JPG,INC.,
Plaintiff
v
.
Wake County
No. 02 CVS 13138
DICK BECK PROFESSIONAL
MARKETING, INC.,
Defendant
Manning, Fulton & Skinner, P.A., by Michael S. Harrell, for
JPG, Inc., plaintiff-appellee.
Parker, Poe, Adams & Bernstein, L.L.P., by Jack L. Cozort and
R. Bruce Thompson, II, for Dick Beck Professional Marketing,
Inc., defendant-appellant.
CALABRIA, Judge.
A contract dispute between JPG, Inc. (“JPG”) and Dick Beck
Professional Marketing, Inc. (“DBP”) centered on whether the
company's Operating Agreement (the “agreement”) required appraisal
of company real estate to be limited to its “use in the 'cattle
business.'” We find the clear language of the agreement required
appraisal of the real estate to be based on “gross fair market
value” without limitation, and we reverse the trial court's
decision.
On 8 January 1997, JPG and DBP, the sole members of
Springfield Angus, LLC (the “company”), entered into the agreementand formed the company. The agreement authorizes the company,
under North Carolina General Statutes Chapter 57C, “to engage in
any lawful business including the ownership and operation of a
cattle business” on a 370.5-acre tract of real estate in Franklin
County (the “property”). Paragraph 21(b) of the agreement gives
JPG the option “to acquire DBP's interest in the Company” prior to
31 December 2004 if JPG determines, in good faith, DBP's continued
participation as a member impedes the success of the company.
Paragraph 21(b) further provides, “The purchase price of DBP's
interest shall be equal to its capital account balance, adjusted
for the gross fair market value of Company assets in accordance
with the provision of paragraph 3(e). . . .”
In pertinent part, paragraph 3(e) states:
If the Managers [disagree] regarding the gross
fair market value of the Company assets, such
value shall be determined by appraisal as
follows. With respect to the Company's real
property, the Managers shall select two
qualified appraisers, [who shall] appoint a
third qualified appraiser, and the three
appraisers separately shall appraise the gross
fair market value of such real estate. The
average of the two appraisals . . . closest in
amount shall be binding upon the parties. . .
. The Managers shall agree on appraisers to
appraise the gross fair market value of the
Company's cattle, equipment, and other assets.
. . . For purposes hereof, a qualified
appraiser shall be any entity or person who
(i) regularly engages within the local market
area for real estate and equipment and in the
relevant market for cattle, as shall be
determined reasonably and in good faith within
the discretion of the Managers, in the
valuation of assets of the kind and nature
owned by the Company, and (ii) holds
themselves out as being in such business and
qualified to make such valuation.
In a letter dated 13 September 2002, JPG informed DBP that it
was exercising its option under paragraph 21(b) to purchase DBP's
interest and had chosen a “qualified appraiser” per the terms of
paragraph 3(e). Further, JPG requested DBP select a “qualified
appraiser” so that the two appraisers could “select a third . . .
and appraise the property as a cattle farm as required by the
Operating Agreement.” In a letter dated 27 September 2002, DBP
named its “qualified appraiser,” stated its appraiser would “take
into account the highest and best uses of the property,” and
contended “[t]he Operating Agreement does not require differently.”
On 30 September 2002, JPG filed a complaint in Wake County
Superior Court requesting “a declaratory judgment that any
appraiser selected by any party as per the terms of [the agreement]
. . . appraise the real property owned by the [company] only as an
ongoing cattle farm. . . .” The trial court's decision required
the appraisers to conduct the appraisals
with due consideration given by the appraisers
to those factors which form the basis of their
respective qualifications, that is, the local
market for real estate and the equipment
associated with a cattle farming operation, as
well as the relevant market area for cattle
. . . so as to provide a gross fair market
value of the Company's real estate for use in
the “cattle business.”
On 2 May 2003, DBP filed notice of appeal.
The sole issue on appeal is whether the agreement requires
that the property be appraised as “real estate for use in the
'cattle business'” or at its “highest and best uses.” Appellate
review of a declaratory judgment “'is the same as in other cases.' Thus, in a bench trial, the [trial] court's findings of fact are
conclusive, while its conclusions of law are reviewable de novo.”
Teasley v. Beck, 155 N.C. App. 282, 288, 574 S.E.2d 137, 141
(2002), disc. rev. denied, 357 N.C. 169, 581 S.E.2d 755 (2003)
(citation omitted).
DBP asserts the trial court erred in limiting the valuation of
the property to cattle farming applications. DBP argues the
parties' intent can be discerned by reference to their use of the
term “gross fair market value,” which requires appraisal of the
property at its “highest and best uses.” We find merit in this
argument.
