Strohmyer v. Papillion Family Medicine ( 2017 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
06/16/2017 09:12 AM CDT
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Nebraska Supreme Court A dvance Sheets
296 Nebraska R eports
STROHMYER v. PAPILLION FAMILY MEDICINE
Cite as 296 Neb. 884
Jeffry L. Strohmyer, M.D., appellant and
cross-appellee, v. Papillion Family Medicine, P.C.,
a Nebraska professional corporation, et al.,
appellees and cross-appellants.
___ N.W.2d ___
Filed June 9, 2017. No. S-16-381.
1. Equity: Appeal and Error. In an appeal of an equitable action, an
appellate court tries factual questions de novo on the record and reaches
a conclusion independent of the findings of the trial court, provided that
where credible evidence is in conflict on a material issue of fact, the
appellate court considers and may give weight to the fact that the trial
judge heard and observed the witnesses and accepted one version of the
facts rather than another.
2. Fraud: Judgments. The existence of a fiduciary duty and the scope of
that duty are questions of law for a court to decide.
3. Corporations. An officer or a director of a corporation occupies a
fiduciary relation toward the corporation, and must comply with the
applicable fiduciary duties in his or her dealings with the corporation
and its shareholders.
4. Corporations: Liability: Damages. A violation by a trustee of a duty
required by law, whether willful, fraudulent, or resulting from neglect, is
a breach of trust, and the trustee is liable for any damages proximately
caused by the breach.
5. Corporations. An officer or a director of a corporation occupies a fidu-
ciary relation toward the corporation and its stockholders and should
refrain from all acts inconsistent with his or her corporate duties.
6. Partnerships. Partners must exercise the utmost good faith in all their
dealings with the members of the firm and must always act for the com-
mon benefit of all.
Appeal from the District Court for Sarpy County: William
B. Zastera, Judge. Affirmed in part, and in part reversed and
remanded for further proceedings.
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Nebraska Supreme Court A dvance Sheets
296 Nebraska R eports
STROHMYER v. PAPILLION FAMILY MEDICINE
Cite as 296 Neb. 884
Russell S. Daub, and W. Eric Wood, of Downing, Alexander
& Wood, for appellant.
Larry R. Forman, of Hillman, Forman, Childers &
McCormack, for appellees.
Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy,
K elch, and Funke, JJ.
Heavican, C.J.
I. INTRODUCTION
Dr. Jeffry L. Strohmyer, Dr. Robert G. Naegele, and Dr.
Edward M. Mantler formed Papillion Family Medicine, P.C.
(PFM), located in Papillion, Nebraska. On December 31, 2013,
Strohmyer provided notice that he was leaving PFM to start his
own medical practice, effective March 31, 2014.
Strohmyer filed suit against PFM, Naegele, and Mantler due
to PFM’s failure to “buy out” Strohmyer and pay associated
director fees following his departure. Strohmyer also contests
PFM’s calculation of the value of its stock, assets, and good-
will. PFM, Naegele, and Mantler counterclaimed.
The district court found that PFM was not a corporation
under the laws of Nebraska. It further (1) held that the value
of Strohmyer’s stock was $104,220, (2) awarded Strohmyer
$9,389.27 in unpaid compensation, and (3) awarded PFM
damages in the amount of $30,673 on its cross-complaint.
Strohmyer appeals. We affirm in part, and in part reverse
and remand for further proceedings not inconsistent with
this opinion.
II. BACKGROUND
1. Factual History
(a) Formation of PFM
In 2000, Strohmyer, Naegele, and Mantler incorporated
PFM, a Nebraska professional corporation conducting a medi-
cal and surgical practice, with its principal place of business
in Papillion.
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Nebraska Supreme Court A dvance Sheets
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STROHMYER v. PAPILLION FAMILY MEDICINE
Cite as 296 Neb. 884
The articles of incorporation were filed on September 15,
2000. The three doctors were listed as the sole directors and
shareholders of PFM. Naegele was elected to serve as presi-
dent, Strohmeyer as vice president, and Mantler as secretary
and treasurer. A document entitled “By-Laws of the Papillion
Family Medicine, P.C. As of October 16, 2000” contains a
“Buy Out” section outlining payment due to a doctor after
death or departure, but it was not signed by any of the doctors.
Naegele testified that he drafted this document and viewed it
only as a draft for discussion at a directors’ meeting.
A second document, entitled “Bylaws of Papillion Family
Medicine, P.C.,” was signed only by Mantler in his role as
secretary of PFM. With his signature, Mantler certified that the
bylaws were adopted by the board of directors on December 4,
2000. The bylaws stated that “the majority of the shares repre-
sented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater
number is required by law.” These bylaws did not include any
process for a director’s departure from PFM, as a “buy out”
or otherwise.
A third document, entitled “By-Laws of the Papillion Family
Medicine, P.C. As of October 16, 2000,” is identical to the first
bylaws, but was signed by Mantler on April 2, 2012. With his
signature, Mantler certified that the bylaws were adopted by
the board of directors on October 16, 2000.
(b) Relevant Portions of
Articles of Incorporation
and Bylaws
The relevant portion of the October 16, 2000, bylaws states
the following under the “Buy Out” section:
Upon death or departure the doctor or his estate will be
paid every two weeks at the usual time, a pay check,
which is the actual accounts receivable that are collected,
less 1/3 expenses of the corporation. These payments
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will continue for 6 months regardless of the remaining
accounts receivable. . . .
....
. . . For 2nd 6 months of the year after leaving, the doc-
tor or his estate is paid 1/3 of the total assets at the time
of departure, d[i]vided by 1/3, pai[d] in equal amounts
over 6 months.
The October 16, 2000, bylaws also describe physician
compensation:
1. The basis for physician compensation shall be cal-
culated on the amount collected from a set of physician
charges, not on the amount billed.
a. To this amount collected, one third of the common
charges collected will be added. The common charges are
all bills submitted by the physician assistants and all lab
and x-ray charges.
b. From the collections shall be subtracted one third of
the common expenses, including but not limited to com-
mon expenses, equipment, and supplies.
c. Also subtracted will be any expenses peculiar to the
physician himself . . . .
d. Once the final amount is reconciled for a given pay
period, the physician will draw money equal to 90% of an
average of the . . . amount of money collect[ed] in the last
4 pay periods (a period of roughly 2 months).
