author: MURDOCK, Judge. THOMPSON, Judge,

text:
    James OFFENBECHER v. BARON SERVICES, INC.
    2000025.
    Court of Civil Appeals of Alabama.
    May 10, 2002.

      S. Mitchell Howie, Huntsville, for appellant.
    Frank McRight of Lanier Ford Shaver & Payne, P.C., Huntsville, for appellee.
   On Application for Rehearing

MURDOCK, Judge.

This court’s opinion of May 18, 2001, is withdrawn, and the following is substituted therefor.

Baron Services, Inc., acting pursuant to § 10-2B-13.30, Ala.Code 1975, sued James Offenbecher, one of its minority shareholders, seeking a determination of the fair value of Offenbeeher’s stock. Baron Services paid $72,488.49, its estimate of the value of Offenbecher’s 130 shares of Baron Services stock, into the court. After the parties had conducted discovery, the trial court conducted a nonjury trial. On April 13, 2000, the court entered a judgment in favor of Baron Services, directing Offen-becher to deliver his shares to Baron Services in exchange for the funds Baron Services had paid into the court. Offenbecher filed a postjudgment motion pursuant to Rule 59, Ala. R. Civ. P. Baron Services moved for an award of an attorney fee. The trial court denied both motions. Of-fenbecher appealed to the Supreme Court of Alabama, which transferred the appeal to this court, pursuant to § 12-2-7(6), Ala. Code 1975.

On appeal, Offenbecher argues that the court erred in its determination of the number of outstanding shares of Baron Services stock and in failing to award him an attorney fee. Offenbecher also challenges the propriety of the court’s use of a 50 percent marketability discount in calculating the fair value of the stock of Baron Services.

The record reveals that Baron Services was incorporated in 1990 by Bob Baron; the company sold weather-radar systems and related software. In 1990, Bob Baron gave Offenbecher, who had designed some software for Baron Services, 130 shares of Baron Services stock. Baron Services made no profit in its first few years of operation, selling only 10 radar systems. Baron Services earned profits of $59,847 in 1994; $22,480 in 1995; and $165,434 in 1996. However, in 1997, Baron Services sold 23 radar systems, and its profits soared to $735,261.

On March 31, 1998, the board of directors of Baron Services, which was controlled by its majority shareholders, approved a plan to merge Baron Services into a separate Delaware corporation. The Baron Services board’s merger plan included a “cash-out” provision providing for a cash payment to any shareholder owning fewer than 150 shares of Baron Services, while denying such shareholder any ownership stake in the Delaware corporation after the merger. In response to the merger proposal, Offenbecher demanded payment from Baron Services for the fair value of his 130 shares of stock in that company. The parties’ subsequent disagreements concerning the value of his ownership stake (both monetarily and in relation to the total outstanding shareholders’ equity), resulted in the instant litigation.

Offenbecher argues, without any citation to authority, that the trial court erred in determining the number of Baron Services shares that were outstanding. In 1991, Baron Services issued 2,000 shares of stock to Oakley Baron, Bob Baron’s father. Baron Services presented evidence, including stock certificates, indicating that Oakley Baron purchased the 2,000 shares of stock for $20,000. Offenbecher argues that Oakley Baron actually lent Baron Services $20,000 and that Baron Services improperly issued the shares of stock to him. In support of his argument, Offenbecher points to a letter from Oakley Baron to Bob Baron; the letter stated that Bob Baron could repurchase the stock when he had the money to do so. Offenbecher argues that Oakley Baron’s letter clearly indicates that the 1991 transaction was a loan from Oakley Baron to Baron Services. Oakley Baron testified to the contrary, stating that he purchased stock in his son’s company and that he was willing to resell that stock to his son. The resolution of this conflicting evidence was a factual issue to be determined by the trial court. Where the trial court is presented with ore tenus evidence, its judgment based on its factual findings is entitled to a presumption of correctness on appeal. Gray v. Reynolds, 553 So.2d 79 (Ala.1989); Martin v. Dinmark, 531 So.2d 1234 (Ala.Civ.App.1988). Offenbecher’s brief on this issue does not contain any citations to the record or direct this court to any supporting authority. We conclude that Offenbecher has failed to demonstrate that the trial court erred in determining the number of outstanding shares of Baron Services stock.

Offenbecher also argues that the trial court erred, as a matter of law, in accepting a valuation of the fair value of individual shares of Baron Services stock ($547.77) that included a 50 percent “marketability discount.” We note that questions of law are not subject to the ore tenus presumption of correctness. Walker v. Walker, 695 So.2d 58 (Ala.Civ.App.1997).

In entering its judgment, the trial court relied heavily upon the testimony of Gary Saliba, the valuation expert retained by Baron Services. Saliba opined that Baron Services stock as of December 31, 1997, was worth $562.47 per share. In doing so, Saliba initially determined a value of $1,124.94 per share, which he called the “marketable value” of the stock, or the value of each share of stock “on a freely traded basis.”

However, Saliba testified that a 50% “marketability discount” should apply to all the shares of stock for the company; Saliba testified that the marketability discount adjusted for the fact that the company was closely held and was not publicly traded. Saliba’s calculation of the value of the Baron Services stock using the marketability discount resulted in a valuation of $562.47 per share as of December 31, 1997. At the request of Baron Services, Saliba later reevaluated the value of the stock, based on management’s revised sales and income projections. Saliba’s revised valuation indicated a stock value of $547.77 per share, as of December 31, 1997.

In contrast, Bruce Williams, Offenbecher’s valuation expert, valued Offenbecher’s 130 shares of Baron Services stock, as of April 19, 1998, at $215,000, or $1,653.85 per share. While Williams’s opinion was based upon several different valuation assumptions -than those made by Saliba, the principal reason for the wide gap between Williams’s stock valuation and Saliba’s stemmed from Williams’s view that the instant case was an inappropriate one for the application of a marketability discount.

Under § 10-2B-13.02(a), Ala.Code 1975 (a portion of the Revised Model Business Corporation Act, or “BCA,” as adopted by the Alabama Legislature), a shareholder of a corporation, such as Offenbecher, “is entitled to dissent from, and obtain payment of the fair value of his or her shares in the event of’ (emphasis added), certain corporate actions, including mergers such as that undertaken by Baron Services. Under Alabama law, if the corporation’s offer of payment is less than what the shareholder believes is the fair value of his or her shares and the corporation wishes to contest the validity of the shareholder’s payment demand, the corporation may institute a civil action in which the trial court will enter a “judgment for the amount the court finds to be the fair value of his or her shares, plus accrued interest.” Ala. Code 1975, § 10-2B-13.30(f) (emphasis added); see also §§ 10-2B-13.25 and -13.28. Such a statutory right to receive the “fair value” of one’s shareholder interest provides a remedy for actual or threatened oppression of minority shareholders, as one commentator notes:

“Minority shareholders are granted limited statutory rights as a check against rampant majority rule. One such right is the ability of shareholders to dissent from certain corporate actions, primarily mergers and other fundamental corporate changes, and to receive the appraised fair value of their shares. This is sometimes known as the dissent and appraisal remedy, dissenters’ rights, or, simply, the appraisal remedy....
“... Most of the current appraisal litigation involves cash-out mergers, often instituted by a controlling shareholder. The appraisal remedy today serves a minority shareholder protection role, sometimes providing liquidity to shareholders, but most often operating to protect minority shareholders who are cashed out of their investment. The remedy fulfills this function- ex ante, deterring insiders from engaging in wrongful transactions, and ex post, providing a remedy to minority shareholders who are subjected to such transactions.”

Barry M. Wertheimer, The Shareholders’ Appraisal Remedy and How Courts Determine Fair Value, 47 Duke L.J. 613, 613-16 (1998) (footnotes omitted).

What is the “fair value” of a dissenting stockholder’s shares? Ala.Code 1975, § 10-2B-13.01(4), defines it as “the value of the shares immediately before the effec-tuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.” As to the stock of a company that is not publicly traded, “fair value” and “fair market value” are two different things:

“The distinction between the market value of a company as measured by its stock price and the intrinsic value of the company is well known. Nowhere does the [Illinois Business Corporation Act (‘BCA’)] state that dissenting shareholders are entitled to only the discounted, ‘market value’ of their stock as of the date of the challenged transaction....
“Moreover, the equitable considerations implicit in [choosing] ‘fair’ value as the measure of what dissenting shareholders aré entitled to receive for their stock favor an undiscounted measure of stock value. First, the appraisal remedy is designed to protect minority shareholders from the greater risk of oppression by controlling shareholders posed by the repeal of the [historical] requirement of unanimous shareholder approval of fundamental corporate transactions. However, minority and marketability discounts create an incentive for oppressive action by controlling shareholders, especially in non-public corporations.
“If controlling shareholders are required to pay only market value in a reverse stock split, merger, or other squeeze-out transaction, they will not be penalized and, indeed, may be rewarded for taking actions which drive down the market value of the stock held by minority shareholders. The controlling shareholders then can squeeze out the minority shareholders at the heavily discounted market price to acquire the company on the cheap and avoid the proportionate distribution that would follow from a court-ordered dissolution under section 12.50 of the BCA [§ 10-2B-12.50, Ala.Code 1975]. The reduced value attributed to minority shares in non-public companies becomes a self-fulfilling prophecy when minority and marketability discounts are tolerated.
“Second, the corporation that squeezes minority shareholders out of the company has deprived the shareholders of a valuable right to choose whether and for how long to maintain their investment in the company. The compulsion inherent in transactions giving rise to appraisal rights and the corporation’s power to time the transaction and set its terms thus support a higher measure of ‘fair value.’ ”

Thomas J. Bamonte, Measuring Stock Value in Appraisals Under the Illinois Business Corporation Act, 80 Ill. B.J. 236, 237-38 (1992) (emphasis added; footnotes omitted).

