## Facts

- James D. Denkins contracted to purchase 147 shares of stock in Zinkan Enterprises, Inc. for $200,000.
- The parties’ agreement gave Denkins a time-limited option to require Zinkan to repurchase the shares for the greater of (1) $1,500 per share or (2) 2.5 times the “book value” per share.
- The agreement defined “book value” as Zinkan’s equity after taxes “as shown on [the] yearly financial statement,” divided by the number of outstanding shares.
- Denkins exercised the option within the specified period, but Zinkan did not repurchase the shares.
- Denkins sued Zinkan for breach of contract in the Summit County Court of Common Pleas.
- Denkins amended his claimed damages to $343,340.55 plus interest, asserting that amount reflected 2.5 times book value based on an equity figure of $685,745.
- The $685,745 equity number came from a balance sheet Zinkan provided to Star Bank in connection with bank dealings unrelated to the option dispute.
- After a bench trial, the trial court found that Denkins had not proven that the $685,745 figure was the equity-after-taxes amount “shown on [the] yearly financial statement” as required by the contract’s definition of book value.
- The trial court awarded Denkins the contractual minimum of $1,500 per share, totaling $220,500.
- Denkins appealed, challenging the damages calculation.

## Issues

1. Whether Denkins proved, under the contract’s definition of “book value,” that the $685,745 equity figure from the Star Bank balance sheet qualified as Zinkan’s equity after taxes “as shown on [the] yearly financial statement,” such that damages should be calculated at 2.5 times book value rather than the $1,500-per-share minimum.

## Decision

- The Ohio Court of Appeals affirmed the judgment.
- The court held that Denkins did not carry his burden to show that the equity figure he relied on matched the contractually specified input for calculating book value.
- Because the higher-price formula was not proven under the agreement’s definition, the trial court properly applied the $1,500-per-share floor and awarded $220,500.

## Legal Principles

- When parties define a valuation term in a contract (such as “book value”), courts apply the contractual definition rather than a general accounting usage.
- A plaintiff seeking damages under a contract-based valuation formula must prove the required financial figures with reasonable certainty and must connect the proof to the contract’s stated source and method.
- A financial statement created for a separate purpose (such as a balance sheet prepared for a bank) does not establish a contract-defined valuation measure unless the evidence shows it is the statement and figure the contract calls for.
- When a contract provides a minimum price and a higher price depends on proof of a defined valuation metric, a court may award the minimum if the higher metric is not proven.

## Conclusion

The court of appeals upheld the $220,500 award (147 shares at $1,500 per share) because Denkins failed to prove that the equity figure taken from a balance sheet provided to Star Bank satisfied the contract’s definition of “book value” as equity after taxes shown on Zinkan’s yearly financial statement, so he was not entitled to damages based on the 2.5-times-book-value formula.


Denkins v. Zinkan Enterprises, 1997 Ohio App. LEXIS 4742 (1997)