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.