2006, decision indicates this was based on plaintiffs’ failure to prove resulting damages, rather than on a failure to prove forgery. Plaintiffs submitted evidence that defendant forged plaintiffs’ signatures on several documents, including bylaws for the corporation. Plaintiffs argue the trial court correctly found that defendant forged their signatures to the corporate bylaws, but erroneously also found that he forged their signatures on other corporate formation documents, such as the articles of incorporation. Because the only evidence regarding the signing of the articles of incorporation was Khatkar’s testimony that his signature on that document was genuine, plaintiffs contend this finding was erroneous. They argue the court’s erroneous conclusion that the corporate formation documents, not just the bylaws, were forged was the basis for its finding that plaintiffs did not suffer damage as a result of defendant’s forgery.
The November 15, 2006, decision contained the following statements:
“Because it was not proven that articles of incorporation and other corporate requirements were properly instituted, this court makes no determination of whether the ‘corporation’ was properly organized and operating under the laws in California. Regardless, the parties to this action acted and operated the business as if they were a validly operating corporation.”
“No proof had been presented at the trial to show that there had been compliance with California corporate laws prior to July 2005. Defendant claims that at some time he filed requisite corporate filings with the State of California; however, this court finds that the documents submitted contained fraudulent signatures.”
The discussion of the dissolution cause of action contains this language:
“Although this court has found that the Corporation has not complied with legal requirements for a corporation in California, it would appear that by the granting of the Order by Judge Etcheverry, the corporation is at least assumed to be in compliance with California corporate law.”
Judge Etcheverry issued orders staying the dissolution and ordering appointment of an appraiser to determine the value of plaintiffs’ shares of the corporation and an order denying preliminary injunction and appointing provisional directors for the corporation pending the buyout by defendant.
Although these excerpts contain some ambiguity regarding the validity of the corporation, they are not findings of the court and may not be used to impeach the judgment. The judgment treated the corporation as a validly formed and existing corporation, ordering it dissolved pursuant to the statutory proceedings for dissolution of corporations (§ 1800) and permitting defendant to follow the procedures for a buyout applicable in response to proceedings for dissolution of a corporation (§ 2000). The judgment is consistent with plaintiffs’ position that the corporation should have been treated as a valid corporation because there was no evidence of forgery of the corporate formation documents other than the bylaws and the parties did not contend the corporation was not validly formed.
B. Failure to prove resulting damages
Plaintiffs contend defendant forged the corporate bylaws, which they assert appointed defendant to be the sole director of the corporation, and then used those bylaws to conduct a director’s meeting without notice to plaintiffs. At that meeting, defendant removed plaintiffs from their corporate offices, appointed new officers, and removed plaintiffs from the day-to-day operation of the convenience store. As a result, plaintiffs lost their monthly salary. Plaintiffs contend the lost salary constitutes recoverable damages resulting from the forgery of the bylaws.
It is not clear on what legal basis plaintiffs claim a continuing right to operate the corporation’s convenience store and to receive a salary for doing so. Plaintiffs did not assert any rights as employees; their complaint contained no cause of action against the corporation for wrongful termination or breach of an employment contract. Plaintiffs assert they were operating the store prior to June 1, 2005, and they turned the operation of the store over to defendant on that date because he had agreed to buy the business. They assert that, “[w]hen Dhillon failed to purchase the business, Plaintiffs had a right to resume the prior operations.” The source of such a right is not specified.
Contrary to plaintiffs’ repeated assertions, the bylaws did not appoint defendant to be the sole director of the corporation. They did not designate anyone as a director of the corporation; they merely set out the means by which directors were to be elected. The bylaws also provide:
“The Authorized number of Directors shall be (ONE) until changed by a duly adopted amendment to the Articles of Incorporation or by an amendment to this by-law adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote, as provided in Sec. 212.”
Section 212 provides that the bylaws must set forth the number of directors of the corporation, unless the articles of incorporation do so. (§ 212, subd. (a).) “The number or minimum number of directors shall not be less than three.” (Ibid.) However, before shares are issued, or if there are fewer than three shareholders, the number may be one or two. (Ibid.) The corporation’s articles of incorporation did not prescribe the number of directors it would have. In keeping with section 212, the disputed bylaws provided for one director until that number was increased in accordance with the requirements of section 212.