As relevant, article V of PFM’s articles of incorporation
provides:
A director of the corporation shall not be personally
liable to the Corporation or its shareholders for mon-
etary damages for any action taken, or any failure to take
action as a director except for liability (i) for the amount
of financial benefit received by a director to which he or
she is not entitled; (ii) for intentional infliction of harm
on the corporation or its shareholders; (iii) for a violation
of Neb. Rev. Stat. §21-2096; and (iv) for an intentional
violation of criminal law.
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STROHMYER v. PAPILLION FAMILY MEDICINE
Cite as 296 Neb. 884
And article X provides in part:
Any shareholder who ceases to be eligible to be a
shareholder as herein provided shall be obligated forth-
with to dispose of all of his shares to the Corporation or
to some other person qualified to be a shareholder, all
on such terms and conditions as the shareholders and the
Board of Directors shall determine.
(c) Agreement to Work
4 Days Per Week
Naegele and Mantler claim that in forming the corpora-
tion, they had a verbal agreement to each work 4 days per
week at PFM, but that this agreement was never recorded in
writing. Naegele testified that prior to this lawsuit, he never
provided Strohmyer anything in writing that stated Strohmyer
had to work 4 days per week. In addition, the directors did
not sign a noncompete document or any other document that
might establish liability to each other or to PFM for starting
another practice.
Strohmyer testified that prior to and following the formation
of PFM, he worked as an associate medical director for Uninet
Healthcare Network. From 2001 to 2007, Strohmyer served in
various medical staff leadership positions for Alegent Health
(Alegent). In 2008, Strohmyer began working as the “Campus
Medical Director and Quality Officer” at Alegent, requiring
him to work 11⁄2 days per week.
In 2009, Strohmyer became “Medical Director” at Alegent,
which required that Strohmyer work “two full days” per week.
Throughout that time, Strohmyer also worked as a hospitalist
at Alegent. This limited his time at the clinic to 3 days per
week. Naegele testified that prior to this lawsuit, he never pro-
vided Strohmyer anything in writing that said that he objected
to Strohmyer’s involvement with Alegent or the outside work
Strohmyer was doing.
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STROHMYER v. PAPILLION FAMILY MEDICINE
Cite as 296 Neb. 884
(d) Nebraska Wage Payment
and Collection Act
In his prayer for relief, Strohmyer sought his wages and
attorney fees pursuant to the Nebraska Wage Payment and
Collection Act (the Act).1
Section 48-1229 states in relevant part:
(1) Employee means any individual permitted to work
by an employer pursuant to an employment relation-
ship or who has contracted to sell the goods or services
of an employer and to be compensated by commission.
Services performed by an individual for an employer
shall be deemed to be employment, unless it is shown that
(a) such individual has been and will continue to be free
from control or direction over the performance of such
serv­ices, both under his or her contract of service and in
fact . . . and (c) such individual is customarily engaged
in an independently established trade, occupation, profes-
sion, or business. . . .
....
(6) Wages means compensation for labor or services
rendered by an employee, including fringe benefits, when
previously agreed to and conditions stipulated have been
met by the employee, whether the amount is determined
on a time, task, fee, commission, or other basis.
Section § 48-1231 states in relevant part:
(1) An employee having a claim for wages which
are not paid within thirty days of the regular payday
designated or agreed upon may institute suit for such
unpaid wages in the proper court. If an employee estab-
lishes a claim and secures judgment on the claim, such
employee shall be entitled to recover (a) the full amount
of the judgment and all costs of such suit and (b) if
such employee has employed an attorney in the case, an
1
See Neb. Rev. Stat. § 48-1228 et seq. (Reissue 2010 & Cum. Supp. 2016).
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amount for attorney’s fees assessed by the court, which
fees shall not be less than twenty-five percent of the
unpaid wages.
(e) Medicaid Patients
A portion of Strohmyer’s practice was devoted to Medicaid
patients. In an April 18, 2005, memorandum from Naegele
to all clinic staff, Naegele stated that “Mantler’s patient list
is now closed to all Medicaid patients” and that “Strohmyer
and . . . Naegele will continue for the moment to see current
Medicaid patients, and will evaluate new Medicaid patients
on a case-by-case basis.” The directors’ meeting minutes for
January 27, 2006, state that all three doctors were in attendance
and discussed that “Naegele chooses to leave Medicaid” and
that “Strohmyer and PA Gilroy will continue to serve Medicaid
population. Much of this will be in . . . Strohmyer’s nursing
home rounds. No other providers at PFM will see Medicaid
patients.” However, Naegele testified that in 2006, he verbally
instructed Strohmyer and Mantler to close their practice to
Medicaid patients. Strohmyer testified that he was never told
that he could not take Medicaid patients.
(f) Strohmyer’s Departure
From PFM
In late 2012 or early 2013, Strohmyer stopped talking to
Naegele and Mantler. On April 19, 2013, Strohmyer sent
Naegele a letter requesting that the directors “define exit strate-
gies” for PFM. He requested that the directors have the “office
attorney formalize these documents over the next few weeks.”
On April 24, Naegele sent Strohmyer a letter referencing the
bylaws and explaining the “Buy Out” provisions set forth in
the bylaws of October 16, 2000.
On December 31, 2013, Strohmyer gave Naegele and
Mantler notice that he was leaving PFM, effective March 31,
2014, to open his own medical practice. Naegele responded in
his position as president of PFM, and stated that PFM agreed
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STROHMYER v. PAPILLION FAMILY MEDICINE
Cite as 296 Neb. 884
to “follow the ‘Buy Out’ provisions of the bylaws of October
16, 2000, upon which we three members agreed.” That same
day, Naegele transferred a check in the amount of $90,000
from the PFM account for deposit to a trust fund. Naegele
testified that he “estimated to buy a doctor out would be about
$30,000” and that Naegele and Mantle would each receive
$30,000 when they retired. It was listed in PFM’s tax returns
as a “Buy-Out Escrow.” That money was later refunded in its
entirety to PFM. On March 4, 2014, PFM distributed $30,000
to Naegele and $30,000 to Mantler.
