ILNews

COA split on whether company can repurchase stock

Back to TopE-mailPrintBookmark and Share

A panel of Indiana Court of Appeals judges disagreed as to whether a company's attempt to exercise its option to repurchase stock had occurred in a timely manner under a shareholders' agreement.

The majority in Gatlin Plumbing & Heating Inc. v. Estate of Robert Yeager, No. 45A03-0907-CV-318, affirmed the denial of Gatlin's objection to the trial court order that directed the transfer of 63 shares of the company's capital stock held by the late Robert Yeager to his wife.

Under the shareholders' agreement for the company, Gatlin would have the option within 60 days after the death of a shareholder who isn't a decedent of Gatlin's owners or within 30 days after the appointment and qualification of an executor or administrator of the estate to purchase any or all of the stock. Robert died in October 2006; in June 2008, his widow, Musetta, filed an affidavit of entitlement saying Robert died testate but the will wasn't probated as the estate wasn't valued at more than $50,000, so the administration of the estate didn't occur. She also alleged the stock to be valued at $63,000. Musetta sought the transfer of the shares of stock to herself as trustee of two trusts. The trial court ordered the stock transferred to her.

Gatlin objected, arguing it should have had first opportunity to purchase the stock based on the shareholders' agreement. The trial court ruled against Gatlin, finding the company failed to exercise its legal rights in a timely manner.

Judges Carr Darden and James Kirsch found the shareholders' agreement didn't permit two separate opportunities for Gatlin to exercise its option to buy back its stock. They rejected the company's argument that the agreement let it exercise its second option to purchase stock after the trial court's issuance of the June 2008 order.

The majority also disagreed with Gatlin's argument that the trial court erred when it denied its objection to the order of transfer because averments within the estate's affidavit of entitlement as to the minimal value of the estate weren't supported by the evidence. When Gatlin filed its objection, it expressly asserted the amount of the estate's assets was under $50,000, wrote Judge Darden.

In addition, the company knew of Robert's death within days of it, its shareholders told Musetta in 2007 that it wouldn't buy the stock, and by the time the affidavits were filed in the estate in June 2008, the company hadn't taken any action to open an estate for purposes of asserting an interest in the stock, wrote the judge.

Judge Melissa May dissented, finding the majority's ruling would permit heirs to defeat the shareholders' agreement by delaying the opening of the estate for 60 days or more. Musetta's delay and apparent misrepresentation of the value of the estate shouldn't permit her to avoid the shareholders' agreement's provisions that say when Gatlin can purchase Robert's stock, she wrote.

Judge May would hold the company's 30-day period to exercise its option hadn't run because there hasn't yet been an appointment and qualification of an executor or administrator of the estate.

ADVERTISEMENT

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

ADVERTISEMENT