“If initial directors have not been named in the articles [of incorporation], the incorporator or incorporators, until the directors are elected, may do whatever is necessary and proper to perfect the organization of the corporation, including the adoption and amendment of bylaws of the corporation and the election of directors and officers.” (§ 210.) Within 90 days after filing of the articles of incorporation, and annually thereafter, each corporation is required to file with the Secretary of State a statement containing specified information, including the names and addresses of its directors. (§ 1502, subd. (a).) This section contemplates that directors will be designated within that 90-day period, if they are not named in the articles of incorporation. The Secretary of State then mails a reminder notice to the corporation before each annual deadline for compliance. (§ 1502, subd. (d).)
The articles of incorporation were filed on August 15, 2002. They did not name any directors of the corporation. Plaintiffs introduced purported minutes of an August 19, 2002, special meeting of the “members” of the corporation, which reflect the election of officers of the corporation: Khatkar as president, Kaur as secretary, and Amarjit Singh as chief financial officer. The minutes do not reflect the adoption of bylaws specifying the number of directors the corporation was to have or the election or appointment of any directors. Khatkar testified that no such meeting took place, although he signed the minutes. The share certificates were issued on August 19, 2002, to plaintiffs, defendant, and five others. Thus, as of August 19, 2002, the corporation was required to have at least three directors.
There was no evidence that the shareholders or incorporators of the corporation ever elected or designated directors or that they held a meeting to adopt bylaws specifying the number of directors the corporation was to have. There was evidence that, between August 2002 and August 2005, there were no meetings of shareholders or directors, and there was no meeting to adopt bylaws.
Defendant filled out and signed a statement of information, dated August 25, 2003, on a form from the Secretary of State. In the form, defendant listed himself as the only director of the corporation. He testified the letter that came with the form told him to respond by August 31. He also testified that, when he and Khatkar discussed who were to be the officers of the corporation, they discussed defendant being director; the bookkeeper who prepared the articles of incorporation told them they needed a president, a secretary, a chief financial officer and one director. Defendant did not view his role as director as different from Khatkar’s role as president.
There was also evidence that Khatkar and defendant jointly made decisions about the corporation, such as the amount of salary plaintiffs were to be paid and how much of the profits of the corporation should be distributed. Distributions were made equally to Khatkar and defendant; nothing was paid to the five nonparty shareholders. Defendant testified this was because he contributed more than 50 percent of the capital of the corporation, the nonparty shareholders contributed nothing, and the nonparty shareholders were his family.
The first three causes of action of plaintiffs’ complaint sought damages. Regarding the first cause of action, the court’s November 15, 2006, decision stated:
“It is noted that although it was proven that defendant, Dhillon, was responsible for filing forged corporate documents, the plaintiffs have not proved that they were financially damaged as a result of the acts of the defendant.”
As to the second and third causes of action, the court concluded “that plaintiffs have not carried their burden of proof to show a financial damage to warrant judgment.”
Regarding the declaratory relief cause of action, the court also explained:
“No proof was ever presented that any party had a legal right to be the on-site operator of a business that was allegedly operating as a corporation, but without having properly complied with corporate laws.”
Substantial evidence supports the trial court’s conclusion that plaintiffs failed to establish they were damaged by the forgery of the bylaws. The bylaws did not appoint defendant sole director of the corporation. They reflected the statutory requirements that one director was sufficient until circumstances (issuance of shares and more than three shareholders) and a corresponding amendment of the bylaws required at least three. Plaintiffs could not have been damaged by the forgery of bylaws that simply reflected statutory requirements.
Additionally, the court’s observation that plaintiffs did not prove “any party had a legal right to be the on-site operator” of the convenience store was supported by evidence that no directors were ever properly elected, and defendant and Khatkar seemed to share control of the corporation as if each owned 50 percent. Thus, plaintiffs did not prove that they had any greater right to conduct the day-to-day operations of the store than defendant had. Substantial evidence supports the court’s denial of damages on the ground that plaintiffs failed to prove they were damaged by defendant’s forgery of the bylaws.
II. Permanent Injunction
Plaintiffs contend the trial court should have issued a permanent injunction prohibiting defendant from running the corporation or exercising the buyout procedure.