Following Strohmyer’s notice of departure from PFM,
Naegele updated the office with new paint, carpet, and an
x-ray machine. Strohmyer claims he did not know about any
of these costs incurred, nor did he provide his approval for the
purchases. Naegele claims that the office was overdue for these
updates and that he thought the improvements were necessary
to attract a new doctor to the practice.
On March 7, 2014, Strohmyer’s attorney sent a letter to
Naegele, stating that
use of practice cash to pay for practice and leasehold
remodeling constitutes misappropriation and breach of
the By-laws with respect to the amounts of compen-
sation received from prior earnings to be paid to the
physicians.
Any cash on hand now in the practice accounts (held
for emergencies or high deductible situations) or for
available cash is to be paid to . . . Strohmyer forthwith. .
. . If you have plans to use . . . Strohmyer’s share of the
cash for any other purpose, please advise . . . Strohmyer
immediately with an explanation and amounts planned to
be used.
On April 11, 2014, pursuant to the October 16, 2000, bylaws’
“Buy Out” provision, Naegele sent a letter to Strohmyer’s
attorney, stating that based on his calculations, the expenses
were greater than the income between March 31 and April
11, 2014, and that “[b]ecause the bylaws prohibit charging a
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STROHMYER v. PAPILLION FAMILY MEDICINE
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former partner or his estate in the case of a negative balance,
the net sum for a check today is zero dollars.” He further stated
that he “anticipated this outcome for ongoing payments.” In a
letter dated April 25, 2014, Naegele stated that for the period of
April 14 to April 25, the expenses again exceeded the income,
and that the net sum for a check to Strohmyer was zero.
2. Procedural History
On April 28, 2014, Strohmyer filed suit against PFM,
Naegele, and Mantler. His operative complaint, filed October
14, alleges that defendants—PFM, Naegele, and Mantler—
(1) breached the October 16, 2000, bylaws by failing to pay
the wages due Strohmyer, by concealing $90,000, by refus-
ing Strohmyer access to the financial records of PFM, and
by using income and assets that would have otherwise been
disbursed to Strohmyer to purchase capital assets and make
capital improvements; (2) acted in violation of Neb. Rev. Stat.
§§ 21-2212 and 21-2213 (Reissue 2012), which constituted
grounds for judicial dissolution of PFM due to defendants’
repudiation of the bylaws and failure to redeem Strohmyer’s
shares and due to the deadlock and oppressive conduct, all of
which violate the articles of incorporation; (3) refused to pay
Strohmyer wages, compensation, and/or director fees prior to
and/or after his departure from PFM, in violation of the Act;
(4) breached a fiduciary duty due to defendants’ claim that the
expenses of PFM have exceeded and will continue to exceed
the total fees collected by PFM, and due to defendants’ capi-
tal upgrades without notice to or approval of Strohmyer that
have diverted funds that would have otherwise been paid to
Strohmyer; and (5) failed to pay sums due to Strohmyer, thus
requiring declaratory and injunctive relief, because compensa-
tion should have been paid to Strohmyer either as director fees
or as postdeparture compensation and/or asset value under
PFM’s bylaws.
PFM, Naegele, and Mantler filed an answer and counter-
claim to the first amended complaint. In the counterclaim,
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STROHMYER v. PAPILLION FAMILY MEDICINE
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they argued that (1) Strohmyer failed to engage in directors’
activities and attend directors’ meetings, and thus should not
receive compensation for services as a director of PFM; (2)
the services Strohmyer performed for Alegent and Uninet
Healthcare Network during his time at PFM were performed
“in violation of Strohmyer’s duty to expend his best full-time
professional efforts through PFM for the mutual benefit of the
Physicians”; (3) following an agreement among the PFM phy-
sicians to refrain from accepting Medicaid patients, Strohmyer
continued to provide medical services to Medicaid patients;
and (4) while the physicians agreed to spend 4 days per work-
week attending to patients of PFM, Strohmyer spent only 3
days per week attending to such patients. Accordingly, they
argued that Strohmyer was unjustly enriched.
In Strohmyer’s reply to defendants’ answer and his answer
to defendants’ counterclaim, he alleged as an affirmative
defense that (1) defendants in recent years called no directors’
meetings and, in the alternative, distribution of director fees
was not conditioned on attendance at directors’ meetings; (2)
Strohmyer’s work for Alegent and Uninet Healthcare Network
was “known, acquiesced to, and agreed to” by defendants and
not in violation of the articles of incorporation; (3) the Act
prevents defendants from reducing or delaying payment of
compensation owed to Strohmyer; (4) the recovery of director
fees paid to Strohmyer prior to 2010 are barred by the statute
of limitations; (5) the causes of action and damages asserted
by defendants for the recovery of income earned by Strohmyer
as a result of his outside employment by Alegent or Uninet
Healthcare Network prior to 2010 are barred by the statute of
limitations; and (6) the causes of action and damages asserted
by defendants are barred by the doctrine of laches, the doctrine
of estoppel, and the statute of frauds.
The district court issued an order stating that PFM “does not
meet the requirements of a professional corporation as dictated
in the Nebraska Professional Corporation Act,” because (1)
the articles of incorporation do not comply with the Nebraska
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Professional Corporation Act,2 (2) there are no minutes indi-
cating that PFM’s alleged bylaws were adopted, and (3) the
alleged bylaws from October 16, 2000, were not signed.
The court further held that the buyout clause was so ambig­
uous as to be unenforceable under Nebraska law. The court
found that PFM was a business corporation and not a profes-
sional corporation, and that there was insufficient evidence
to judicially dissolve the corporation. Accordingly, the court
found it necessary to “stay the proceedings or any further order
by this Court until the parties comply with Neb. Rev. Stat.
§ 21-20,166.”