The majority rule applied in the several United States jurisdictions with respect to the calculation of “fair value” under the BCA does not allow any discounting such as that advocated by Saliba and applied by the trial court:

“A majority of the courts conclude that no discounts should be taken in determining fair value, reasoning that for most purposes the enterprise should be valued as an entity and any discounts should be taken at the enterprise level. The market value of the enterprise should already be determined, and providing for further discounts at the shareholder level is inherently unfair to the minority who did not pick the timing of the transaction and is not in the position of a willing seller. Because the shares are being purchased by the corporation rather than being sold into a market, the case law rejects the assumption that fair value means fair market value. Accordingly, the value of the shares is their value to the corporation. ‘Any rule of law that gave the shareholders less than their proportionate share of the whole firm’s fair value would produce a transfer of wealth from the minority shareholders to the shareholders in control. Such a rule would inevitably encourage corporate squeeze-outs.’ ”

John J. Oitzinger, Fair Price and Fair Play Under the Montana Business Corporation Act, 58 Mont. L.R. 407, 420-21 (1997) (quoting In re McLoon Oil Co., 565 A.2d 997, 1005 (Me.1989)); accord, Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383, 402, 734 A.2d 738, 749 (1999) (collecting cases) (footnote omitted). As a leading treatise in this area notes, “[i]t seems particularly inappropriate to apply such a [marketability] discount when a shareholder is selling to a person or family that owns all or most of the other shares of the corporation”; “[w]hile the lack of a market affects the ability to sell minority shares in a company, the market for all of a company’s assets or shares or for a controlling interest operates differently and may not be adversely influenced by the fact that the company’s shares are not traded.” 2 F. Hodge O’Neal & Robert B. Thompson, O’Neal’s Close Corporations § 9.32 (3d ed.1998).

The Model BCA has been amended within the past three years to expressly provide that marketability discounts should not be applied in calculating the fair value of corporate shares. Rather, fair value should be calculated “without discounting for lack of marketability or minority status.” 3 Model Business Corporation Act Annotated (American Bar Association) § 13.01(4)(iii) (3d. ed 1998/1999 Supp.). The commentary to the new Model BCA indicates that this change was made “both because most transactions that trigger appraisal rights affect the corporation as a whole and because such discounts give the majority the opportunity to take advantage of minority shareholders who have been forced against their will to accept the appraisal-triggering transaction.” Id. at 13-10. The commentary further notes that the latest Model BCA is designed to adopt the more “modern” view that an appraisal “should generally award a shareholder his or her proportional interest in the corporation after valuing the corporation as a whole, rather than the value of the shareholder’s shares when valued alone.” Id. Like the Georgia Court of Appeals (see Blitch v. Peoples Bank, 246 Ga.App. 453, 540 S.E.2d 667 (2000)), we view these revisions to the Model BCA and its commentary as persuasive authority in construing the current version of the BCA.

Neither Lawson Mardon Wheaton, Inc. v. Smith, supra, 160 N.J. 383, 734 A.2d 738, nor Balsamides v. Protameen Chemicals, Inc., 160 N.J. 352, 734 A.2d 721 (1999), is to the contrary — in fact, they both stand for the proposition that, “absent extraordinary circumstances,” a marketability discount should not be applied in determining the fair value of a dissenting shareholder’s stock holdings in an action to appraise the value of those holdings. Thus, in Lawson Mardon Wheaton, dissenting shareholders who demanded payment for their shares were entitled to receive the full proportionate value of those shares without reference to a 25% marketability discount suggested by the company’s valuation expert. 160 N.J. at 404, 734 A.2d at 750. The New Jersey court concluded that the dissenting shareholders’ desire for liquidity and their lack of confidence in the corporation’s new management were not “extraordinary circumstances” that would counsel against adherence to the general no-discounting rule. Id at 403-04, 734 A.2d at 750.

In contrast, while the New Jersey Supreme Court affirmed a trial court’s application of a 35% marketability discount in Balsamides, that case involved an action under New Jersey’s oppressed-shareholder statute. The particular statute involved in Balsamides expressly permitted the trial court in that case to order the sale of a closely held corporation’s stock for the stock’s “ ‘fair value ... plus or minus any adjustments deemed equitable by the court ’ ” where “ ‘those in control ... [had] acted oppressively or unfairly toward one or more minority shareholders in their capacities as shareholders, directors, officers, or employees.’ ” 160 N.J. at 371, 734 A.2d at 731-32 (quoting N.J. Stat. Ann. § 14A:12-7). Compare Ala. Code 1975, § 10-2B-14.30 et seq. (establishing a cause of action for dissolution of a corporation where persons controlling the corporation have acted in an “oppressive” manner, and providing for shareholder-buyout alternative thereto). Because the trial court had directed the sale to the oppressed shareholder of the stock previously owned by the oppressor, whose unfair actions had prompted the action in the first place, the New Jersey Supreme Court concluded that it would not be equitable for the oppressor to receive the undis-counted value of his shares. Therefore, Balsamides is distinguishable here because Offenbecher, a minority shareholder lacking a controlling stake in Baron Services, was not an oppressor.

Delaware authorities relied upon by Baron Services are, like Balsamides, inapplicable. Rapid-American Corp. v. Harris, 603 A.2d 796 (Del.1992), did not involve a question of whether a minority discount should be deducted from the value of minority shares, as this case does, but whether a control premium should be added to the value of minority shares. Onti, Inc. v. Integra Bank, 751 A.2d 904 (Del. Ch. Ct.1999), applied a discount arising from a direct restriction on the transferability of the particular (nonregistered) shares of stock involved, which would amount to an “extraordinary circumstance” in the parlance of Lawson Mardon Wheaton that is not present here. Finally, Cavalier Oil Corp. v. Harnett, 564 A.2d 1137 (Del.1989), did not hold that corporate-level discounting of minority shares (such as that undertaken by the trial court in this case) was permissible; rather, the Delaware Supreme Court held that a trial court was not required to apply a minority discount in calculating the fair value of a block of stock amounting to 1.5 percent of outstanding shares.

We conclude that the application of a facially neutral marketability discount has made possible a squeeze-out merger. In 1998, the business generated pre-tax income of over $1,150,000. During the first five months of 1999, the post-merger corporation generated almost $2 million in profit. Had the majority shareholders not pursued their squeeze-out merger, Offen-becher would have received a proportionate share of over $1 million that the merged corporation distributed in the 18 months immediately following the merger, while still maintaining ownership of his stock.

The controlling shareholders are the owners of the new corporation they formed for the purpose of merging Baron Services, and Offenbecher’s ownership therein, out of existence. They have achieved that purpose. They will continue to reap the benefit of future earnings of the parties’ business enterprise, while Offenbecher has been “squeezed out.” Such a result, if allowed, will enable the controlling shareholders to accomplish indirectly what Alabama decisions regarding oppression of minority shareholders will not allow them to accomplish directly. See, e.g., Brooks v. Hill, 717 So.2d 759 (Ala.1998).

“While ... [a marketability] discount can claim more theoretical support than the minority discount, and ostensibly could apply to all shares, majority as well as minority, there is the likelihood for this to be a refuge for practitioners and courts that do not recognize the changed role of appraisal.” 1 F. Hodge O’Neal & Robert B. Thompson, O’Neal’s Oppression of Minority Shareholders, § 5.32 (2d ed.1999). In crediting Saliba’s testimony regarding the appropriateness of a 50 percent marketability discount, the trial court not only failed to recognize the role of the modern appraisal remedy, it made possible in this case precisely the sort of squeeze-out oppression that the appraisal remedy based on “fair value” was designed to prevent. We therefore conclude that the trial court’s valuation of Offenbecher’s stock was erroneous as a matter of law, and we reverse the trial court’s judgment as to that issue and remand for that court to calculate the value of the stock of Baron Services without regard to the 50 percent “marketability” discount espoused by Sali-ba.

APPLICATION GRANTED; OPINION OF MAY 18, 2001, WITHDRAWN; OPINION SUBSTITUTED; AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

YATES, P.J., and CRAWLEY and PITTMAN, JJ., concur.

THOMPSON, J., concurs in part and dissents in part.

THOMPSON, Judge,

concurring in part and dissenting in part.

I concur in that part of the main opinion affirming the trial court’s determination of the number of outstanding shares of Baron Services stock. However, I disagree with the main opinion’s conclusion that the trial court erred in valuing that stock.

The trial court’s judgment sets forth its findings of facts and conclusions of law as follows:

“Before the corporate merger that prompted this action, Defendant Offen-becher owned 130 of a total of 3,300 outstanding shares in Baron Services, Inc., an Alabama corporation (‘Baron Services Alabama’).
“In late 1997, following a series of disruptive actions by minority shareholders, which the company saw as efforts by those shareholders to force the company to buy them out, Baron’s Board of Directors engaged Gary Saliba, of Saliba Financial Economics Group, to perform a valuation to determine the value of the stock of the corporation. Mr. Saliba conferred with the company’s management; considered the company’s financial records, projections of future operations, and financial information of similar businesses; reviewed market conditions both of Baron Services’ products and generally in the United States and Alabama; and concluded that each share of stock of the company had a value of $562.47.
“Although Baron Services believed that Mr. Saliba’s evaluation was high, each minority shareholder was given a copy of Mr. Saliba’s report and was offered $562.47 per share for his stock. Mike McCord and Ted Simmons agreed to sell at that price, but James Offen-becher and Clay Durrett did not. Later; as a result of lagging sales in the first few months of 1998, Mr. Saliba developed a supplemental report based on management’s lower projected sales forecasts, which resulted in a small reduction in his appraisal value from $562.47 to $547.77 per share.
On March 31, 1998, the Board of Directors of Baron Services Alabama approved a plan to merge that corporation into Baron Services, Inc., a Delaware corporation (‘Baron Services Delaware’). Pursuant to the plan of merger, Baron Services Delaware offered to pay $547.77 per share to each shareholder owning fewer than 150 shares of Baron Services Alabama. At that point, Mr. Durrett allowed himself to be cashed out at that reduced price. Mr. Offenbecher dissented, which resulted in this proceeding.
“The Court finds from the evidence that Mr. Saliba’s appraisal, more fairly and reasonably than the appraisal performed for Mr. Offenbecher by Mr. ‘Butch’ Williams, reflects the fair value of Mr. Offenbecher’s stock ‘immediately before the effectuation of the corporate action to which the dissenter objects....’ § 10-2B-13.01, Ala. Code 1975. Specifically, the Court finds that in several significant areas, Mr. Saliba could have employed professionally acceptable appraisal methods that would have decreased the value of Baron Services’ stock below $547.77 per share, but he chose not to do so. The Court also finds that Baron Services’ management’s projection of future profits were reasonable based on past operations and good-faith estimates of future operations, and that Mr. Saliba’s handling of the so-called ‘Baron Tech loss’ and his use of an ‘annual convention’ were fair and reasonable.
“The Court also finds as a matter of financial analysis that Mr. Saliba’s decision to apply a marketability discount ‘at the corporate level’ was reasonable and necessary to the determination of the ‘fair value’ of Baron Services’ stock. The Court also concludes that a marketability discount was appropriate as a matter of law.
“Although the Alabama Supreme Court has not specifically addressed discounts for nonmarketability (or illiquidity) in the context of a judicial appraisal of a dissenter’s shares, our Supreme Court has long held the view that, in the valuation of stock in a closely held corporation, a court should not adopt a ‘fixed or arbitrary standard for the ascertainment of values,’ but should consider all factors ‘which contribute in any degree to its desirability ... in arriving at a conclusion.’ State Dep’t of Revenue v. Birmingham Realty Co., 255 Ala. 269, 276, 50 So.2d 760, 766 (1951). Thus, in ‘estimating the value of stock in a bank or other corporation every fact condition having effect to influence or control must be considered.’ Id. See also Blake v. Blake Agency, 107 A.D.2d 139, 486 N.Y.S.2d 341, 347 (1985) (court deciding on method for appraising shares should look for guidance to other contexts in which shares are appraised, regardless of whether shares are being appraised in context of dissolution or dissent); cf. Weinberger v. UOP, Inc., 457 A.2d 701, 713 (Del.1983) (‘We believe that a more liberal approach must include proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court ....’).
“In addition, courts throughout the country, applying similar rationales, have given the trial court discretion to apply discounts, such as the marketability discount applied by Mr. Saliba, in cases such as this. See, e.g., Perlman v. Permonite Mfg. Co., 568 F.Supp. 222, 231-32 (N.D.Ind.1983), aff'd, 734 F.2d 1283 (7th Cir.1984); Pioneer Bancorporation, Inc. v. Waters, 765 P.2d 597, 599 (Colo.App.1988); Atlantic States Constr. v. Beavers, 169 Ga.App. 584, 314 S.E.2d 245, 251 (1984); Stanton v. Republic Bank of S. Chicago, 144 Ill.2d 472, 581 N.E.2d 678, 682, 163 Ill.Dec. 524 (1991); Independence Tube Corp. v. Levine, 179 Ill.App.3d 911, 129 Ill.Dec. 162, 535 N.E.2d 927, 931 (1988); Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 556 (Ky.App.1982); Friedman v. Beway Realty Corp., 87 N.Y.2d 161, 661 N.E.2d 972, 638 N.Y.S.2d 399, 402-03 (1995); Matter of Fleischer, 107 A.D.2d 97, 486 N.Y.S.2d 272 (1985); Blake v. Blake Agency, supra; Columbia Mgmt. Co. v. Wyss, 94 Or.App. 195, 204-05, 765 P.2d 207, 213-14 (1988).
“It is also well recognized that there is a fundamental difference between applying a discount to reflect lack of marketability, which affects all shareholders, and applying a discount to only the minority shares, which arguably imposes a penalty on the minority shareholders for lack of control. Courts have explained that difference as follows:
“ ‘In determining the “fair value” of the shares of a closely held corporation, discounts for the lack of marketability of such shares are appropriate and do not provide a windfall to the majority shareholders merely because the shares to be purchased by the majority pursuant to their election under Business Corporation Law § 1118 constitute a minority interest in the corporation (see Matter of Blake, [sic] supra). We note that petitioner argues on appeal that Special Term applied a minority interest discount to the value of the shares. This is simply not so. What was applied was a lack of marketability discount, {cf Matter of Blake, [sic] supra).’

“In re Fleischer, 107 A.D.2d at 101, 486 N.Y.S.2d at 275. Accord, Blake v. Blake Agency, supra; Ford v. Courier-Journal Job Printing Co., supra. In this case, the marketability discount applied by Mr. Saliba affected all shareholders and was not applied only against the minority shareholders as a penalty for lack of control.

“A recent decision by a Delaware court addressed the precise issue of whether marketability discounts are permissible in a cash-out merger case like this one.

“ ‘In Cavalier Oil Corp. v. Harnett, [564 A.2d 1137 (Del.1989)], the Supreme Court authorized corporate level discounting but not shareholder level discounting — i.e., if a stock discount affects the entire company, it should be considered in the appraisal, but if it only affects certain shareholders (such as a minority discount does), it should be eliminated by an upwardly adjusted market value. The Cavalier Oil Court found that a shareholder level discount “fail[s] to accord to a minority shareholder the full proportionate value of his shares [which] imposes a penalty for lack of control, and unfairly enriches the majority shareholders.” Here, however, the discount that results from the restrictions on the shares affects not just the Coun-terclaimants but also Counterclaim defendants.’

“Onti, Inc. v. Integra Bank, 751 A.2d 904, 913 (Del.Ch.1999). Accord, Rapid-American Corp. v. Harris, 603 A.2d 796 (Del.1992).

“For all the foregoing reasons, the Court concludes that Baron Services has offered Mr. Offenbecher the fair value of his shares, $547.77 per share, based on a professionally developed and fair appraisal of the value of his shares of stock that the Court finds was consistent in all respects with applicable law.

I disagree with the main opinion’s reversal of the trial court’s determination of the “fair value” of the Baron Services stock.

“ ‘Fair value,’ with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.”

§ 10-2B-13.01(4), Ala.Code 1975.

The trial court found that Saliba’s valuation of the Baron Services stock shares was correct, and it adopted his $547.77 per-share value as a part of its judgment. In arguing. that the trial court erred in reaching its determination of the fair value of the stock, Offenbecher maintains only that the fair value of the stock “cannot be” the value reached by the trial court, given the financial income of Baron Services. I do not believe that that argument is sufficient to warrant a reversal of the trial court’s determination of the fair value of the stock. The remainder of Offenbecher’s argument relates to his contention that the trial court erred in applying a marketability discount to reach its determination of the fair value of Baron Services stock.

A marketability discount is an adjustment applied to a valuation of stock, intended to reflect the decreased worth of stock in a closely held corporation, for which there is no readily available market. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 734 A.2d 721 (1999).

“Before exploring the issue of marketability discounts, it is useful to understand the distinction between a marketability discount and a minority discount. A minority discount adjusts for lack of control over the business entity, while a marketability discount adjusts for a lack of liquidity in one’s interest in an entity. Even controlling interests in nonpublic companies may be eligible for marketability discounts, as the field of potential buyers is small, regardless of the size of the interest being sold.”

Balsamides v. Protameen Chems., Inc., 160 N.J. at 373, 734 A.2d at 733. The court also noted: “Some commentators observe that a marketability discount is not a discount at all. Rather, it is a price adjustment reflecting factors typical of close corporations.” Balsamides v. Protameen Chems., Inc., 160 N.J. at 379, 734 A.2d at 736. In his appeal, Offenbecher addresses only the issue of the marketability discount; he makes no argument that the trial court improperly applied a minority discount in determining the value of the Baron Services stock.

In support of his argument on the issue of the marketability discount, Offenbecher cites only two cases, Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383, 734 A.2d 738 (1999), and Balsamides v. Protameen Chems., Inc., supra. In Lawson Mardon Wheaton, Inc. v. Smith, the Supreme Court of New Jersey held that marketability discounts should not be applied in determining the fair value of a dissenting shareholder’s stock, absent “extraordinary circumstances.” In so holding, the court stated:

“A rule that imposes a discount on the exiting dissenting shareholder ‘fail[s] to accord to a minority shareholder the full proportionate value of his shares ... [and] enriches the majority shareholder who may reap a windfall from the appraisal process by cashing out a dissenting shareholder-’ ... ‘Any rule of law that [gives] the shareholders less than their proportionate share of the whole firm’s fair value would produce a transfer of wealth from the minority shareholders to the shareholders in control. Such a rule [also] would inevitably encourage corporate squeeze-outs....’”

Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. at 402, 734 A.2d at 749. Thus, the court refused to apply a marketability discount at the shareholder level and instead required that a dissenting shareholder receive his proportionate share of the company.

In Balsamides v. Protameen Chemicals, Inc., supra, the New Jersey Supreme Court noted that it had held in Lawson Mardon Wheaton that, absent extraordinary circumstances, marketability discounts should not be applied in determining the value of a dissenting shareholder’s stock. Although the court in Balsamides defined “marketability discount” in terms of “one’s interest” in a company, it noted that applying a discount at the corporate level might be appropriate. 160 N.J. at 373, 734 A.2d at 733. The court in Bal-samides held that extraordinary circumstances present in that case warranted a marketability discount. The court characterized the selling party as “the oppressor,” and stated that allowing the selling party to avoid the marketability discount would result in a windfall to the selling party. Balsamides, 160 N.J. at 378-79, 734 A.2d at 736. The court stated that if the parties sold their stock at the same time, the price they would receive for the stock of the closely held corporation would reflect the corporation’s illiquidity. The court held that the purchasing party “should not bear the brunt of [the company’s] illiquidity merely because he is the designated buyer.” Balsamides, 160 N.J. at 378, 734 A.2d at 736. The court’s holding resulted in the parties’ sharing the cost of the closely held corporation’s lack of marketability.

