In this shareholder dispute, plain meaning of the words on the page ruled the day in Indiana Supreme Court.

February 23, 2021

In Blake B. Hartman v. BigInch Fabricators & Construction Holding Company, Inc., the primary issue was whether valuation discounts apply under a buyback provision in a shareholder agreement. The case was tried in three different Indiana courts between September 2019 and January 2021. It ultimately reached the Indiana Supreme Court (the “Supreme Court”), which ruled that discounts applied based on “the plain and unambiguous language” of the shareholder agreement.

Blake B. Hartman (“Hartman”) was one of the founders and the former president of BigInch Fabricators & Construction Holding Company, Inc. (the “Company”), serving as president from 1998 to 2014. The Company is a closely held Indiana corporation in the busines of fabricating and installing natural gas and pipeline compressor and pumping stations and related apparatus. 

On March 1, 2006, the shareholders of the Company entered into a “Shareholder Agreement.” At the time, there were 10 shareholders of the Company, with none holding a majority interest. The Shareholder Agreement required the Company to purchase the shares of any shareholder who was involuntarily terminated as an officer or director of the Company. The issue at hand was the interpretation of Article V of the Shareholder Agreement. Article V of the Shareholder Agreement provides for the “Valuation and Payment for the Shares.” Section 5.1 states

“The price per Share for the Shares of the Corporation to be sold pursuant to Article III or Article IV of this Agreement shall be the appraised market value on the last day of the year preceding the valuation, determined in accordance with generally accepted accounting principles by a third party valuation company within the twenty-four months preceding the transfer of shares, with adjustments for changes in the number of outstanding Shares since such year end, and in the case of sales under Article IV, if the value is less than the price paid to acquire the Shares paid by the Involuntary Transferee.”

On March 2, 2018, the Company removed Hartman without cause. At the time of the termination, Hartman held 8,884 shares of the Company, which represented 17.77% of the total shares outstanding. Similar to when the Shareholder Agreement was executed, at the time of Hartman’s termination, the Company only had 10 shareholders, with no single shareholder holding a majority interest in the Company. Hartman was the third-largest shareholder of the Company as of March 2, 2018. The top two shareholders of the Company owned 35.84% and 24.01% of the outstanding shares.

Trial Court Ruling[1]

Pursuant to the Shareholder Agreement, the Company engaged an appraiser, Wonch Valuations (“Wonch”), to value Hartman’s stock. Wonch determined the value of Hartman’s stock to be $2,398,000 using the “fair market value” standard of value and applying discounts for lack of control and lack of marketability. Hartman contested the Wonch valuation, arguing that Indiana law does not permit the use of discounts for lack of control and lack of marketability. Therefore, Hartman alleged the value of his stock was $3,526,000, which represented the pro-rata value of his shares in the Company prior to the application of a discount for lack of control and a discount for lack of marketability. The Company’s counter-argument was that the Shareholder Agreement’s “appraised market value” definition was synonymous with “fair market value.” Thus, discounts for lack of control and lack of marketability applied.

On cross-motions for summary judgement, the Parke Circuit Court of the State of Indiana (the “Trial Court”) ruled in favor of the Company. In its ruling in September 2019, the Trial Court cited the Black’s Law Dictionary definitions of “market value” and “fair market value.” The Trial Court concluded that “[t]hese terms are substantially synonymous” and are “consistent with the term ‘fair market value’ used by our Indiana Courts.” 

The Trial Court went on to further note that the term “appraised,” as used in the Shareholder Agreement, is “merely an adjective describing the manner in which ‘market value’ shall be determined…” The Trial Court also noted that, when the Shareholder Agreement was executed, there were 10 shareholders and no shareholder held a majority interest. Thus, all of the Company’s shareholders “would have been impacted the same by application of these discounts inherent in market value then, just as they would have been on the date of [the Wonch] valuation.” 

Finally, with respect to Hartman’s pro-rata conclusion of $3,526,000, the Trial Court stated the following:

“There is nothing in the four corners of the Shareholder Agreement to suggest that was the correct value to ascribe or that simply removing those discounts represents the true intent of the parties, within the plain meaning of the words used.”

Indiana Court of Appeals Ruling[2]

Hartman filed an appeal in the Court of Appeals of Indiana (the “Appeals Court”) against the Trial Court’s ruling on summary judgement. In May 2020, the Appeals Court reversed the decision of the Trial Court and ruled in favor of Hartman – deciding that discounts did not apply. The Appeals Court noted that Hartman relied on Wenzel v. Hopper & Galliher, P.C. (“Wenzel”)[3] to contend that appraised market value cannot be equal to fair market value, as Hartman’s shares were not being sold in an “open market.” In Wenzel, the court rejected the application of valuation discounts, stating that:

“Acknowledging that the discounts would create a ‘windfall’ if applied to a sale outside the open market, the Wenzel court clarified that a sale of the minority shareholders’ shares to majority shareholders consolidates or increases the power of those already in control, so applying a minority discount to such a case would result in a windfall to the purchasing majority shareholder, particularly because the shares would have the same value in the minority shareholder’s hands as in the majority shareholders.”