On May 22, 2015, Strohmyer subsequently filed a motion to
exclude ex parte communications and for clarification of the
earlier order. Following a hearing on that motion, the district
court ordered:
a. The Defendant corporation is given until July 13,
2015, to elect whether to purchase the common stock
of [Strohmyer]. If it does, [Strohmyer’s] counsel is to
forthwith notify the Court at which time the Court will
set down for hearing the evidentiary hearing needed to
resolve the remaining issues if the parties cannot reach
an agreement as to value as set forth in the statute.
The hearing will follow the 60 day time allocated per
the statute.
b. During the 60 day period following the election to
purchase, the parties are to attempt to set the gross value
of [Strohmyer’s] common stock and the terms of pay-
ment. The Court will thereafter involve itself, if needed,
in determining the effect of the remaining unresolved
issues on the value and any other matters associated with
the judicial dissolution statute.
On July 13, 2015, defendants filed an election to purchase
Strohmyer’s stock in PFM in accordance with a July 7, 2015,
2
Neb. Rev. Stat. § 21-2201 et seq. (Reissue 2012).
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agreement between the parties. The 60-day period for the par-
ties to determine whether they could reach fair value expired
without agreement.
Following a March 21, 2016, hearing, the court held that in
determining the value of the stock of PFM on April 1, 2014,
“the most compelling [are] Exhibits #46 and #113.” The court
stated that in each of these exhibits, “[Strohmyer] used the
appraised value of the fixed assets proposed by [his] expert,
being Exhibit #36 of a value of $79,495.” However, the court
found Naegele’s testimony most persuasive, placing “the value
of the fixed assets at $19,765, based upon cost when he pur-
chased them on E-Bay.” The court accordingly adjusted “the
fair value of the Stock in Exhibits 46 and 113 by $19.91 per
share,” which set “a value per share on Exhibit #46 at $96.35
per share and on Exhibit #113 at $113.09, for an average
fair value per share of $104.72,” thus, “setting the value of
[Strohmyer’s] stock at $104,720.00.” The court then ordered
that “the value of [Strohmyer’s] stock is fixed in the amount
of $104,220.” (This is an apparent contradiction. Our calcula-
tions indicate that the proper value based on the district court’s
calculation is $104,720.)
The court also found that there was “no goodwill or intangi-
ble value to [the] medical practice, where one of the physicians
leaves and takes his patients and part of the staff with him.”
The court next found that under § 48-1229 of the Act,
Strohmyer was not entitled to compensation for March 2014.
The court held that none of the physicians met the definition of
an employee under the Act and that any sums due did not fall
within the Act, because (1) there were no employment agree-
ments between PFM and the physicians which set out specific
compensation, (2) each of the physicians set his own schedule
and saw his own patients, and (3) there was no evidence that
the monthly payments to the physicians were paid as “W-2
wages or 1099 compensation.”
The court found that “Exhibit #18 is the correct determi-
nation of the amounts due to [Strohmyer] for the period of
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March 2014.” Accordingly, Strohmyer was awarded the sum
of $9,389.27 as unpaid compensation. The court stated that
“the director’s fees which were being held in trust, have been
considered in the Court’s valuing of [Strohmyer’s] stock.”
Next, the court concluded that due to the lack of employment
contracts, [Strohmyer] did not breach a fiduciary duty when he
worked 3 days per week for 4 years, because no fiduciary duty
had been created. In addition, the court held that Strohmyer
breached a fiduciary duty by treating Medicaid patients after
the board of directors made a decision to cease treatment of
Medicaid patients. The court determined that Strohmyer dam-
aged PFM in the amount of $30,673.
III. ASSIGNMENTS OF ERROR
Strohmyer assigns, restated and consolidated, that the dis-
trict court erred in (1) miscalculating the value of PFM’s
share value and the amount of fixed assets due to Strohmyer,
which led to an inequitable result; (2) finding that PFM had
no compensable goodwill to which Strohmyer was entitled;
(3) relying upon the values obtained from eBay in determining
the replacement cost for medical equipment; (4) not awarding
compensation for director fees, salary, and attorney fees as an
employee covered by the Act; and (5) finding that Strohmyer
breached a fiduciary duty by continuing to accept Medicaid
patients, holding him liable for a physician assistant’s contin-
ued treatment of Medicaid patients, and in its calculation of
damages based on these claims.
On cross-appeal, PFM assigns, restated and consolidated,
that the district court erred in finding that Strohmyer owed no
fiduciary duty to the corporation to work 4 days per week and
compensating PFM for this breach even though the court found
that Strohmyer owed a fiduciary duty to the corporation to
cease taking Medicaid patients.
IV. STANDARD OF REVIEW
[1] In an appeal of an equitable action, an appellate court
tries factual questions de novo on the record and reaches
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a conclusion independent of the findings of the trial court,
provided that where credible evidence is in conflict on a
material issue of fact, the appellate court considers and may
give weight to the fact that the trial judge heard and observed
the witnesses and accepted one version of the facts rather
than another.3
[2] The existence of a fiduciary duty and the scope of that
duty are questions of law for a court to decide.4
V. ANALYSIS
1. PFM’s Net Equity
Strohmyer argues that the district court miscalculated the
value of PFM’s shares. The lower court held that Strohmyer’s
stock was worth $104,720. We note that the court made a
minor misstatement of the numbers when it then ordered
“the value of [Strohmyer’s] stock is fixed in the amount of
$104,220.” The lower court based its calculation on the fol-
lowing exhibits.
(a) Exhibit 46
In exhibit 46, entitled “Reconciliation of Assets as of
March 31, 2014,” the “Total Adjusted Assets” are listed as
$348,767.90, or $116.26 per share. Exhibit 46 was drafted by
Strohmyer’s expert witness Todd Lehigh.
(b) Exhibit 113
Exhibit 113, entitled “Reconciliation of Net Liquid and
Fixed Assets Before Intangibles & Goodwill as of March 31,
2014,” lists the net equity before intangibles/business good-
will at $401,174.14. Exhibit 113 was also drafted by Lehigh.
