## Facts

- Trapp Family Lodge, Inc. (TFL) was a closely held Vermont holding company owning a resort hotel, substantial additional acreage, a timeshare-related receivable, and royalty rights; it also carried significant long-term debt.
- TFL proposed a merger that would cash out certain shareholders.
- Dissenting minority shareholders invoked statutory appraisal rights and sought a judicial determination of the “fair value” of their shares as of the merger date.
- TFL’s expert used a capitalized-cash-flow approach for operations, discounted the timeshare-related interest, and used a real-estate appraisal for land, concluding $33.84 per share.
- Dissenters’ expert used a net-asset-value method, relying on discounted cash flows and the same land appraisal, assuming 3% growth and an 8.6% discount rate with adjustments for nonrecurring expenses, concluding $63.44 per share.
- A shareholder restriction agreement required offers of shares for certain transfers at $30.92 per share; TFL argued this figure evidenced value.
- The trial court accepted the dissenters’ expert valuation and set fair value at $63.44 per share; TFL appealed.

## Issues

1. Whether the trial court failed to make an independent fair-value determination by effectively adopting one expert’s valuation.
2. Whether the trial court clearly erred in accepting the dissenters’ expert assumptions (growth rate, discount rate, and cash-flow adjustments).
3. Whether the trial court improperly relied on or interpreted the real-estate appraisal used to value TFL’s land.
4. Whether the shareholder restriction agreement price should control or substantially determine statutory “fair value.”
5. Whether applying a 30% control premium was permissible in determining fair value for dissenting shareholders.
6. Whether fair value had to be reduced for taxes associated with a hypothetical corporate asset sale.

## Decision

- The Vermont Supreme Court affirmed the judgment setting fair value at $63.44 per share.
- The trial court satisfied its duty to determine fair value by weighing competing expert testimony and crediting the more persuasive analysis; it was not required to modify or average expert figures.
- The trial court did not clearly err in accepting the dissenters’ expert’s growth rate, discount rate, and normalization adjustments as supported by the record.
- The court’s use of the real-estate appraisal within the overall valuation was not erroneous.
- The restriction agreement price was not controlling evidence of statutory fair value in a merger appraisal.
- The 30% control premium was within the trial court’s discretion and supported by expert testimony, consistent with valuing the enterprise without minority discounts.
- The court was not required to account for tax costs from a speculative asset sale absent evidence such a sale was planned or imminent.

## Legal Principles

- In a statutory dissenters’ rights appraisal, “fair value” generally reflects the shareholder’s proportionate interest in the corporation immediately before the corporate action, assessed through judicial appraisal.
- Trial courts have broad discretion to select valuation approaches and weigh expert testimony; appellate review is deferential and will not reweigh supported factual findings.
- Fair value in this context commonly looks to enterprise value as a going concern and generally excludes minority discounts; a control premium may be used when supported by evidence to reflect enterprise-level value.
- Contractual transfer restrictions and buy-sell prices may be considered but are not conclusive of statutory fair value, particularly when the contract price reflects constraints or purposes different from a merger appraisal.
- Hypothetical tax liabilities from transactions not shown to be reasonably expected (such as an unplanned asset sale) need not be deducted from fair value.

## Conclusion

The court affirmed a $63.44 per-share appraisal, holding that the trial court permissibly credited the dissenters’ net-asset-value analysis, did not treat a restriction-agreement price as determinative, could apply a control premium consistent with enterprise-level fair value, and need not subtract speculative taxes from a hypothetical asset sale.


In re 75,629 Shares of Common Stock of Trapp Family Lodge, Inc., 169 Vt. 82, 725 A.2d 927 (1999)