A court is required “to interpret a contract according to the
intent of the parties to the contract, unless such intent is
contrary to law.” Bueltel v. Lumber Mut. Ins. Co., 134 N.C. App.
626, 631, 518 S.E.2d 205, 209 (1999). “If the plain language of a
contract is clear, the intention of the parties is inferred from
the words of the contract[,]” Walton v. City of Raleigh, 342 N.C.
879, 881, 467 S.E.2d 410, 411 (1996), and “the court is obliged to
interpret the contract as written, and cannot, under the guise of
construction, 'reject what parties inserted or insert what parties
elected to omit.'” Corbin v. Langdon, 23 N.C. App. 21, 25, 208
S.E.2d 251, 254 (1974) (quoting Weyerhaeuser Co. v. Light Co., 257
N.C. 717, 719, 127 S.E.2d 539 (1962)) (citation omitted).
The commonly accepted definition of “fair market value” is
“[t]he price that a seller is willing to accept and a buyer is
willing to pay on the open market and in an arm's-lengthtransaction.” Black's Law Dictionary 1587 (8th ed. 2004). See
also Becker v. Becker, 127 N.C. App. 409, 414, 489 S.E.2d 909, 913
(1997) (defining “fair market value” similarly in cases of
equitable distribution); Marina Food Assoc., Inc. v. Marina
Restaurant, Inc., 100 N.C. App. 82, 94, 394 S.E.2d 824, 831 (1990)
(defining “fair market value” similarly in cases of conversion).
In determining fair market value, the inquiry “'in a sale of
property between private parties . . . must be, what is the
property[,] [in its present state,] worth in the market, viewed not
merely with reference to the uses to which it is at the time
applied, but with reference to the uses to which it is plainly
adapted -- that is to say, what is it worth from its availability
for valuable uses.'” Barnes v. Highway Commission, 250 N.C. 378,
387, 109 S.E.2d 219, 227 (1959) (quoting Power Co. v. Power Co.,
186 N.C. 179, 183-84, 119 S.E. 213, 215 (1923) (stating the
determination of fair market value in condemnation actions is the
same as the determination in the sale of property between private
parties)).
We also find persuasive that Unif. Standards of Prof'l
Appraisal Practice, Standards Rule 1-3 (2004) provides:
When the value opinion to be developed is
market value . . . an appraiser must[,]
[unless otherwise agreed to by the parties]:
(a) identify and analyze the effect on use and
value of existing land use regulations,
reasonably probable modifications of such land
use regulations, economic supply and demand,
the physical adaptability of the real estate,
and market area trends; and
(b) develop an opinion of the highest and best
use of the real estate.
(Emphasis added). We also note N.C. Admin. Code tit. 21, r.
57A.0501(a) (June 2004) requires that “state-licensed and state-
certified real estate appraiser[s] . . . comply with [the]
appraisal practice standards known as the 'Uniform Standards of
Professional Appraisal Practice. . . .'”
In the instant case, paragraph 21(b) of the agreement equates
“[t]he purchase price of DBP's interest . . . [to DBP's] capital
account balance, adjusted for the gross fair market value of
Company assets in accordance with the provision of paragraph 3(e).
. . .” Paragraph 3(e) provides that the “three [duly appointed]
appraisers separately shall appraise the gross fair market value of
[the company's] real estate.” The agreement contains no limitation
on or departure from the commonly accepted definition of “gross
fair market value.” Thus, the property's worth on the open market
must be appraised “not merely with reference to [its present use as
a cattle farm], but with reference to . . . its availability for
valuable uses[,]'” Barnes, 250 N.C. at 387, 109 S.E.2d at 227,
necessarily encompassing consideration of its “highest and best
uses.”
Nonetheless, JPG argues the “gross fair market value” of the
property should reflect its use as a cattle farm based upon the
agreement's definition of a “qualified appraiser” and the intention
of the parties, looking at the agreement as a whole. We disagree.
First, the agreement's definition of a “qualified appraiser” limits
the parties' choice of appraisers to those with the required
experience for each type of company asset but does not limit themethod used or valuation reached by such appraisers. Second, as
discussed above, nothing in the agreement limits the explicit term
“gross fair market value,” and this Court may not insert such a
limitation “under the guise of [contract] construction.” Corbin,
23 N.C. App. at 25, 208 S.E.2d at 254. Moreover, to the extent
JPG's argument has merit, it would merely create an ambiguity,
which must be construed against JPG as drafter of the contractual
language giving rise to the ambiguity. Reichhold Chems., Inc. v.
Goel, 146 N.C. App. 137, 153, 555 S.E.2d 281, 291 (2001).
Reversed.
Judges WYNN and STEELMAN concur.
Report per Rule 30(e).
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