Exhibit 113 contains the same values as exhibit 46, and in
addition includes: prepaid supplies on hand ($11,829.86), other
3
Rauscher v. City of Lincoln, 269 Neb. 267, 691 N.W.2d 844 (2005).
4
In re Estate of Stuchlik, 289 Neb. 673, 857 N.W.2d 57 (2014), modified on
denial of rehearing 290 Neb. 392, 861 N.W.2d 682 (2015).
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fixed assets per exhibit 35 ($79,545), daily supplies ($31,774),
adjusted accounts receivable ($143,043.60), accounts payable
($11,185.41), payroll taxes ($3,391.32), and salary due to
Strohmyer ($9,389.27).
(c) Exhibits 35 and 36
Exhibit 36 is a copy of the notes written by Strohmyer’s
expert witness Doug Killion, for his retrospective appraisal
report. That report valued PFM’s fixed assets at $79,545,
based on the fair market value. Killion’s report is found in
exhibit 35.
(d) Exhibit 98
Exhibit 98 is a calculation by Naegele of the value of PFM’s
fixed assets based on the cost of each item in similar condition
found on “eBay and Craigslist.” Exhibit 98 contains the same
items described in exhibit 36, but calculates the fair market
value at $19,755.
(e) Trial Court’s Calculation
The trial court found that exhibits 46 and 113 were credible
valuations of the corporate shares of PFM. However, the court
found that Naegele’s assessment of fixed assets in exhibit 98
was a more persuasive valuation than Killion’s assessment in
exhibit 36. Because the share values in exhibits 46 and 113
were based on the cost of replacement in exhibit 98, the court
adjusted the values in exhibits 46 and 113. The court accord-
ingly subtracted the difference in cost of replacement between
exhibits 36 and 98 and divided it by 3,000 shares, which
equaled $19.91 per share.
For exhibit 46, the court deducted $19.91 in calculating
the amount of $96.35 per share. For exhibit 113, the court
deducted $19.91 to arrive at $113.09 per share. The court then
averaged these two amounts. The average value was $104.72.
Each director was issued 1,000 shares; therefore, the court
multiplied $104.72 by 1,000 to arrive at a value of $104,720
for Strohmyer’s shares.
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(f) Errors in Trial Court’s Calculation
(i) PFM’s Share Value
Strohmyer argues that the district court miscalculated the
value of PFM’s shares by “using inconsistent accounting and
averaging logic,” which led to an inequitable and unjust
result. Strohmyer contends that the court should have awarded
him $16,740 as the difference in value between exhibits 46
and 113.
Under a de novo standard of review, we give weight to the
lower court’s assessments of credibility. However, we find that
the district court erred in its calculations using the values in
these exhibits.
First, the court made a minor misstatement of the numbers
in its calculations. The court stated that the value of fixed
assets in exhibit 36 was $79,495, whereas exhibit 36 lists the
value of fixed assets as $79,545. In addition, the court stated
that Naegele placed the value of the fixed assets at $19,765,
when the value listed in exhibit 98 was $19,755.
Second, the court averaged the values calculated in exhibits
46 ($348,767.90) and 113 ($401,174.14). In drafting each of
these exhibits, Lehigh included everything listed in exhibit 46
in his valuation in exhibit 113. Because the lower court found
exhibit 113 credible, it implicitly found all of the additional
line items listed in exhibit 113 to be credible. It is therefore
illogical to average the valuation in exhibit 113 with the more
basic valuation in exhibit 46.
Because the trial court found the additional line items to be
credible, under a de novo standard of review, we find that it
should have relied only upon the valuation from exhibit 113.
In support of our conclusion that the district court erred in
averaging the two exhibits, we note that the adjusted value of
exhibit 46 does not contain the fixed asset valuation per exhibit
35 of $79,545. By subtracting the difference in value of fixed
assets of $59,790 ($79,545 − $19,755) from the net value in
exhibit 113 of $401,174.14, the adjusted net equity value of
exhibit 113 should equal $341,384.14.
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Third, we find an error in the calculation in exhibit 113.
In exhibit 113, “Account Payables” and “Payroll Taxes” are
treated as assets. Our review indicates that these items should
be treated as liabilities. In Lehigh’s testimony, he does not
address why he has listed these items as assets rather than
as liabilities.
By treating the “Account Payables” and “Payroll Taxes”
as liabilities rather than assets, and adjusting the value of
fixed assets to the value in exhibit 98 (Naegele’s calculation),
the adjusted net equity value of exhibit 113 is $312,230.68.
Thus, the value of Strohmyer’s shares would be $104,077.
Despite the lower court’s calculation errors, this value is
almost the same as the court’s valuation of Strohmyer’s shares
at $104,720. This is not a material difference. Hence, we find
no reversible error in the court’s ultimate valuation of shares
at $104,720.
(ii) Director Fees
Strohmyer argues that the lower court failed to award one-
third of the “Net Quarterly Director Fees” to Strohmyer and
that he should be awarded $72,991.22 accordingly.
In exhibit 113, entitled “Reconciliation of Net Liquid and
Fixed Assets Before Intangibles & Goodwill,” Lehigh cal-
culated the “Total Adjusted Equity Before Director Fees”
as $620,147.82. Lehigh then subtracted the “Net Quarterly
Director Fees (1/3 for each shareholder)” from the total.
In his testimony, Lehigh states that he arrived at the “Net
Quarterly Director Fees” amount by adding the following
components:
[C]ash in [the] bank per QuickBooks [in the amount of]
37,143, the litigation escrow account [in the amount]
of the 90,000, [and] the outstanding checks from 2008
through 2013 [are also included]. And then . . . the depos-
its for the carpet, painting, X-ray machine, the real estate
taxes and for painting [are included in the amount], and
all those numbers totaled the [amount of] 318,973.68.
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Lehigh then subtracted $100,000 from this amount for oper-
ating capital in the business, based on the testimony of the
assistant office manager, to arrive at the value of $218,973.68
as director fees.
