IRAC 37.3
Supreme Court of South Dakota, 2006 SD 98, 724 N.W>2d334 (2006)
Facts
Midnight Star Enterprises, L.P.(MSEL) is a limited partnership, which operates a gaming, on-sale liquor and restaurant business in Deadwood, South Dakota. The owners of Midnight Star are:
1- Midnight Star Enterprises, Ltd. With 22%) – it is also the general partner.
2- Kevin Costner with 71.5% ownership. However, Costner owns Midnight Star, so he owns 93.5%.
Francis and Carla Caneva, own 3.25%, each. Caneva managed the operations of Midnight Star while receiving a salary/bonuses for the work.
MSEL the petitioned to dissolve the partnership. But, in order to do so, an accountant must be broght to assess the market value of the company. Its accountant found that the fair market value was $3.2 million whereas, Carena solicited an outside party to make an offer. This was offer was much higher, it was about $6.2 million. The court found the higher number to be the true (or truer) market value and ordered the business be bought out at the higher price in 10 days, or it would be sold in the open market. MSEL appealed.
The issues are whether:
Article 10.4 requires that the property be sold in the open market? Which value is the correct value? Whether the court made a mistake by ordering the forced sale of Midnight Star.
Rules that Apply:
A general partner is given the authority to voluntarily disassociate, or withdraw, from a limited partnership, the partnership contract stated otherwise. Finally, sound policy gives out several reason why an offer cannot be the fair market value. These reasons include offering an extremely high offer (personal, subjective, and irrational reasons) or rejecting the extremely high offer (again, for personal, subjective, and irrational reasons).
Application to the Case:
Based on the sound policy, we could not consider the extremely high offer of just one person to represent the market value. Assuming that the accountant acted in an ethical,
Facts
Midnight Star Enterprises, L.P.(MSEL) is a limited partnership, which operates a gaming, on-sale liquor and restaurant business in Deadwood, South Dakota. The owners of Midnight Star are:
1- Midnight Star Enterprises, Ltd. With 22%) – it is also the general partner.
2- Kevin Costner with 71.5% ownership. However, Costner owns Midnight Star, so he owns 93.5%.
Francis and Carla Caneva, own 3.25%, each. Caneva managed the operations of Midnight Star while receiving a salary/bonuses for the work.
MSEL the petitioned to dissolve the partnership. But, in order to do so, an accountant must be broght to assess the market value of the company. Its accountant found that the fair market value was $3.2 million whereas, Carena solicited an outside party to make an offer. This was offer was much higher, it was about $6.2 million. The court found the higher number to be the true (or truer) market value and ordered the business be bought out at the higher price in 10 days, or it would be sold in the open market. MSEL appealed.
The issues are whether:
Article 10.4 requires that the property be sold in the open market? Which value is the correct value? Whether the court made a mistake by ordering the forced sale of Midnight Star.
Rules that Apply:
A general partner is given the authority to voluntarily disassociate, or withdraw, from a limited partnership, the partnership contract stated otherwise. Finally, sound policy gives out several reason why an offer cannot be the fair market value. These reasons include offering an extremely high offer (personal, subjective, and irrational reasons) or rejecting the extremely high offer (again, for personal, subjective, and irrational reasons).
Application to the Case:
Based on the sound policy, we could not consider the extremely high offer of just one person to represent the market value. Assuming that the accountant acted in an ethical,