A. Enjoining buyout by defendant
The denial of a permanent injunction is a matter within the sound discretion of the trial court and will not be reversed on appeal except for an abuse of discretion. (Salazar v. Eastin (1995) 9 Cal.4th 836, 850.)
An action for involuntary dissolution of a corporation may be brought on specified grounds, including the ground that “[t]hose in control of the corporation have been guilty of or have knowingly countenanced persistent and pervasive fraud, mismanagement or abuse of authority or persistent unfairness toward any shareholders or its property is being misapplied or wasted by its directors or officers.” (§ 1800, subd. (b)(4).) If the corporation or other shareholders wish to avoid dissolution, they may follow the statutory buyout procedure.
“[I]n any suit for involuntary dissolution, … the corporation or, if it does not elect to purchase, the holders of 50 percent or more of the voting power of the corporation (the ‘purchasing parties’) may avoid the dissolution of the corporation … by purchasing for cash the shares owned by the plaintiffs or by the shareholders so initiating the proceeding (the ‘moving parties’) at their fair value. … The election of the corporation to purchase may be made by the approval of the outstanding shares … excluding shares held by the moving parties.” (§ 2000, subd. (a).)
If the purchasing parties and the moving parties cannot agree on the fair value of the moving parties’ shares, they may apply to the court and the court shall appoint three appraisers to determine the fair value. (§ 2000, subds. (b), (c).) Once the court has confirmed the award of the appraisers, it “shall enter a decree which shall provide in the alternative for winding up and dissolution of the corporation unless payment is made for the shares within the time specified by the decree.” (§ 2000, subd. (c).) If the purchasing parties make timely payment, the moving parties must transfer their shares to the purchasing parties. (§ 2000, subd. (d).) Otherwise, the corporation will be dissolved.
Plaintiffs filed a complaint requesting involuntary dissolution of the corporation. Defendant moved for appointment of appraisers to determine the fair value of plaintiffs’ shares for a buyout. Defendant’s motion was granted and an appraisal was conducted. The November 15, 2006, decision indicates the court found plaintiffs had grounds for involuntary dissolution “based upon defendant having knowingly countenanced persistent and pervasive fraud, mismanagement or abuse of authority.” The court confirmed the award of the appraiser, as modified, and ordered dissolution of the corporation, unless the corporation or defendant purchased plaintiffs’ shares at the appraised value.
Plaintiffs now assert defendant should have been enjoined from using the buyout procedure to acquire plaintiffs’ shares of the corporation. They assert the court may take into account equitable principles to avoid a result that rewards defendant’s fraud. “Alternatively,” they suggest, “instead of Dhillon being allowed to purchase the shares, the Plaintiffs could be allowed to purchase Dhillon’s shares.”
Courts have held that the provisions of predecessors of section 2000, “are mandatory and that when the prescribed conditions are met the court must recognize the right thus clearly given and must stay the proceeding and proceed to ascertain and fix the value of the shares owned by the plaintiffs.” (Merlino v. Fresno Macaroni Mfg. Co. (1944) 64 Cal.App.2d 462, 464; accord, Reese v. Darden (1951) 106 Cal.App.2d 699, 701.) Section 2000 permits a buyout “in any suit for involuntary dissolution,” even one based on the wrongdoing of those controlling the corporation. (Id., subd. (a).) The statute contains no provision for the court to exercise discretion to deny the buyout on the basis of the purchasing parties’ wrongdoing.
Plaintiffs cite cases they contend authorize an exercise of discretion by the court on equitable grounds. In none of those cases, however, did the court ignore the language of the statute and deny a buyout by the corporation or the purchasing parties when the statutory conditions for a buyout were met. (See Trahan v. Trahan (2002) 99 Cal.App.4th 62; Chapin v. Gritton (1960) 178 Cal.App.2d 551; Ronald v. 4-C’s Electronic Packaging, Inc. (1985) 168 Cal.App.3d 290.)
As to the suggestion that plaintiffs be permitted to buyout defendant, aside from the absence of any suggestion plaintiffs ever sought that remedy in the trial court, section 2000 does not authorize the court to allow the moving parties to buyout the purchasing parties, i.e., to allow those who sought to dissolve the corporation to buyout the shareholders who have expressed no interest in selling their shares or dissolving the corporation. Additionally, there is no provision in section 2000 for an appraisal of defendant’s shares, and no such appraisal has been conducted in this case.