The lower court stated in its order that “[Strohmyer] and
Defendants were the sole Directors of the Corporation.” The
court stated thereafter that “[Strohmyer] for the two years prior
to his departure refused to attend Director’s meetings.” The
court further noted that “the director’s fees which were being
held in trust, have been considered in the Court’s valuing of
[Strohmyer’s] stock.”
In exhibit 46, director fees were not listed in the valuation
of PFM’s net equity. In exhibit 113, as mentioned above, direc-
tor fees were subtracted in valuing the net equity. Therefore,
in its calculation of net equity owed to Strohmyer, the court
awarded only one-third of the value of PFM. It merely sub-
tracted the director fees from the total net equity and did not
make a separate finding of the amount of director fees due to
Strohmyer. Our reading of the record is that the lower court
made a factual finding that Strohmyer was a director of PFM,
but that Strohmyer was not entitled to director fees, because
he did not attend directors’ meetings. Because this was a fac-
tual finding, we hold that under a de novo standard of review,
the lower court did not err in finding that Strohmyer was not
entitled to director fees.
2. Goodwill
Strohmyer argues that the district court erred in “not award-
ing an additional $55,000.00 for intangible assets . . . and by
treating intangible assets in the same category as goodwill
assets.”5 PFM contends that there is “no goodwill to divide
upon dissolution of a professional enterprise when the clients
remain with the firm taking their files.”6 The district court
5
Brief for appellant at 31.
6
Brief for appellees at 23.
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held that there was “no goodwill or intangible value to a medi-
cal practice, where one of the physicians leaves and takes his
patients and part of the staff with him.”
In Taylor v. Taylor,7 this court addressed whether a phy-
sician’s professional corporation, of which he was the sole
practitioner and shareholder, had professional goodwill that
could be included as an asset in the marital estate upon dis-
solution of the marriage. In Taylor, we characterized good-
will as
“‘the advantage or benefit which is acquired by an estab-
lishment beyond the mere value of the capital, stock,
funds, or property employed therein, in consequence of
the general public patronage and encouragement which it
receives from constant or habitual customers, on account
of its local position or common celebrity, or reputation for
skill or affluence, or punctuality, or from other accidental
circumstances or necessities, or even from ancient par-
tialities or prejudices.’”8
This court further stated that
where goodwill is a marketable business asset distinct
from the personal reputation of a particular individual,
as is usually the case with many commercial enterprises,
that goodwill has an immediately discernible value as
an asset of the business and may be identified as an
amount reflected in a sale or transfer of such business.
On the other hand, if goodwill depends on the contin-
ued presence of a particular individual, such goodwill,
by definition, is not a marketable asset distinct from
the individual.9
Therefore, we held that in the context of the division of mar­
ital property under Neb. Rev. Stat. § 42-365 (Reissue 1984),
“goodwill must be a business asset with value independent
7
Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851 (1986).
8
Id. at 727-28, 386 N.W.2d at 856-57.
9
Id. at 731, 386 N.W.2d at 858.
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of the presence or reputation of a particular individual, an
asset which may be sold, transferred, conveyed, or pledged.”10
Accordingly, “[w]hether goodwill exists and whether good-
will has any value are questions of fact.”11 We held, on
those facts, that the district court did not err in concluding
that plaintiff’s medical practice did not have any compen-
sable goodwill.
In Detter v. Miracle Hills Animal Hosp.,12 this court
addressed whether a professional corporation can have good-
will as a distributable asset in a corporate dissolution proceed-
ing. We reiterated the holding in Taylor, that “the existence of
professional goodwill as a distributable asset presents a ques-
tion of fact.”13
In its analysis, the Detter court cited Thomas v. Marvin E.
Jewell & Co.,14 in which three partners left a partnership to
begin their own partnership, and evidence showed that the
departing partners took the files of the clients they wished to
retain and contacted those clients. After the transition, “[m]ost
of the clients stayed with the firm that possessed the client
file.”15 We held that the parties received all of the goodwill to
which they were entitled, because “each of the two factions
took the clients and whatever goodwill was available at the
time of dissolution.”16
Strohmyer’s expert witness on intangible asset valuation
testified that according to his calculations, the intangible assets
were worth $165,000. The witness stated that “from a busi-
ness appraiser’s standpoint . . . there’s not business goodwill
10
Id. at 731, 386 N.W.2d at 858-59.
11
Id. at 732, 386 N.W.2d at 859.
12
Detter v. Miracle Hills Animal Hosp., 269 Neb. 164, 691 N.W.2d 107
(2005).
13
Id. at 175, 691 N.W.2d at 115-16.
14
Thomas v. Marvin E. Jewell & Co., 232 Neb. 261, 440 N.W.2d 437 (1989).
15
Id. at 266, 440 N.W.2d at 441.
16
Id. at 268, 440 N.W.2d at 443.
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in this practice, but there’s value of intangible assets, identifi-
able intangibles.”
Among these identifiable intangibles, the witness listed
PFM’s computer system, patient records, and assembled work-
force. However, Strohmyer testified that he did not take any
patient files, though he did send letters to his patients inform-
ing them of his departure. Approximately 50 percent of those
patients followed him to his new practice. Naegele testified
that eight PFM employees, almost one-third of PFM’s staff,
also followed Strohmyer to his new practice. Furthermore,
Naegele produced a spreadsheet showing that there was a
$543,578.22 decrease in PFM revenues between the last 9
months of 2013, while Strohmyer was at PFM, and the
last 9 months of 2014, after Strohmyer had departed. While
Strohmyer’s witness testified that there were unidentified
intangible assets with value, there was also significant evi-
dence that any goodwill depended on the continued presence
of Strohmyer, not merely on PFM.
Similar to Taylor, the lower court here heard the expert
witnesses and gave more weight to the testimony that there
was no goodwill or unidentified intangible value to the medi-
cal practice. Under a de novo standard of review, the district
court did not err in finding that there was no goodwill to the
medical practice. Strohmyer’s second assignment of error is
without merit.
3. R eplacement Cost for
Medical Equipment
Strohmyer contends that the district court erred in accept-
ing Naegele’s testimony about replacement costs for medical
equipment over the values testified to by Strohmyer’s expert.