In the commentary to § 10-2B-13.01, Ala.Code 1975, which contains Alabama’s statutory definition of “fair value,” our legislature indicated that Delaware law was valuable in determining fair value of a dissenting shareholder’s stock. In Cavalier Oil Corp. v. Harnett, 564 A.2d 1137 (Del.1989), the Delaware Supreme Court distinguished between a permissible corporate-level discounting and an impermissible stockholder-level discounting. The court affirmed the lower court’s refusal to apply a minority discount to the dissenter’s stock in valuing that stock. The court stated that the dissenting shareholder should receive his proportionate share of the company after it had been valued as an entity. Cavalier Oil Corp., 564 A.2d at 1144.

In Rapid-American Corp. v. Harris, 603 A.2d 796 (Del.1992), the Delaware Supreme Court stated that a dissenting shareholder’s stock must be valued as his or her proportionate share of the company. The court reversed the trial court’s refusal to allow a “control premium” that would affect the value of all of the company’s stock. The court characterized the control premium as a “valid adjustment to [the trial court’s] valuation” of the company. Rapid-American Corp. v. Harris, 603 A.2d at 805.

In Onti, Inc. v. Integra Bank, 751 A.2d 904 (Del.Ch.1999), cited by the trial court in its judgment, the court held that a marketability discount at the corporate level was appropriate. In so holding, the court reiterated that a discount that affects the entire company is permissible, but that one that affects only certain shareholders is impermissible. Onti, Inc. v. Integra Bank, 751 A.2d at 913.

The Alabama Business Corporation Act, § 10-2B-1.01 et seq., Ala.Code 1975, which became effective in March 1994, is modeled after the American Bar Association’s Revised Model Business- Corporation Act. See § 10-2B-1.01 Commentary. In 1999, the Model Act’s definition of “fair value” was modified to expressly provide that discounts for lack of marketability and minority status should not be applied in determining the fair value of stock. The commentary to the Model Act states that a dissenting shareholder should, generally, be awarded his or her proportional interest, rather than the value of his or her interest in the company valued alone.

In Blitch v. Peoples Bank, 246 Ga.App. 453, 540 S.E.2d 667 (2000), the Supreme Court of Georgia noted that the 1999 revision to the Model Business Corporation Act resulted in a change in the definition of “fair value.” Although Georgia had not yet adopted the new definition of “fair value” contained in the Model Act, the court found that the revised act and its comments were persuasive authority in determining the meaning of “fair value” under the Georgia Code provisions. The court concluded .that “the term fair value in [Georgia’s] statute encompasses the modern view expressed by the Model Act that a shareholder should generally be awarded his or her proportional interest in the corporation after valuing the corporation as a whole.” Blitch v. Peoples Bank, 246 Ga.App. at 457, 540 S.E.2d at 670.

The marketability discount approved by the trial court was applied to all of the shares of Baron Services stock, not just to the shares of stock of the minority shareholder. Although a marketability discount might not be- appropriate in all cases involving a dissenting shareholder, I would affirm the trial court’s use of the marketability discount in this case. The trial court adopted Saliba’s method of. valuing the Baron Services stock. Saliba made a cor-poratedevel adjustment to the values of the stock of every share of Baron Services stock for lack of marketability, because, in calculating the value of that stock, he had used values comparable to those used for publicly traded companies. In response to the trial court’s questioning regarding his opinion on the fair value of the Baron Services stock immediately before the purchase offer, Saliba responded:

“[SALIBA]: Based on my interpretation of the law, I would put [the fair value] at $562.
“THE COURT: Can you tell me why? “[SALIBA]: The same kind of explanation I just gave you is the company is not — the $1,124 is based on not considering anything related to cost of capital differences between [Baron Services] and public companies, and the fact that it is not public and I did not make those adjustments directly,. I waited to make them at the end of the day, so to speak, with the 50% discount. If I had not -made that. adjustment, I would have raised my cost-of-capital numbers and I would have increased the public-offering discount and I would have included a liquidity premium for that shareholder, and those numbers would be in the $562 range, and the $1,124 number would have never appeared. It would have never been anywhere in the report.”

The trial court concluded that Saliba’s valuation represented the value of the corporation valued as a whole. The $547.77 per-share value Saliba reached represented the value of every share of Baron Services stock, after Saliba had applied the marketability discount to his calculation, which used figures for calculating the value of 'public companies. The trial court expressly found that Saliba had applied the marketability discount at the corporate level, rather than at the shareholder level, and, therefore, that, at the price of $547.77 per share, Offenbecher would receive payment for his proportionate interest of Baron Services. Given the caselaw discussed above, I believe that the trial court’s adoption of the proportionate corporate-level marketability discount in valuing the Baron Services stock was permissible, and I conclude that its valuation of the Baron Services stock utilizing that discount is entitled to a presumption of correctness on appeal. See D.J. Sherwood Transp. v. Road Shows, Inc., 656 So.2d 884 (Ala.Civ.App.1995) (affording a presumption of correctness to the trial court’s valuation of a joint venture where the trial court received conflicting ore tenus testimony).

I would also reject Offenbecher’s argument that the marketability discount rate of 50% was excessive. Saliba’s report detailing his valuation of the Baron Services stock indicates that discounts ranging from 40% to 63% had been used in valuing similar closely held corporations. Williams, Offenbecher s expert witness, disagreed with the use of a marketability discount and the amount of the discount used by Saliba. However, I conclude that the record contains evidence that supports the trial court’s determination regarding the amount of the marketability discount. Given the evidence in the record, I cannot say that the 50% marketability discount adopted by the trial court was excessive.

For the foregoing reasons, I conclude that Offenbecher failed to demonstrate that the trial court erred in its valuation of the Baron Services stock. Therefore, I dissent from the main opinion’s reversal on that issue.

      . That corporation is also known as "Baron Services, Inc.”

      . We note that the amount of money paid into court by Baron Services and awarded to Of-fenbecher ($72,488.49) included accrued interest of approximately $9.83 per share.

      . In calculating this "marketable value” of the Baron Services stock, Saliba used a "discounted annual rate of return" of 19.82%. The factors considered by Saliba in calculating this discount rate included three discounts reflective of the company's small, non-publicly held, status, namely those discounts that Saliba variously labeled and assessed as an "equity risk premium” of 7.5%, a “micro-capitalization premium” of 3.5%, and a "company-size premium” of 4.35%. Nonetheless, Baron Services contends on appeal that a marketability discount was necessary because no adjustments had been made for Baron Services "being a private company and for its cost of capital and access to capital and those material factors.” Baron Services quotes Saliba’s testimony that, "If I had not made [the marketability] adjustment, I would have raised my cost of capital numbers and I would have increased the public offering discount and I would have included a liquidity premium.'' The quantitative significance of the "cost of capital” factor is not readily apparent from the record. Elsewhere in his testimony, Saliba testified that there was relative “ease of market entry” in Baron Services' market because of "the absence of a whole lot of capital requirement,” and that "the company’s capitalization was adequate.” Nor is the relevance of a "public offering discount” readily apparent from the record. Both this discount and the “liquidity premium” referenced by Saliba appear from the record to address some of the same concerns as does a "marketability discount.”

      . In his statement of the issues, Offenbecher maintains that he was entitled to an award of an attorney fee at trial. However, in his brief on appeal, Offenbecher makes no argument regarding this issue, in contravention of Rule 28, Ala. R.App. P. Therefore, the issue is waived. Boshell v. Keith, 418 So.2d 89 (Ala.1982).

      "TThe Court finds that 2,000 shares of stock were properly issued to the Baron Family Trust in March 1992, after Bob Baron's father, Oakley Baron, paid the company $20,000 for the stock, that payment was recorded as paid-in capital, and a certificate for that stock was issued to [Oakley] Baron as Trustee for the Baron Family Trust on March 5, 1992."

      . After first determining the stock was worth $562.47 per share, Saliba supplemented his report to recalculate the share value based on a lower projected sales forecast, and he determined that, based on that forecast, the stock was worth $547.77 per share.


source: Caselaw Access Project

author: SEE, Justice.

license: Public Domain

text:
    Ex parte BARON SERVICES, INC. (In re James Offenbecher v. Baron Services, Inc.).
    1011635.
    Supreme Court of Alabama.
    April 4, 2003.
    Rehearing Denied Sept. 19, 2003.

      Frank McRight and J. Clark Pender-grass of Lanier Ford Shaver & Payne, P.C., Huntsville, for petitioner.
    S. Mitchell Howie, Huntsville, for respondent.
   SEE, Justice.

Baron Services, Inc., an Alabama corporation (“Baron Services”), petitioned this Court for a writ of certiorari to review whether the Court of Civil Appeals erred in reversing the trial court’s judgment with respect to the fair value of Baron Services stock held by James Offenbecher. See Offenbecher v. Baron Services, Inc., 874 So.2d 532 (Ala.Civ.App.2002). This Court granted certiorari review on September 13, 2002. For the reasons discussed below, we affirm the judgment of the Court of Civil Appeals.

I.

Baron Services, located in Huntsville, develops weather-radar software that assists local television stations in monitoring storms and in predicting the timing, severity, and location of storms. Robert Baron founded Baron Services in 1990 and retains a controlling interest in the stock of the company. He currently serves as the company’s president and chief executive officer.