The Company argued that the Wenzel case does not apply in this dispute, as the relevant standard of value in the Wenzel case was “fair value,” not “fair market value.” In Wenzel, the court adopted the general framework that “fair value” is not the same as “fair market value,” thus the application of valuation discounts do not apply under the “fair value” standard of value. The Company reiterated the Trial Court’s reliance on definitions in Black’s Law Dictionary that “market value,” which the Company contends is synonymous with “appraised market value” in the Shareholder Agreement, is equal to “fair market value” and that valuation discounts apply when using these standards of value.

However, the Appeals Court found Hartman’s arguments more compelling, noting the following.

“…we cannot conclude that Wenzel is limited to cases arising under the statutory application of the fair value standard; Wenzel and its progeny rejected the application of open-market discounts to any sale occurring in a closed market, regardless of the used valuation standard. The Shareholder Agreement itself recognizes that the mandated buyback of shares to the Company differs from a sale to a third party on the open market and thus, different interests must be recognized by implementing an appraised market value rather than the open-market valuation method of fair value or fair market value.”

The Appeals Court argued that the Wonch report’s fair market value conclusion would result in the Company purchasing Hartman’s shares at a discount “and then immediately retain control over the Company and resell the shares without the discount, thereby allowing the Company to reap a windfall.” As such, the Appeals Court concluded that the “market value” and “fair market value” standards of value are not applicable in this matter “as there is no sale of the shares in the open market.”

Indiana Supreme Court Ruling[4]

Given the disparate rulings between the Trial Court and the Appeals Court, the Supreme Court heard this case and gave a final ruling. The primary argument was whether valuation discounts applied, even in a “closed-market” sale, given the plain language of the Shareholder Agreement, or whether valuation discounts did not apply given that Hartman’s shares were not sold in an “open-market” as stipulated by the definitions of “market value” and “fair market value.”

The Supreme Court first considered Hartman’s position with respect to the Wenzel case, which concluded that valuation discounts do not apply. However, the Supreme Court noted that the Wenzel case was a matter of interpretation of a statute, not a contract like the Shareholder Agreement. Thus, the Supreme Court concluded that “Wenzel’s rationale, then, doesn’t control in this situation.” The Supreme Court then moved to determine whether the Shareholder Agreement “unambiguously allows the discounts to apply.” In determining this, the Supreme Court’s goal was “to determine the parties’ intent when they entered into their agreement” by “determining whether the contract’s language is ambiguous – and when it isn’t, we apply its plain and ordinary meaning in light of the whole agreement, ‘without substitution or addition’.”

In its analysis of the foregoing, the Supreme Court concluded the following.

  1. Despite the Shareholder Agreement not defining “appraised market value,” the Supreme Court concluded that the Shareholder Agreement “expressly calls for a standard identical to ‘fair market value’” for three reasons. First, the Shareholder Agreement sets the “price per Share,” which the Supreme Court concludes is the shareholder’s interest in the Company, not the value of the Company in its entirety. Second, the Supreme Court concluded that “market value,” as used in the Shareholder Agreement, “plainly and unambiguously refers to the shares’ ‘fair market value’.” Third, that the term “appraised” in the Shareholder Agreement simply describes how to determine the share’s “market value.”
  2. In addition, the Supreme Court concluded that, “while the parties agreed to a compulsory, closed-market sale – not an arm’s-length transaction – the agreement’s plain and unambiguous language also shows that the shareholders agreed to value their shares as if they were sold in the open market.”
  3. Finally, the Supreme Court determined whether the Wonch valuation resulted in an “absurd result” and a windfall to the Company, as Hartman contends, that would result in the Supreme Court declining to enforce the plain language in the Shareholder Agreement. The Supreme Court noted that, by definition, a windfall is unexpected. However, all of the Company’s shareholders agreed in 2006 to be equally bound by the Shareholder Agreement. In addition, the Supreme Court noted that, as Hartman agreed, Hartman benefited from the Shareholder Agreement because it provided him a market for his shares by compelling the Company to purchase them.

Ultimately, and based on the foregoing, the Supreme Court in January 2021 ruled in favor of the Company, stating that:

“In sum, the plain and unambiguous language of the shareholder agreement calls for BigInch to pay Hartman the fair market value of his shares. We thus conclude that Hartman’s shares could be discounted for their lack of marketability and his lack of a controlling interest in the company.”

While the Trial Court, Appeals Court, and Supreme Court ultimately noted that their rulings were a question of law, it is nonetheless important for an appraiser to consider the ruling of the Supreme Court in this matter that “the plain and unambiguous language” ruled the day.


  1. Blake B. Hartman vs. BigInch Fabricators & Construction Holding Company, Inc., Cause No. 61C01-1809-PL-000394 (Indiana Parke Circuit Court, 2019)
  2. Blake B. Hartman vs. BigInch Fabricators & Construction Holding Company, Inc., Case No. 19A-PL-2263 (Indiana Court of Appeals, 2020)
  3. Wenzel v. Hopper & Galliher, P.C., 779 N.E.2d (Indiana Court of Appeals, 2002)
  4. Blake B. Hartman vs. BigInch Fabricators & Construction Holding Company, Inc., Case No. 20S-PL-618 (Indiana Supreme Court, 2021)

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