- 60 -
increase specified in the $1 million note to the 10-percent
contract rate of the $450,000 note.3 Why the default provisions
negotiated with a different debtor nearly 4 years earlier
accurately reflect the inherent risk in the Marsh note as of
decedent’s date of death is not elucidated. We are afforded no
information on relative conditions and circumstances that would
facilitate a useful comparison. It is for these reasons that we
were unable to give Mr. Cronkite’s income approach any
significant weight in our analysis. In addition, we observe that
Mr. Cronkite testified at trial to having relied primarily on the
market approach in his valuation.
As regards Mr. Cronkite’s market approach, our concerns in
many respects parallel those highlighted above in connection with
the income approach. Again, the report is cursory, conclusory,
and reveals little underlying reasoning that would enable us to
evaluate the result reached. The report sets forth value
estimates made by Mr. Marsh and characterizes Mr. Marsh as “a
secondary loans expert”. Mr. Cronkite explained at trial only
that Mr. Marsh “represented to me that he was an expert in the
secondary loan market.” When questioned regarding Mr. Marsh’s
3 Although the estate on brief refers to 15 percent as “the
default rate under the Marsh Note” and respondent similarly
characterizes 15 percent as “the default rate on the note”, the
copy of the Marsh note itself in the record does not contain any
provisions regarding a default rate. Rather, the $1 million
note, which bears a contract rate of 11.25 percent, specifies a
default rate of the contract rate plus 5 percent.
Page: Previous 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 NextLast modified: May 25, 2011