On March 31, 1998, the board of directors of Baron Services approved a plan of merger pursuant to which Baron Services was to merge into Baron Services, Inc., a Delaware corporation (“Baron-Delaware”). The proposed merger was structured as a stock-for-stock exchange, that is, a shareholder in Baron Services would receive one share of Baron-Delaware stock for each share of Baron Services stock he or she owned. The merger plan also contained a cash-out provision applicable to any shareholder who owned fewer than 150 shares of Baron Services stock; it provided that any such shareholder would receive the cash value of his or her shares instead of stock in the surviving corporation. Offenbecher owned 130 shares of Baron Services stock, which he received in exchange for services he had provided to the company; therefore, under the terms of the proposed merger, Offen-becher’s shares were to be cashed out.

In conjunction with the merger, Baron Services engaged Gary Saliba of Saliba Financial Economics Group, Inc., to value the company’s stock. Saliba estimated that, as of December 31, 1997, “the fair value of a shareholder’s interest in Baron Services, Inc.,” was $1,124.94 per share. Saliba estimated the “marketable value of the Company’s equity” at $562.47 per share, after applying a 50% marketability discount. ■ Saliba subsequently adjusted this estimate to $547.77 per share upon receiving a lower sales forecast from Baron Services.

'To arrive at those figures, Saliba calculated the weighted-average value of Baron Services’ equity under two recognized methods of valuation — discounting future earnings and capitalizing actual earnings. Discounting and capitalizing earnings are direct-valuation approaches, that is, they rely on data specific to the subject company. Discounting is a valuation approach in which a discount rate is applied against a stream of projected future earnings. The discount rate represents the rate of return an investor in the company would expect to receive over a long period. Capitalizing earnings involves applying a capitalization rate, which is derived from the discount rate, to past years’ earnings.

A majority of the shareholders at a shareholders’ meeting on April 17, 1998, adopted the plan of merger approved by the board of directors on March 31, 1998. Exercising his rights under § 10-2B-13.02(a), Ala.Code 1975, Offenbecher dissented from the plan of merger and demanded payment for his shares, specifically rejecting the price at which his shares were to be purchased pursuant, to the plan of merger. On August 11, 1998, Baron Services petitioned the trial court, pursuant to § 10-2B-13.30, Ala.Code 1975, to appraise the fair value of its stock.

The action proceeded to trial on February 7, 2000. The proceedings included oral testimony from financial experts for each of the parties. On April 13, 2000, the trial court entered an order, finding that the amount Baron Services had offered Offenbecher for his shares represented the fair value of those shares. That order read, in part:

“The Court finds from the evidence that Mr. Saliba’s appraisal, more fairly and reasonably than the appraisal performed for Mr. Offenbecher by Mr. ‘Butch’ Williams [Offenbecher’s financial expert], reflects the fair value of Mr. Offenbecher’s stock....
“The Court also finds as a matter of financial analysis that Mr. Saliba’s decision to apply a marketability discount ‘at the corporate level’ was reasonable and necessary to the determination of the ‘fair value’ of Baron Services’ stock. The Court also concludes that a marketability discount was appropriate as a matter of law.”

On May 15, 2000, Offenbecher moved the trial court to alter, amend, or vacate the judgment. The trial court denied the motion on July 17, 2000, after hearing oral arguments. Offenbecher filed a notice of appeal in the Court of Civil Appeals on August 25, 2000. On May 18, 2001, the Court of Civil Appeals affirmed the judgment of the trial court. On June 1, 2001, Offenbecher applied for a rehearing, which the Court of Civil Appeals granted. On May 10, 2002, the Court of Civil Appeals withdrew its May 18, 2001, opinion and issued another opinion, affirming the judgment of the trial court in part and reversing the trial court’s judgment insofar as it applied a 50% marketability discount when valuing Baron Services stock. Offenbecher, 874 So.2d at 539.

II.

The sole issue we address on appeal is the meaning of “fair value” under § 10-2B-13.01, Ala.Code 1975, and whether the meaning of that term provides for the application of a marketability discount in the context of a judicial appraisal of a dissenting shareholder’s shares. This question is one of first impression in this Court; it is for this reason that we granted Baron Services’ petition for certiorari review. See Rule 39(a)(1)(C), Ala. R.App. P.

Standard of Review

The trial court entered its judgment in this case after hearing oral testimony from the parties regarding the fair value of Baron Services stock. Therefore, the ore tenus rule applies to our review of the trial court’s findings of fact. “Under the ore tenus rule, a trial court’s findings of fact are presumed correct and its judgment will be reversed only if plainly or palpably wrong or against the preponderance of the evidence.” Ex parte Cater, 772 So.2d 1117, 1119 (Ala.2000). The appraisal of the fair value of a dissenting shareholder’s stock is a question of fact. Huntsville Indus. Assocs., Inc. v. Cummings, 292 Ala. 391, 398, 295 So.2d 251, 256 (1974).

The trial court’s interpretation of § 10-2B-13.01, Ala.Code 1975, involves a question of law; it is, therefore, not subject to the ore tenus standard of review. “[T]he ore tenus rule does not extend to cloak a trial judge’s conclusions of law ... with a presumption of correctness.” Eubanks v. Halse, 752 So.2d 1113, 1144-45 (Ala.1999). Therefore, we review de novo, without any presumption of correctness, the trial court’s conclusions' as to the permissibility of applying a marketability discount to appraise “fair value” under § 10-2B-13.01, Ala.Code 1975.

The Meaning of Fair Value

“Fair value,” with respect to a dissenter’s shares, is defined at § 10-2B-13.01(4), Ala.Code 1975, as follows:

“ ‘Fair Value,’ with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.”

The statute is silent on the application of a marketability discount. Therefore, we are forced to look outside the language of the statute to determine what the Legislature intended.

Baron Services urges this Court to adopt a definition of fair value that would permit the application of marketability discounts in the case of shares of a closely held corporation. A marketability discount adjusts for a lack of liquidity in one’s shares on the theory that there is a limited supply of potential buyers for stock in a closely held corporation. Thus, the interpretation of fair value advanced by Baron Services takes into account the limited market available for sale of the shares.

Under its interpretation of fair value, Baron Services essentially equates fair value with fair market value.

“Under a fair market value standard a marketability discount should be applied because the court is, by definition, determining the price at which a specific allotment of shares would change hands between a willing buyer and a willing seller.”

Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353, 361 (Colo.2003).

There is, however, a fundamental difference between fair value and fair market value when those terms are used in the appraisal context:

“ ‘Fair value’ is not the same as, or short-hand for, ‘fair market value.’ ‘Fair value’ carries with it the statutory purpose that shareholders be fairly compensated, which may or may not equate with the market’s judgment about the stock’s value. This is particularly appropriate in the close corporation setting where there is no ready market for the shares and consequently no fair market value.
“... When appraising shares of a close corporation, fair value cannot be fairly equated with the company’s fair market value. Close corporations by their nature have less value to outsiders, but at the same time their value may be even greater to other shareholders who want to keep the business in the form of a close corporation. [Marketability] [discounts would call for speculation by a court as to whether a market exists by requiring the judge to determine a value, deduct a variable percentage, decide how unmarketable a stock is, and so forth.... Furthermore, applying a lack of marketability discount would allow the majority who approved the transaction to later buy out with a net gain what the minority dissenters have lost, granting the majority an unfair windfall.”

Bobbie J. Hollis II, The Unfairness of Applying Lack of Marketability Discounts to Determine Fair Value in Dissenters’ Rights Cases, 25 J. Corp. L. 137, 141-42 (1999) (footnotes omitted).

We have recognized fair market value as “ ‘ “the sum arrived at by fair negotiation between an owner willing to sell and a purchaser willing to buy, neither being under pressure to do so.” ’ ” Mt. Carmel Estates, Inc. v. Regions Bank, 853 So.2d 160, 166 (Ala.2002) (quoting Barnard v. First Nat’l Bank of Okaloosa County, 482 So.2d 534, 536 (Fla.Dist.Ct.App.1986), quoting in turn Flagship Bank of Orlando v. Bryan, 384 So.2d 1323 (Fla.Dist.Ct.App.1980)). In the context of a cash-out merger, a minority shareholder is not a willing seller; instead, the minority shareholder is selling his or her shares under the compulsion of the majority shareholders who approved the merger. We cannot conclude that the Legislature intended by fair value to mean fair market value.

The Delaware courts define the fair value of a dissenting shareholder’s shares as the value of “what has been taken from the shareholder: ‘viz. his proportionate interest in [the company as] a going concern.’ ” Cavalier Oil Corp. v. Harnett, 564 A.2d 1137, 1144 (Del.1989) (quoting Tri-Continental Corp. v. Battye, 74 A.2d 71, 72 (Del.1950)). In determining the dissenting shareholder’s proportionate interest, “the [trial court] is not required to apply further weighting factors at the shareholder level, such as discounts to minority shares for asserted lack of marketability.” 564 A.2d at 1144. In reaching this conclusion, the Delaware court reasoned:

“The application of a discount to a minority shareholder is contrary to the requirement that the company be viewed as a ‘going concern.’ ... Where there is no objective market data available, the appraisal process is not intended to construct a pro forma sale but to assume that the shareholder was willing to maintain his investment position, however slight, had the merger not occurred. Discounting individual share holdings injects into the appraisal process speculation on the various factors which may dictate the marketability of minority shareholdings. More important, to fail to accord to a minority shareholder the full proportionate value of his shares imposes a penalty for lack of control, and unfairly enriches the majority shareholders who may reap a windfall from the appraisal process by cashing out a dissenting shareholder, a clearly undesirable result.”

Id. at 1145. We hereby adopt the Delaware fair-value standard insofar as it prohibits discounting for lack of marketability, or otherwise, at the shareholder level.