(a) Relevant Law
Generally,
[a]n owner’s opinion testimony as to the value of his
or her property cannot be based on naked conjecture or
solely speculative factors. In addition, purely hearsay
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evidence as to the value of a chattel is insufficient as
a basis for testimony predicated thereon by the owner.
However, information received in part from others has
been held to be unobjectionable.17
The Iowa Supreme Court, in W & W Livestock Enterprises,
Inc. v. Dennler,18 stated that “[i]t is generally held that the price
for which personal property sells at a bona fide sale is compe-
tent evidence of its value.”
In First Baptist Church v. State,19 this court addressed how
to determine the market value of the land at issue. We held that
“[m]arket value is not a question of science or skill upon
which experts alone may give an opinion. [Citation omit-
ted.] It is necessary only to show that he has the means of
forming an intelligent opinion derived from an adequate
knowledge of the nature and kind of property in contro-
versy, and of its value. [Citation omitted.] It is not essen-
tial that every witness expressing an opinion shall have
all-inclusive information of every detail of the elements
entering into the value. . . .”20
The Nebraska Court of Appeals has also addressed a similar
question and held that it was not an abuse of discretion for
the lower court to rely upon a valuation of personal prop-
erty based on “garage sale and ‘craigslist’ prices” in a mar-
riage dissolution.21
(b) Testimony at Trial
At trial, several witnesses testified as to the estimation of
the value of replacement cost for PFM’s medical equipment.
17
31A Am. Jur. 2d Expert and Opinion Evidence § 232 at 267 (2012).
18
W & W Livestock Enterprises, Inc. v. Dennler, 179 N.W.2d 484, 489-90
(Iowa 1970).
19
First Baptist Church v. State, 178 Neb. 831, 135 N.W.2d 756 (1965).
20
Id. at 835, 135 N.W.2d at 758-59 (emphasis in original).
21
See McIver v. McIver, No. A-13-052, 2013 WL 5434646 at *6 (Neb. App.
Oct. 1, 2013) (selected for posting to court website).
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Strohmyer offered the PFM’s accountant’s report of the assets,
liabilities, and stockholders’ equity for income tax basis on
December 31, 2013, in which report the medical equipment
was valued at $113,502. Killion, Strohmyer’s expert wit-
ness, testified that fair market value of the medical equipment
was $79,545.
In addition, during cross-examination, Naegele testified that
his estimated values showed the fair value, which he defined
as “what is the stuff actually worth, what did I buy it for or
could replace it for, and your appraiser defined fair market
value in a way that I disagree.” He stated that his calculation
was the fair and reasonable value because he “bought almost
everything used on eBay or Craigslist.”
Based on this understanding of fair market value, Naegele
prepared exhibit 98, which lists the cost of replacement as
$19,755. In the exhibit, Naegele also included printouts of each
of the items and their listed prices on eBay, for which he based
his estimations of replacement value.
The lower court judge heard the testimony from each of the
witnesses and found Naegele’s testimony to be more persua-
sive. Under a de novo standard of review, we cannot conclude
that the district court erred in this finding. Strohmyer’s third
assignment of error is without merit.
4. Awarding Wages Under the Act
Strohmyer argues that the district court erred in failing to
award attorney fees, director fees, and salary under the Act.
The district court held that none of the physicians met the
definition of employees under the Act, nor was there evidence
presented that the payments they received were paid as “W-2
wages or 1099 compensation.”
An individual is not an employee under the Act if the “indi-
vidual has been and will continue to be free from control or
direction over the performance of such services, both under his
or her contract of service and in fact.”22 Testimony established
22
§ 48-1229(1)(a).
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that Strohmyer set his own work schedule and unilaterally
limited the number of days he worked at PFM, did not speak
to Naegele and Mantler in the last 2 years before his departure
from PFM, and continued to receive Medicaid patients after
Naegele and Mantler decided that PFM should no longer treat
Medicaid patients. In addition, Strohmyer was not working
at PFM under an employment agreement. Accordingly, under
§ 48-1229, Strohmyer “has been and will continue to be free
from control or direction over the performance of such serv­
ices” and is thus not an employee under the Act. Thus, the
district court did not err in finding that Strohmyer was not an
employee under § 48-1229. Strohmyer’s fourth assignment of
error is without merit.
5. Fiduciary Duty and
Medicaid Patients
Strohmyer next assigns that the district court erred in award-
ing PFM $30,673 on its allegation that Strohmyer’s continued
treatment of Medicaid patients was a breach of his fiduciary
duty and that the calculation of damages on this claim was
purely speculative.
[3,4] An officer or a director of a corporation occupies a
fiduciary relation toward the corporation, and must comply
with the applicable fiduciary duties in his or her dealings with
the corporation and its shareholders.23 A violation by a trustee
of a duty required by law, whether willful, fraudulent, or result-
ing from neglect, is a breach of trust, and the trustee is liable
for any damages proximately caused by the breach.24
In D & J Hatchery, Inc. v. Feeders Elevator, Inc.,25 this court
discussed ratification of a corporate officer’s unauthorized acts
by the corporation:
23
Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (2004).
24
Id.
25
D & J Hatchery, Inc. v. Feeders Elevator, Inc., 202 Neb. 69, 74, 274
N.W.2d 138, 141 (1979).
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“‘The unauthorized acts of an officer of a corporation
may be ratified by the corporation by conduct implying
approval and adoption of the act in question. Such rati-
fication may be express, or may be inferred from silence
and inaction, and if the corporation, after having full
knowledge of the unauthorized act, does not disavow the
agency and disaffirm the transaction within a reasonable
time, it will be deemed to have ratified it.’”