Plaintiffs suing for involuntary dissolution of a corporation have chosen to end their association with the corporation and to seek compensation for their investment in it. The objective of the appraisal and buyout procedure is “to award plaintiffs what they would have received had their involuntary dissolution action been allowed to proceed to a successful conclusion.” (Brown v. Allied Corrugated Box Co. (1979) 91 Cal.App.3d 477, 489; accord, Trahan v. Trahan, supra, 99 Cal.App.4th at p. 75.) As long as this objective is achieved and plaintiffs receive the fair value of their shares as if the corporation had been dissolved, they have been afforded all the relief they would have received in the absence of the buyout procedure. Consequently, we do not view wrongdoing by a shareholder as appropriate equitable grounds to deny the corporation or the purchasing parties their statutory right to buyout plaintiffs’ shares in the corporation. The trial court did not abuse its discretion by denying a permanent injunction against defendant exercising his statutory right to buyout plaintiffs’ shares of the corporation.
B. Enjoining defendant’s continued operation of the convenience store
“‘“A permanent injunction is a determination on the merits that a plaintiff has prevailed on a cause of action … against a defendant and that equitable relief is appropriate.” [Citation.] The grant or denial of a permanent injunction rests within the trial court's sound discretion and will not be disturbed on appeal absent a showing of a clear abuse of discretion. [Citation.] … We resolve all factual conflicts and questions of credibility in favor of the prevailing party and indulge all reasonable inferences to support the trial court’s order.’” (Haley v. Casa Del Rey Homeowners Assn. (2007) 153 Cal.App.4th 863, 872.)
Although plaintiffs prevailed on their request for dissolution of the corporation, defendant prevailed on his request to buyout or have the corporation buyout plaintiffs’ shares in the corporation. Equitable relief preventing defendant from operating the convenience store owned by the corporation would be inconsistent with the judgment permitting defendant to buy plaintiffs out and would be unnecessary if the dissolution proceeds. Consequently, the permanent injunction requested by plaintiffs would conflict with the judgment and would be inappropriate. Denial of an injunction against defendant’s continued operation of the convenience store was not an abuse of discretion.
III. Appraised Value
Section 2000 provides that the purchasing parties “may avoid the dissolution of the corporation … by purchasing for cash the shares owned by the plaintiffs … at their fair value. The fair value shall be determined on the basis of the liquidation value as of the valuation date but taking into account the possibility, if any, of sale of the entire business as a going concern in a liquidation.” (§ 2000, subd. (a).) The statute prescribes the appointment of three disinterested appraisers, and provides that “[t]he award of the appraisers or of a majority of them, when confirmed by the court, shall be final and conclusive upon all parties.” (Id., subd. (c).) Apparently pursuant to an agreement of the parties, the trial court appointed Reddington as the sole appraiser to determine the fair value of plaintiffs’ shares of the corporation as of the valuation date of August 12, 2005.
Both parties represent that they agreed or stipulated to a single appraiser. The agreement or stipulation is not part of the record.
Generally, the valuation date in the case of an action for involuntary dissolution of the corporation is the date on which the dissolution action was commenced. (Id., subd. (f).) The valuation date designated by the trial court in this case was the date plaintiffs’ complaint was filed.
After Reddington submitted his appraisal report, plaintiffs filed objections, which included a challenge to the deduction of a “liquidation cost” from the value of the corporation. Plaintiffs also opposed defendant’s motion to confirm the appraiser’s award, again challenging the deduction of a “liquidation cost.” In the course of briefing, plaintiffs submitted their own appraisal report, prepared by Peter C. Brown and Khosrow Ken Shakoori, and Reddington responded to it. After a hearing, the court confirmed Reddington’s appraisal, with one modification: the court made an upward adjustment to the final appraisal amount, because Reddington’s initial appraisal had characterized a certain sum as loans from shareholders, and it was later clarified that the sum represented capital contributions of the shareholders.