Baron Services argues that Saliba in fact applied the marketability discount in this case at the company level, not at the shareholder level, and that, therefore, the discount was permissible under the fair-value standard. See Onti, Inc. v. Integra Bank, 751 A.2d 904, 912 (Dd.Ch.1999) (applying discount to market value of shares because shareholders were restricted in their ability to sell shares under Securities and Exchange Commission Rule 144). In Onti, the court calculated the value of the subject company, and, in turn, the fair value of the dissenting shareholder’s shares, by weighing the values of the company using a stock-market-value approach and a discounted-cash-flow approach. In determining the value of the company under the stock-market-value approach, the court applied a 31.31% discount to the market value of the successor company’s publicly traded stock. This discount reflected the fact that the stock the dissenting shareholders would have received in the successor company but for the cash-out merger would have been unregistered stock. However, the discounted-cash-flow value assigned to the business did not reflect a further marketability discount to take into account the fact that the shares could not be freely traded.

Saliba’s valuation, unlike the court’s valuation in Onti, was not calculated, in whole or in part, on the stock-market value of a publicly traded company. Further, it was not calculated based on a comparative market analysis, which, by its nature, requires that a marketability discount be applied to the figures of the company being used for comparison. The direct-valuation approaches used in Saliba’s valuation are not based on market-comparable values; therefore, we find no reason to apply a marketability discount in this case.

Nonetheless, Baron Services argues, the marketability discount was necessary to account for the cost of capital differences between it and public companies. In this regard, Saliba testified:

“If I had not made that [marketability] adjustment, I would have raised my cost of capital numbers and I would have increased the public offering discount and I would have included a liquidity premium for that shareholder.... ”

In deriving appropriate discount and capitalization rates for use in his valuation models, Saliba did account for the fact that Baron Services was a small closely held company that presented a higher degree of investment risk than a larger publicly traded company. Saliba included in the discount rate a “micro-capitalization risk premium” of 3.5% and a “company size premium” of 4.35%. He describes his rationale for adding those premiums as follows:

“3. Micro-Capitalization Risk Premium “The typical small company has a higher degree of investment risk than a similar, but larger company.... Therefore, smaller companies must offer a higher expected rate of return than similar larger companies....
“5. Equity Risk related to Size Differential
“... Since a small, closely-held company is usually restricted to narrower markets than publicly-traded companies, an additional small company premium is warranted....”

By including the above premiums in the discount rate, Saliba directly accounted for the market differences between Baron Services and larger public companies. Based on the justifications given by Saliba for including in his valuation the “micro-capitalization risk premium” and the “company size premium,” permitting a marketability discount would amount to double counting the market premiums included in the discount rate.

The need for a “public-offering discount” is not apparent from the facts of this case. In his valuation report, Saliba states: “Given the size of the Subject Company, its corporate organization and the number of shareholders, the likelihood of a public offering is considered implausible.” Moreover, “a liquidity premium for [Offenbeeher]” would not be permissible under the fair-value standard because it would apply to Offenbecher’s shares only. See Cavalier Oil, 564 A.2d at 1144. Therefore, we are not convinced by Baron Services’ argument that “as a matter of financial analysis” a marketability discount was reasonable and necessary in this case.

III.

Based on our interpretation of the meaning of fair value under § 10-2B-13.01(4), Ala.Code 1975, we conclude that the marketability discount applied in this case was improper, and we affirm the judgment of the Court of Civil Appeals.

AFFIRMED.

MOORE, C.J., and BROWN, HARWOOD, and STUART, JJ., concur.

      . Saliba's valuation report, dated December 31, 1997, states the purpose of the valuation as follows:
      "Saliba Financial Economics Group was retained to render an opinion as to the fair market value of certain common shares in Baron Services, Inc. The purpose of the valuation was to assist the Company’s Board of Directors in determining the fair market value, at the Shareholder level, regarding an ownership position in the Company's common stock.”

      . Notably, Saliba did not use a public-market comparison to value Baron Services. Under this method, one looks for a similar actively traded company to estimate the value of the subject company. If the subject company is privately held, that is, not publicly traded, a marketability discount would be applied; that discount would account for the fact that the comparison is to a public company instead of a private company. In his report in this case, Saliba noted that he could not identify any comparable companies that were publicly traded, so he did not use public-market comparison as a valuation technique.

      . At the start of the appraisal proceeding in the trial court, Baron Services and Offenbecher stipulated that the statutory requirements for appraisal had been satisfied by each party.

      . May 13, 2000, the thirtieth day after the order was entered, was a Saturday; therefore, Offenbecher’s motion filed on Monday, May 15, 2000, was timely.

      . The Alabama Business Corporation Act, § 10-2B-1.01 et seq., Ala.Code 1975, is based on the Model Business Corporation Act (“the MBCA”). The MBCA was revised in 1999 to expressly address the issue of marketability discounts. The MBCA, as revised, defines fair value as "the value of the corporation's shares determined ... without discounting for lack of marketability....” Model Bus. Corp. Act 3d § 13.01(4)(iii) (2002). Although the MBCA had not been revised when the Legislature enacted the Alabama Business Corporation Act, we view the 1999 revision as reflective of the majority view in states that have adopted the MBCA. See Blitch v. Peoples Bank, 246 Ga.App. 453, 456, 540 S.E.2d 667, 669-70 (2000) ("[Tjhe majority of other jurisdictions with [MBCA] statutes have held that ... marketability discounts should not be applied when determining the fair value of dissenting shareholders’ stock.... Reflecting this majority view, the [MBCÁ] definition of fair value was modified in 1999.” (footnote omitted)).

      . Black’s Law Dictionary 597 (6th ed.1990) defines fair market value as:
      "The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.”

      . Offenbecher and Baron Services both agree that Delaware law is instructive in determining the meaning of fair value under Alabama’s judicial-appraisal statute. See also Commentary to § 10-2B-13.01 ("There is considerable Delaware case law on the subject [of fair value].”).

      . We further note that the standard we adopt here today is consistent with Saliba's definition of fair value in the valuation report:
      ''[F]air value represents a proportionate share of the value of the whole, with entity value based on such factors as individual assets values, ongoing concern values, and/or a combination of approaches. A material factor with respect to fair value is that the lack of marketability is not considered, in that the interest would be considered marketable.”
      (Emphasis added.)

      . Securities and Exchange Commission Rule 144, 17 C.F.R. § 230.144, imposes restrictions on the alienability of unregistered stock in a public company. Unregistered shares, thus, are less valuable than registered shares, which can be freely traded on the market.


author: THOMPSON, Judge. THOMPSON, Judge.

text:
    Junior ABLES v. STATE of Alabama and Jack Bostick, District Attorney, 25th Judicial Circuit.
    2010592.
    Court of Civil Appeals of Alabama.
    Sept. 6, 2002.
    Opinion on Return from Remand Sept. 19, 2003.

      J. Tony Glenn, Hamilton, for appellant.
    William H. Pryor, Jr., atty. gen., and Marc A. Starrett, asst. atty. gen., for the State of Alabama.
   THOMPSON, Judge.

On October 1, 2001, the State of Alabama filed a complaint seeking the forfeiture of a vehicle that belonged to Junior Abies (“Junior”). After receiving ore ten-us evidence, the trial court entered a judgment ordering the forfeiture of the vehicle. Junior appealed.

The record indicates that on September 29, 2001, Ricky Purser, a deputy sheriff with the Marion County Sheriffs Department, stopped a 2000 Chevrolet Blazer sport-utility vehicle driven by Timothy Abies (“Timothy”). At the time, Junior, Timothy’s uncle, was a passenger in the vehicle. Purser testified that he had received a telephone call informing him that the men in the vehicle had been drinking; he testified that he decided to stop the vehicle after the vehicle’s driver ran a stop sign. During the course of the traffic stop, Timothy declined to take any field sobriety tests and instead admitted that he was intoxicated. Purser placed Timothy under arrest on charges of driving under the influence of alcohol. •

Timothy consented to Purser’s searching the vehicle. Purser found three cases, or 72 twelve-ounce cans, of beer in the vehicle. Marion County is a-dry county, i.e., the sale of alcoholic beverages is prohibited in Marion County. Purser investigated and determined that the vehicle actually belonged to Junior.

The State filed a petition, 'purportedly pursuant to § 20-2-93, Ala.Code 1975, seeking the forfeiture of Junior’s vehicle. At the hearing on that petition, Timothy testified that the three cases of beer in the vehicle at the time of the September 29, 2001, traffic stop belonged to him. Timothy explained the presence of the beer in the vehicle by stating that he and Junior had been planning to have a party because Junior was moving to Michigan. Timothy testified that he had purchased the beer from a store in an adjacent county; he did not specify in which county he purchased the beer.

On cross-examination, the State’s attorney ' asked Timothy if he had any knowledge regarding the sheriffs department receiving telephone calls in which the caller stated that Junior’s vehicle had been used to pick up five cases of beer every day; the implication of the questioning on that subject was that the daily trips for beer were for the purpose of transporting the beer into Marion County. Timothy answered that Junior’s son made the reports because the son was angry at Junior. Timothy stated that Junior’s son telephoned the sheriffs department almost daily-

junior testified that his brother and Timothy purchased the beer, but that he had waited in the vehicle. Junior stated that although he knew there was beer in the vehicle, he did not know how much beer the two men had purchased. Junior explained that he and Timothy had taken Junior’s brother home just before Purser stopped the vehicle. Junior testified that the beer in the vehicle did not belong to him. Junior denied having any knowledge of the sheriffs department receiving reports that his vehicle was used every day to transport five cases of beer into Marion County. He also denied knowing whether any beer was unloaded when his brother got out of the vehicle shortly before the traffic stop. Junior testified that he is disabled and that he receives Social Security disability income.

It is illegal for any person to transport five gallons or more of any intoxicating beverage in a dry county. § 28-4-115, Ala. Code 1975. The three cases of beer found in the vehicle in this case contained 864 ounces of beer, or a total of 6.75 gallons.