In a memorandum from Naegele to all clinic staff, dated
April 18, 2005, Naegele states that “Mantler’s patient list is
now closed to all Medicaid patients” and that “Strohmyer
and . . . Naegele will continue for the moment to see current
Medicaid patients, and will evaluate new Medicaid patients on
a case-by-case basis.” The minutes for the January 27, 2006,
directors’ meeting states all three doctors were in attendance
and discussed that “Naegele chooses to leave Medicaid” and
that “Strohmyer and PA Gilroy will continue to serve Medicaid
population. Much of this will be in . . . Strohmyer’s nursing
home rounds. No other providers at PFM will see Medicaid
patients.” Naegele testified that at the meeting on January 27,
Naegele and Mantler both wanted to discontinue treatment
of all Medicaid patients and that Strohmyer disagreed, but
this was not written down. Naegele testified that he verbally
instructed Strohmyer to close his practice to Medicaid patients
in 2006 because the two votes against continuing Medicaid
treatment were controlling. Naegele testified that Strohmyer
responded that “he would continue to do whatever he wanted
to do.”
Despite these alleged instances in which Strohmyer was
instructed to cease treating Medicaid patients, Naegele also
testified that there were “many, many issues” and that he “was
afraid of a wrongful termination lawsuit” and “never wanted to
confront [Strohmyer] on the issue until he left.”
As in D & J Hatchery, Inc., ratification of a corporate
officer’s unauthorized acts “may be inferred from silence and
inaction, and . . . the corporation [had] full knowledge of the
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unauthorized act.” Naegele’s April 18, 2005, memorandum
to PFM’s staff and the minutes from the January 27, 2006,
directors’ meeting indicate that the three physicians discussed
ceasing treatment of Medicaid patients in 2006, but that they
agreed that Strohmyer could continue treating such patients.
Naegele provides no evidence of any oral agreement in 2006
that all doctors at PFM must cease taking Medicaid patients.
Even if Strohmyer was not authorized by PFM to accept
Medicaid patients, Naegele’s testimony, in addition to the
meeting minutes and the memorandum, indicates that Naegele
and Mantler had full knowledge of Strohmyer’s continued
treatment of Medicaid patients in 2006. After having full
knowledge, they took no action to stop Strohmyer from accept-
ing such patients until Strohmyer filed a complaint in 2014,
thus failing to “‘disaffirm the transaction within a reasonable
time.’”26 This inaction, from 2006 to the filing of the complaint
in 2014, amounts to ratification of Strohmyer’s unauthorized
acts. Therefore, we conclude that PFM, Naegele, and Mantler
ratified Strohmyer’s actions. As such, Strohmyer’s fifth assign-
ment of error has merit, and the order awarding PFM $30,673
must be vacated.
6. PFM’s Cross-A ppeal
On cross-appeal, PFM assigns that the district court erred
in finding that Strohmyer owed no fiduciary duty to the cor-
poration to work 4 days a week and in failing to compensate
PFM for this breach. The district court found that PFM had
no employment contracts setting out the terms of employ-
ment; as such, no fiduciary duty existed. In addition, the
court noted that PFM had the authority under the terms of the
bylaws to terminate Strohmyer’s employment, but failed to do
so, and that Strohmyer’s work production during the 3 days
per week he worked was substantially the same as Naegele’s
and Mantler’s.
26
Id.
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[5,6] An officer or a director of a corporation occupies a
fiduciary relation toward the corporation and its stockholders
and should refrain from all acts inconsistent with his or her
corporate duties.27 Partners must exercise the utmost good faith
in all their dealings with the members of the firm and must
always act for the common benefit of all.28
Naegele claims that the three doctors had an oral agreement
to work 4 days per week at PFM. Strohmyer contends that
no such agreement existed. Through the course of his time at
PFM, Strohmyer reduced his hours from 4 days per week to 3
days per week because of his outside employment. The minutes
for the directors’ meeting held June 23, 2006, at which all three
doctors were listed as present, state: “Discussed and agreed:
. . . Strohmyer to pursue medical directorship at Midlands.
Discussed how that would impact [the] practice.” And in a
meeting on May 1, 2009, the minutes state:
Strohmyer . . . brought up the possibility that Alegent
might offer him a significant amount of money to become
a hospital administrator . . . . We therefore had a frank
conversation about that and the need to start planning for
it. . . . Mantler and . . . Naegele were supportive of what-
ever steps he needs to take to best take care of his family
and himself . . . .
The minutes from PFM’s meetings indicate Strohmyer stated
to the other doctors that he would be taking these outside posi-
tions and that it could impact his work at PFM. There is no evi-
dence that prior to this litigation, the other doctors attempted
to enforce this alleged oral agreement to work 4 days per
week. Nor was any evidence introduced that Strohmyer’s other
employers competed with PFM.
Strohmyer’s charges to patients at PFM decreased after tak-
ing the positions at Alegent in 2008. However, Strohmyer’s
charges remained comparable to Naegele’s and Mantler’s
27
Bellino v. McGrath North, 274 Neb. 130, 738 N.W.2d 434 (2007).
28
Id.
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between 2008 and 2013. Therefore, we find that neither
Strohmyer’s work for other employers nor his decision to
work 3 days per week at PFM was “inconsistent with his . . .
corporate duties” at PFM.29 Strohmyer did not breach a fidu-
ciary duty to PFM by failing to work at PFM’s office 4 days
per week. PFM’s sole assignment of error on cross-appeal is
without merit.
VI. CONCLUSION
The district court did not err in its ultimate valuation of
Strohmyer’s shares, in finding that PFM had no goodwill
for which Strohmyer was entitled to compensation, in rely-
ing upon the values PFM obtained from eBay in determining
the replacement cost for medical equipment, and in failing
to award compensation for director fees and salary as an
employee covered by the Act.
However, we find that the district court erred in finding
that Strohmyer breached a fiduciary duty by continuing to
accept Medicaid patients, in holding Strohmyer liable for a
physician assistant’s continued treatment of Medicaid patients,
and in its calculation of damages based on these claims. The
district court did not err in finding on PFM’s cross-appeal that
Strohmyer did not breach a fiduciary duty by failing to work at
PFM 4 days per week.
Accordingly, we affirm in part, and in part reverse and
remand for further proceedings not inconsistent with this
opinion.
A ffirmed in part, and in part reversed and
remanded for further proceedings.
29
See id. at 144, 738 N.W.2d at 446.