Case Name: Frances Radosta De FELICE, wife of and Stephen J. De Felice v. Herbert J. GARON and Rufus M. Carimi
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1980-10-10
Citations: 395 So. 2d 658
Docket Number: No. 66993
Parties: Frances Radosta De FELICE, wife of and Stephen J. De Felice v. Herbert J. GARON and Rufus M. Carimi.
Judges: WATSON, J., dissents and assigns reasons.
Reporter: Southern Reporter, Second Series
Volume: 395
Pages: 658–664

Head Matter:
Frances Radosta De FELICE, wife of and Stephen J. De Felice v. Herbert J. GARON and Rufus M. Carimi.
No. 66993.
Supreme Court of Louisiana.
Oct. 10, 1980.
On Rehearing March 2, 1981.
Victoria L. Bartels, William F. Wessel, New Orleans, for plaintiff-applicant.
Milton E. Brener, Garon, Brener & McNeely, New Orleans, for defendants-respondents.
William F. Wessel Professional Law Corp., New Orleans, for plaintiff-applicant on rehearing only.
Mack E. Barham, Barham & Churchill, New Orleans, A. N. Yiannopoulos, Saul V. Litvinoff, Louisiana State University, Baton Rouge, of counsel, for defendant-respondent on rehearing only.

Opinion:
PER CURIAM.
In an excellent and well reasoned opinion, the Court of Appeal reversed the trial court judgment (upon motion for summary judgment) which had invalidated an agreement by which two of the five respondents, Gar-on and Carimi, had secured the right to control the management of the corporation, Pascal's Manale, Inc.
That agreement (essentially contained in two contracts, a "Joint Venture Agreement", and a "Voting Trust Agreement"), was entered into coincident with respondents' assisting relator in borrowing $600,-000.00 by personally guaranteeing her loan and posting security valued in excess of $200,000.00.
The pertinent facts surrounding the agreement and its contractual provisions, as well as the Court of Appeal's legal reasons, are set out in the Court of Appeal opinion which is reported at 380 So.2d 676. A portion of that opinion, principally that which recites the facts, is contained in an appendix to this opinion.
Essentially the Court of Appeal made the following determinations: that the contract did not contain an invalidating potestative condition; that although the provisions of R.S. 12:78, requiring two or more shareholders for the creation of a voting trust, did render the "Voting Trust Agreement" here invalid as a voting trust, it was of no particular moment in the context of the overall circumstances; that the contract, in which substance rather than title determines its nature, was such as to constitute defendants pledgees rather then trustees; that respondents were pledgees upon whom the owner of the stock had expressly conferred by contract the right to vote the shares, with the implicit right in the pledgee to obtain a transfer of the shares upon the books of the corporation, a transfer contemplated and statutorily authorized by R.S. 12:75(D); that such contract was not invalid as a contract which separates voting rights from ownership interests, but valid as a contract authorized by R.S. 12:75(D); and that the pledgee may enforce the contract by having the shares of stock transferred into his name on the books of the corporation during the existence of the pledge.
We now conclude that the judgment and reasons of the Court of Appeal are correct, and the writ improvidently granted by this Court.
Decree
Accordingly, the judgment of the Court of Appeal is affirmed and the case remanded to the district court for further proceedings.
AFFIRMED; REMANDED TO THE DISTRICT COURT.
WATSON, J., dissents and assigns reasons.
DENNIS, J., dissents with reasons.
APPENDIX
"Prior to the execution of the contract at issue, plaintiff was the owner of 50% of the shares of stock in Pascal-Manale, Inc., and defendants Garon and Carimi were the attorney and accountant respectively for the corporation. Plaintiff had contracted to purchase the other 50% of the stock from her sister for the price of $450,000.00, but had difficulty obtaining financing. Through defendants' efforts a bank agreed to lend plaintiff $600,000.00 (which included the pay-out of an existing $150,000.00 loan), but required the pledge of the corporate stock and mortgages of other property owned by plaintiff, as well as personal guaranties by defendants and three other persons (in-tervenors in this suit) and additional security valued in excess of $200,000.00 to be furnished by defendants and interve-nors.
"As part of the agreement to guarantee the loan and furnish the necessary security defendants and intervenors required plaintiff to execute two contracts. In the first contract, entitled Joint Venture Agreement, the parties stated that it was in their best interest for the corporation to be managed and directed under a definite and fixed policy in order to properly develop the corporation's business opportunities and to repay the loan, and they agreed that defendants and interve-nors would guarantee the loan and provide the additional security and that plaintiff would pay them $2,000.00 per month during the term of the loan (or a minimum of $120,000.00). Plaintiff further agreed that, in the event of her default on the note, she would assign all of her interest in the corporation to defendants and intervenors upon their demand, subject to plaintiff's right to reacquire the stock within 60 days by paying all sums expended to remedy the default.
"In the second contract, entitled Voting Trust Agreement, plaintiff, as sole shareholder, and defendants, as trustees, reasserted that it was in plaintiff's best interest for the corporation to be managed and directed during the next ten years under a definite and fixed policy, and for this purpose plaintiff 'requested' defendants to hold legal title to the stock in trust for ten years under the contract terms. Defendants were further given the unqualified right to vote the stock as shareholders, free from any interference by plaintiff, but without liability as shareholders, and were also given the following powers:
'a) The right to vote for election of directors and in favor of or in opposition to any resolution or proposed action of any character whatsoever which may be presented in any meeting requiring the consent of shareholders of the corporation;
'b) The right to set salaries, bonuses, and other compensation for all employees, agents, officers, and directors of the corporation;
'c) The right to declare all dividends;
'd) The right to hire and fire all per-' sonnel employed by the corporation;
'e) The right to approve of any and all remodeling, alterations and repairs of any property owned or leased by the corporation;
'f) The right to authorize and approve all capital expenditures for any purpose whatsoever; and
'g) The right to dispose of the collateral securing the debt of shareholder in any manner deemed appropriate by the trustees and to pledge the stock to secure any corporate loan.'
The contract specified a term of ten years, but reserved to the trustees the right to terminate the agreement sooner by unanimous vote."
The Honorable Gerald P. Fedoroff participated in this decision as an Associate Justice Ad Hoc in place of Associate Justice Harry T. Lemmon, who was recused.