We note that although the State purported to bring this action under § 20-2-93, Ala.Code 1975, and although both parties continue on appeal to address that section, the beer at issue in this case is not a “controlled substance” as that term is defined under the Alabama Uniform Controlled Substances Act, § 20-2-1 et seq., Ala.Code 1975. Rather, the State’s authority to condemn the vehicle at issue in this case arose under §§ 28-4-286 through -290, Ala.Code 1975, which govern the condemnation of vehicles used to transport intoxicating beverages in dry counties.

On appeal, Junior argues only that the forfeiture of his vehicle under the facts of this case constitutes an excessive fine that is violative of the Eighth Amendment to the United States Constitution.

“In United States v. Bajakajian, 524 U.S. 321, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998), the Supreme Court established a standard for determining whether a forfeiture constitutes an excessive fine for purposes of the Eighth Amendment. The Supreme Court held that ‘a punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant’s offense.’ 524 U.S. at 334, 118 S.Ct. at 2036. The Supreme Court explained:
“ ‘In applying this standard, the district courts in the first instance, and the courts of appeals, reviewing the proportionality determination de novo, must compare the amount of the forfeiture to the gravity of the defendant’s offense. If the amount of the forfeiture is grossly disproportional to the gravity of the defendant’s offense, it is unconstitutional.’
524 U.S. at 336-37, 118 S.Ct. 2028. The Supreme Court stated that, in determining excessiveness, (1) ‘judgments about the appropriate punishment for an offense belong in the first instance to the legislature,’ and (2) ‘any judicial determination regarding the gravity of a particular criminal offense will be inherently imprecise.’ 524 U.S. at 336, 118 S.Ct. 2028.”

Ex parte Borough, 773 So.2d 1001, 1004 (Ala.2000).

In Ex parte Borough, supra, the record did not indicate the value of the appellant’s seized vehicle or the nature of the charge against the appellant. Therefore, the trial court did not address the issue whether the forfeiture of the appellant’s vehicle was “grossly disproportional to the gravity” of the appellant’s offense. Ex parte Borough, 773 So.2d at 1004. See also United States v. Bajakajian, 524 U.S. 321 at 337, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998). Our supreme court remanded the case to this court to remand to the trial court for the trial court to make a determination of the value of the appellant’s vehicle. Ex parte Borough, 773 So.2d at 1005.

Similarly, in this case, the record contains no evidence regarding the value of Junior’s vehicle. Therefore, this court is unable to apply the analysis set forth in United States v. Bajakajian, supra, and discussed in Ex parte Borough, supra. We remand this action to the trial court for a determination of the value of Junior’s vehicle and whether the forfeiture of that vehicle constitutes an excessive fíne. See

Ex paite Dorough, supra.

REMANDED WITH INSTRUCTIONS.

YATES, P.J., and PITTMAN, J., concur.

On Return from, Remand

THOMPSON, Judge.

This court originally considered this matter in Ables v. State, 874 So.2d 552 (Ala.Civ.App.2002) (“Ables I”). In Ables I, the trial court had granted the State’s petition seeking to condemn Ables’s vehicle pursuant to §§ 28-4-286 through — 290, Ala.Code 1975. This court reversed the judgment and remanded the case with instructions, directing the trial court to determine the value of Ables’s vehicle and whether the forfeiture of that vehicle would constitute an excessive fine under the authority of United States v. Bajakajian, 524 U.S. 321, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998), and Ex parte Borough, 773 So.2d 1001 (Ala.2000).

Pursuant to this court’s directive, the trial court has returned a judgment, dated May 28, 2003, in which it found the value of Ables’s vehicle to be $15,000 and determined that the forfeiture of the vehicle under the facts of the case would constitute an excessive fine. Neither party has challenged the trial court’s May 28, 2003, judgment. Therefore, we affirm that judgment.

AFFIRMED.

YATES, P.J., and PITTMAN, J., concur.


author: MURDOCK, Judge.

text:
    JoAnne GARTMAN et al. v. James W. HILL.
    2011066.
    Court of Civil Appeals of Alabama.
    March 21, 2003.
    Rehearing Denied Sept. 26, 2003.

      Floyd C. Enfinger, Jr., Montrose, for appellants.
    James G. Curenton, Jr., Fairhope, for appellee.
   MURDOCK, Judge.

This is an action to quiet title brought pursuant to Ala.Code 1975, § 6-6-540. The trial court entered a judgment in favor of the plaintiff, James Hill. We reverse.

On May 5, 1988, James Hill and Mary Hill, a married couple, entered into a written contract with Gary D. Skipper and Quitman Hamm, as sellers, to purchase a parcel of land for $18,500. On November 3, 1988, the Hills entered into a second written contract with Skipper and Hamm to purchase a second parcel of land for $15,936. The contracts for purchase provided for installment payments to be made over a period of years by the Hills for each parcel of land, with covenants by Skipper and Hamm to convey the parcels to the Hills upon payment of all installments. Each contract also entitled Mary and James to maintain possession of the parcels for the period during which they were making the installment payments.

Apparently, Skipper and Hamm subsequently assigned their interests in the contracts to Sunco Properties, Inc. (“Sunco”). On August 30, 1994, James assigned to Mary his interest in both contracts, pursuant to written assignment agreements entered into by James, Mary, and Sunco. Eleven days later, on September 10, 1994, Mary was killed in an automobile accident. Following Mary’s death, James continued to make the payments on both contracts. According to the testimony of a representative of Sunco, James also resided on the parcels and paid the property taxes due on them. He made the final payment on the first parcel on June 1, 1999, and he made the final payment on the second parcel on July 24, 2000. On those dates, Sunco conveyed the respective parcels to the estate of Mary Hill.

Mary’s heirs include James, five children from Mary’s prior marriage (the “siblings”), and one grandchild. One of Mary’s children, JoAnne Gartman, testified that, after Mary’s death, James' attempted to convince her and the other siblings to sign documents that he said would enable him to sell the parcels. Gartman stated that the siblings refused to sign those documents after concluding that the documents would have conveyed their interest in the parcels to James alone.

Gartman further testified that she and her siblings agreed among themselves to allow James to continue living on the parcels, knowing that James was making payments owed to Sunco under the above-described contracts. There was no testimony indicating that any of the siblings ever spoke to James about that alleged agreement. Gartman testified that she and her siblings considered James’s payments to be “just like lot rent.” Gartman compared James’s payments to her own rental payments: “I can pay [rent] on [land] for 10 years; its not going to be mine.” In addition, Gartman testified that Sunco had agreed to notify her or the other siblings if James quit making payments on the parcels so that the siblings could continue to make payments and retain the property.

Mary died intestate. At the time of her death, in addition to the parcels at issue in this case, which are located in Baldwin County, Mary owned certain property located in Florida. A probate estate was opened in Florida by James, but the Alabama land at issue was not referenced in that proceeding and Mary’s heirs, other than James, himself, were not notified of that proceeding. No probate estate was ever opened for Mary in Alabama.

On June 13, 2002, the trial court entered a judgment in favor of James, finding, in pertinent part:

“1. The plaintiff and his wife entered into a contract to purchase the land in question.
“2. The plaintiff and his wife assigned the contract to the wife solely.
“7. The intent of the sellers in the contract was to convey the property to the plaintiff and his wife.
“8. The title conveyance to the estate of Mrs. Hill was improper on the part of the sellers.”

The trial court therefore ordered that title to the parcels be quieted in James. The other heirs of Mary Hill appeal from that judgment.

As a preliminary matter, we note that James does not base his claim to the parcels at issue in this case on his status as an heir of Mary Hill; nor does he claim title to the parcels through her estate. Instead, this is an action to quiet title in which the issue presented is whether the parcels should have been conveyed to the estate in the first instance, not how the property is to be distributed from the estate. See generally Ala.Code 1975, § 6-6-540; cf. Grass v. Ward, 451 So.2d 803 (Ala.1984) (determining title to property as between a grantee to whom the property was conveyed by a decedent’s predecessor in interest and the decedent’s husband, who claimed a life estate under the curtesy statute).

The sole issue raised in this appeal is not whether James may claim some partial interest in the parcels as one of several heirs of Mary Hill, but instead is whether James alone is the rightful owner of the parcels pursuant to an implied contract directly between James and Sunco. James takes the position that Sunco should not have conveyed the parcels either to Mary’s estate (from which James and the other heirs may have been entitled to their respective distributions of undivided interests in the parcels), or directly to all of the heirs, but instead should have conveyed the parcels directly and exclusively to him based on an implied contract he allegedly had with Sunco.

The trial court did not find that an implied contract existed between James and Sunco; instead it held that James was entitled to receive the entire fee-simple title to the parcels pursuant to the express, written contracts between the Hills and Sunco. Because we will affirm a trial court “ ‘on any valid legal ground,’ ” see Smith v. Equifax Servs., Inc., 537 So.2d 463, 465 (Ala.1988) (quoting Tucker v. Nichols, 431 So.2d 1263, 1265 (Ala.1983)), we will discuss both the express-contract rationale relied upon by the trial court and the implied-contract theory argued by James.

We first examine the express-contract rationale relied upon in the trial court’s judgment. The appellants argue that the trial court’s determination — that the “intent of the sellers in the contract was to convey the property to the plaintiff and his wife” — is not supported by the evidence. The contracts at issue originally did provide for the conveyance of the parcels at issue to James and Mary. A few days before Mary’s death, however, James assigned all of his interest in those contracts to Mary. The sellers’ assignee, Sun-co, was a party to that assignment. Under the resulting written contract, the unambiguously expressed intent of the parties was that title to the parcels would be conveyed solely to Mary. The trial court’s contrary interpretation of the parties’ contracts, and its judgment quieting title solely in James rather than in all of the heirs of Mary Hill, finds no support within the four corners of the instruments forming that contract.

“It is well settled under Alabama law that the words of a contract are to be given their ordinary meaning and that the intention of the parties is to be derived, if possible, from the provisions of the contract itself. Where a contract, by its terms, is plain and free from ambiguity, there is no room for construction and the contract must be enforced as written.”

