Opinion ID: 31822
Heading Depth: 2
Heading Rank: 2

Heading: Enforceability of the Stock Transfer

Text: 3 Tucker further argues that the district court inappropriately relied on Begola Services, Inc. and Tecorp Ent’mt Ltd. v. Heartbreakers, Inc., No. 209861, 2001 WL 740007 (Mich. App. 2001) (unpublished opinion). We disagree. The district court properly cited to both cases for Michigan’s severability rules. 7 Tucker argues that the district court misapplied Mississippi law governing corporations when it determined that Tucker transferred his shares to Lepoutre in order to “be relieved of his shareholder obligations” and his “financial obligations under the parties’ shareholder agreement.” Tucker asserts that the rights of the part ies as shareholders are governed by Mississippi corporations law, under which a shareholder is not personally liable for the acts or debts of the corporation. MISS. CODE ANN. § 79-4-6.22. Tucker argues that he had no future financial obligations to National Textile arising from his ownership of the shares. Moreover, Tucker asserts that there was never a “shareholder agreement” requiring him to make equal financial contributions for his stock in the company. Rather, Tucker contends that he was asked only to provide customers and sales. Lepoutre, however, contends that Tucker’s duties arose from his personal agreement with Lepoutre to contribute to the business, made prior to the formation of National Textile. Lepoutre asserts that Tucker elected to transfer his shares to Lepoutre in order to get out of the business, when he decided that he could not or would not contribute as he had previously agreed. The district court found that in 1994, Lepoutre and Tucker agreed they would start a garment business together, but they “never executed a formal written contract setting forth their respective obligations vis-a-vis the business.” Instead, they operated under an unwritten “shareholder agreement.” Despite the district court’s use of the term “shareholder agreement” to describe the parties’ initial business agreement, it is apparent that the district court found that Tucker had obligations under an initial agreement between him and Lepoutre which existed before National Textile was incorporated. Indeed, the business began operations prior to its incorporation. Regarding the parties’ respective financial obligations, the district court credited the testimony of Lepoutre that “he and Tucker had started the business with the expectation they would be 50/50 8 ‘partners,’ meaning that each agreed to make equal financial contributions.” Thus, the district court concluded that the transfer agreement was enforceable because Tucker received relief from his financial obligations under this so-called “shareholder agreement.” After reviewing the record, we find no clear error in the district court’s factual findings, and we agree that the stock transfer is enforceable.4