“The trial court's confirmation of the appraiser's report is primarily a factual determination, which must be affirmed if supported by substantial evidence. [Citations.]” (Trahan v. Trahan, supra, 99 Cal.App.4th at p. 70.) Plaintiffs contend the appraisal value confirmed by the trial court was not supported by substantial evidence, because certain costs (broker’s fees/commissions, attorney’s fees, capital gains tax, and accountant’s fees) should not have been deducted from the assets of the business. They also contend Reddington’s appraisal was based on the liquidation value of the corporation, and should have taken into account the sale value because of defendant’s expressed intention to purchase plaintiffs’ shares.
Plaintiffs essentially argue that the appraiser should have calculated the value of the corporation as if plaintiffs’ shares were going to be sold to the corporation or defendant, and should not have included any costs that would be incurred only if the corporation were liquidated. Such a calculation would be contrary to the provisions of section 2000, however. Section 2000 requires a determination of “the liquidation value … taking into account the possibility, if any, of sale of the entire business as a going concern in a liquidation.” (Id., subd. (a).) It does not require the appraiser to determine, or even take into account, the value of the corporation to the shareholders, i.e., its value if one group of shareholders buys out the rest of them. Abrams v. Abrams-Rubaloff & Associates, Inc. (1980) 114 Cal.App.3d 240 (Abrams) is not to the contrary. There, “although noting that section 2000 does not ask for a determination of this particular value, [the appraiser] calculated … the approximate going concern value of the corporation and its assets” to the plaintiff and the defendant. (Id. at p. 249.) That amount was higher than the value the appraisers calculated as the value on liquidation of the corporation’s assets or on a sale of the business as a going concern to a third party. (Id. at pp. 248-249.) The Abrams court rejected plaintiff’s argument that he should have been awarded the higher sum:
“However, the express language of section 2000 specifically instructs that the fair value is to be ‘determined on the basis of the liquidation value,’ taking into account only the possibility ‘of sale of the entire business as a going concern in a liquidation.’ Accordingly, the trial court acted correctly in confirming the majority of the appraisers’ valuation based upon the corporation’s forced liquidation and/or sale as a going concern to a third party.” (Abrams, supra, 114 Cal.App.3d at p. 250.)
Plaintiffs also cite Abrams for the proposition that taxes and other expenses that would not be incurred by the corporation if plaintiffs’ shares were purchased by defendant or the corporation should not be deducted from the assets of the corporation in calculating the fair value of plaintiffs’ shares. Abrams addressed this issue in a single paragraph:
“Rubaloff next argues that the appraisers and the trial court erred in not deducting taxes in determining the fair value of Abrams’ shares. However, if Rubaloff elects to purchase Abrams’ stock only Abrams will suffer tax consequences as a result. We therefore disagree with Rubaloff’s claim that the alleged taxes on the corporation’s assets in the event of an actual liquidation should reduce the fair value of Abrams’ shares in the section 2000 proceeding.” (Abrams, supra, 114 Cal.App.3d at p. 250.)
To the extent this paragraph suggests taxes which are imposed on the corporation in the event of liquidation, but not in the event of a sale of shares from one shareholder to another, should not be taken into account in determining the value of the corporate shares, it is inconsistent with the Abrams court’s own conclusion that the appraiser must determine the liquidation value, taking into account only the possibility of a sale as a going concern to a third party.
In any event, “‘“[a] judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.…”’ ‘A necessary corollary to this rule is that if the record is inadequate for meaningful review, the appellant defaults and the decision of the trial court should be affirmed.’ [Citations.]” (Gee v. American Realty & Construction Inc. (2002) 99 Cal.App.4th 1412, 1416.) Plaintiffs challenge the handling of certain costs in Reddington’s appraisal report, but they failed to include the appraisal report in the record. As a result, they have not established what taxes or other costs were included in or excluded from the appraiser’s determination of the value of the corporation, or how they affected the appraisal amount. Accordingly, plaintiffs have failed to demonstrate any error in Reddington’s calculation of the value of plaintiffs’ shares, and we must presume that the appraisal was supported by substantial evidence and the judgment is correct.
DISPOSITION
The judgment is affirmed. The share payment to plaintiffs, provided for in the judgment at page 3, paragraph 2, shall be made within 30 days after issuance of the remittitur. Defendant is awarded his costs on appeal.
WE CONCUR: VARTABEDIAN, Acting P.J., GOMES, J.