BõWing Office Sys., Inc. v. Johnson, 744 So.2d 915, 918 (Ala.Civ.App.1999) (citations omitted). See also Mobile Eye Ctr., P.C. v. Van Buren P’ship, 826 So.2d 135, 138 (Ala.2002) (applying a de novo standard of review to a trial court’s determination of whether a contract is ambiguous and to a trial court’s determination of the legal effect of an unambiguous contract).

We turn next to James’s argument that we should uphold the judgment of the trial court on the alternative ground that James obtained title to the parcels pursuant to an implied contract between him and Sunco. As noted, however, the trial court made no factual finding that James obtained title through an implied contract. To the contrary, the trial court’s judgment is based on an express contract, to the apparent exclusion of an implied contract. While it is true that this court will affirm the judgment appealed from if supported on any valid legal ground, the evidence in this case falls well short of what would be required for this court to hold, as a matter of law, that James is entitled to the parcels pursuant to an implied-contract theory. This is so for two reasons.

First, there is insufficient evidence of an implied contract. The only witnesses at trial were a representative of Sunco and Gartman; James did not testify. The representative from Sunco made no mention in her testimony of a new agreement with James after Mary’s death. Gartman testified that James “tried to get [the siblings] to sign papers and sign our rights” over to him. As noted above, Gartman testified that she and the other siblings rejected this proposal, while permitting James to continue residing on the parcels following his wife’s death. She testified that she and the other siblings considered the payments he was making to Sunco to be rent on the parcels.

Second, we cannot conclude, as a matter of law, based on the evidence presented, that James’s possession of the parcels was referable exclusively to the alleged implied contract. To the extent James’s possession of the parcels began before Mary’s death, James was placed, or at least maintained, in that possession by Mary pursuant to her contractual right of possession under her contracts with Sunco. At Mary’s death, either her estate or her heirs assumed the contractual right to possession of the parcels, see note 2, supra, a fact that conflicts with James’s assertion that he was put in possession of the parcels by Sunco following Mary’s death. Further, as previously noted, Gartman testified that she and the other heirs acquiesced in James’s possession of the parcels following their mother’s death and that they viewed his payment of the installments due under the contracts with Sunco as consideration to them in the nature of rent for his exclusive possession of the parcels.

“ ‘To withdraw an oral contract from the Statute [of Frauds], one must pay some or all of the purchase price and be put in possession of the land by the seller.’ ” Durham v. Harbin, 530 So.2d 208, 212 (Ala.1988) (quoting Darby v. Johnson, 477 So.2d 322, 326 (Ala.1985)). The possession of the land by the “buyer” under an implied-contract theory must be referable exclusively to the implied contract. Davis v. Barnfield, 833 So.2d 58 (Ala.Civ.App.2002); see also Dixieland Food Stores, Inc. v. Geddert, 505 So.2d 371 (Ala.1987). The evidence in the record before us does not enable us to make such a holding as a matter of law. James’s claim to the parcels therefore does not fall outside the Statute of Frauds.

In light of the foregoing, the trial court’s judgment is due to be reversed, and the cause is remanded for the entry of a judgment consistent with this opinion.

REVERSED AND REMANDED.

YATES, P.J., and CRAWLEY, J., concur.

THOMPSON, J., concurs in the result.

PITTMAN, J., recuses himself.

      . All of the heirs, other than James, were named as defendants in this action to quiet title to the parcels.

      . We recognize that title to real property passes to a decedent's heirs immediately upon death, see Ala.Code 1975, § 43-2-830(a), and that, under appropriate circumstances, when a prospective vendee under a contract for the purchase of real property dies before the contract is fully executed, the contractual rights of the prospective vendee are, themselves, treated as real property under the doctrine of “equitable conversion.” See, e.g., Grass v. Ward, 451 So.2d 803 (Ala.1984); McGuire v.

        Andre, 259 Ala. 109, 65 So.2d 185 (Ala.1953). Whether the contract presented in this case is of such a nature that it could support an equitable-conversion claim was not an issue raised in the trial court and is not at issue in this appeal.

      . It is unclear from the record when James's possession of the parcels began and the extent to which James possessed the parcels to the exclusion of the rights of the other heirs of Mary Hill.


text:
    D.O.L. and J.L. v. J.M.P.H.
    2010341.
    Court of Civil Appeals of Alabama.
    March 28, 2003.
    Rehearing Denied Sept. 12, 2003.
    Tiffin M. Taylor and Henri B. McDaniel of McDaniel & McDaniel, L.L.C., Huntsville, for appellants.
    Oliver Frederick Wood and Jeremy L. Streetman, Hamilton, for appellee.
   MURDOCK, Judge.

On September 30, 1994, D.O.L. and J.L. (hereinafter referred to collectively as the “paternal grandparents”) and T.A.L. (“the father”) filed a petition in the Marion Juvenile Court alleging that J.M.P.H. (“the mother”) was not properly caring for C.A.L., the minor child of the father and the mother, and seeking custody of the child. Following ore tenus proceedings, the juvenile court entered a judgment on February 1, 1995, awarding the paternal grandparents custody of the minor child and granting the mother visitation. No appeal was taken from that judgment.

On May 17, 2001, the mother filed a petition seeking to regain custody of the minor child. Following ore tenus proceedings on October 10, 2001, and November 30, 2001, the trial court entered a judgment on December 5, 2001, that, among other things, transferred custody of the minor child to the mother and granted the father visitation rights.

The paternal grandparents served a copy of a motion to alter, amend, or vacate on counsel for the mother on or about December 18, 2001; however, the motion was not filed with the trial court clerk until January 7, 2002. On December 19, 2001, the paternal grandparents filed a motion requesting the trial court to stay the judgment pending appeal. On January 4, 2002, the mother filed a response to the motion to stay and to the motion to alter, amend, or vacate. The paternal grandparents filed a notice of appeal on January 8, 2002.

The mother filed a motion in this court seeking to dismiss the paternal grandparents’ appeal. The mother asserted that the paternal grandparents’ filing of the motion to stay did not suspend the time for filing a notice of appeal; that the paternal grandparents’ motion to alter, amend, or vacate was filed outside the 14-day period allowed by the Alabama Rules of Civil Procedure and therefore had no legal effect; and that the notice of appeal was due to be dismissed as untimely filed.

The paternal grandparents filed a response to the motion to dismiss, asserting, among other things, that the motion to alter, amend, or vacate had been timely served on counsel for the mother on December 18, 2001, although it had not been received and date stamped by the clerk of the trial court until January 7, 2002. The response also presented two “scenarios” to be considered by this court:

“1. If the trial court had fourteen days from the date said court received the motion in question, January 7, 2002, the motion was deemed denied on January 21, 2002. [The paternal grandparents’] last day to file a timely notice of appeal with the Trial Court was February 4, 2002. Therefore, in accordance with Alabama Rules of Appellate Procedure, Rule 4(a)(5), the notice of appeal filed herein would be held in abeyance until all post-judgment motions pursuant to Rule 50, 52, 55, and 59, Alabama Rules of Civil Procedure, are ruled upon, such a notice of appeal shall become effective upon the date of disposition of the last of such motions. [Ala. R.App. P.], Rule 4(a)(5).
“2. However, in the event that the time for ruling on the motion is calculated from the date the motion was served on Appellee, December 18, 2002, the motion was deemed denied on January 1, 2002, requiring notice of appeal to be filed on or before January 15, 2002.
“In any event, a timely notice of appeal was filed on January 7, 2002.”

(First emphasis in original; second emphasis added.)

Rule 4(a)(1), Ala. RApp. P., provides for a period of 14 days for the filing of a notice of appeal to this court from a judgment of the juvenile court. This 14-day period begins to run on the day on which the juvenile court’s final judgment is entered. See Gamble v. First Alabama Bank, 404 So.2d 688 (Ala.Civ.App.1981). “The filing of a post-judgment motion pursuant to Rules 50, 52, 55 or 59 of the Alabama Rules of Civil Procedure (ARCP) shall suspend the running of the time for filing a notice of appeal.” Rule 4(a)(3), Ala. R.App. P. See also Gamble, supra; City of Talladega v. McRae, 375 So.2d 429 (Ala.1979). However, Rule 1(B), Ala. R. Juv. P., provides that “[a]ll post-judgment motions ... must be filed within 14-days after entry of judgment” (emphasis added), and the time period for taking an appeal will not be suspended if a post-judgment motion is not timely filed. See Bice v. SCI Alabama Funeral Home Servs., 764 So.2d 1280, 1281 (Ala.Civ.App.2000) (“[T]he time for appeal may be extended where a party files a timely post-judgment motion pursuant to Rule 50, 52, 55, or 59, Ala. R. Civ. P.” (Emphasis added.)).

As previously noted, in the present case, the trial court entered its final judgment on December 5, 2001. The paternal grandparents did not file their post-judgment motion to alter, amend, or vacate until January 7, 2002, beyond the 14 days allowed by Rule 1(B). Accordingly, that untimely postjudgment motion did not toll the time for taking an appeal from the December 5, 2001, judgment, see Bice, supra. As a result, the paternal grandparents’ notice of appeal filed on January 8, 2002, was filed well beyond the 14-day period following the entry of the juvenile court’s final judgment.

Rule 2(a)(1), Ala. R.App. P., provides that “[a]n appeal shall be dismissed if the notice of appeal was not timely filed to invoke the jurisdiction of the appellate court.” This court is without jurisdiction; therefore, this appeal is due to be dismissed. Asam v. City of Tuscaloosa, 585 So.2d 60 (Ala.Civ.App.1991).

The appellee’s request for the award of an attorney fee on appeal is denied.

APPEAL DISMISSED.

YATES, P.J., and CRAWLEY, THOMPSON, and PITTMAN, JJ., concur.

      . The certificate of service for the motion reflects that the motion was mailed to counsel for the mother on December 18, 2001.