Opinion ID: 197195
Heading Depth: 2
Heading Rank: 2

Heading: The Reduction of the Ansin Interest to 4,000 Shares

Text: 11 Harold Ansin did not sell any of the River Oaks shares until 1992. Nonetheless, at some point in 1989, the Ansin ownership interest was reduced from 7,500 to 4,000 shares, or from 10% to 4% of the company. 2 The company issued 25,000 new shares in 1989, but that legitimate dilution would only have reduced the Ansin stake to 7.5%. 12 Following Harold Ansin's purchase of his son's shares, River Oaks did not issue a new stock certificate in Harold Ansin's name. Harold Ansin was upset about this and kept asking Larry to do something about it. Larry Ansin wrote to Simons twice in 1989 requesting a new share certificate for Harold. Eventually, a certificate was issued on September 22, 1989 which indicated that, as of January 1, 1988, Harold Ansin owned 4,000 shares of River Oaks. 13 The Stock Transfer Ledger of River Oaks Furniture, which was not actually typed up (from Keenum's notes) until 1993, shows Lawrence Ansin as originally owning 7,500 shares. However, according to the Ledger, Ansin transferred only 4,000 shares to his father on January 1, 1988, and then transferred 1,000 shares to Simons and 2,500 shares to Donald Franks, another of the original River Oaks investors, on January 1, 1989. 14 Simons testified that these transfers of stock by Larry Ansin were part of a general reallocation of shares undertaken in early 1989. According to Simons, during a telephone conversation in February or March 1989, he told Larry Ansin that, in order to recruit talented new employees, the company wished to issue 25,000 new shares of stock. Simons further testified that Larry Ansin then orally agreed to reduce his ownership interest to 4%. However, Simons acknowledged that there is no record of this conversation nor any contemporaneous records or correspondence memorializing the transfers to Simons and Franks. Simons also testified that he and Ansin only discussed percentages of ownership, as opposed to numbers of shares, and that Ansin did not receive any money for the transfers. Simons did not speak to Harold Ansin about the transfers. 15 Thomas Keenum, who, as company secretary, was responsible for maintaining the Stock Transfer Ledger, testified that no document, other than his personal notes, records these stock transactions, and that only Simons, and not the Ansins, ever communicated with him about the decrease in the Ansin ownership interest. Although other capital transactions are recorded in the minutes of the Board of Directors, the Ansin transfers were not, nor to Keenum's knowledge, were there any signed agreements, letters, or memoranda noting these transfers. 16 The foundation documents of River Oaks included Articles of Incorporation, By-Laws, and a Subscription Agreement among the stockholders. These documents regulated, among other things, the transfer of shares in the company. Paragraph 12 of the Articles of Incorporation provided that: 17 before a transfer [of stock] may be made, [the] owner or holder shall notify the secretary/treasurer of this corporation in writing of the number of shares to be transferred, the certificate involved [and other pertinent information]. 18 The Subscription Agreement, which was binding upon and shall inure to the benefit of each individual Stockholder and his respective heirs, executors, administrators, assigns and legal representatives, recited that [e]ach Stockholder agrees that all shares of Stock of the Company ... shall be subject to the terms and conditions of Paragraph Number 12 of the Articles of Incorporation. The By-Laws, which charged the secretary with maintaining the stock transfer books of the corporation, stated that: 19 Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative.... 20 At trial, the plaintiffs argued that these documents constituted an enforceable contract, and that defendants' unauthorized transfer of 3,500 River Oaks shares to Simons and Franks amounted to a breach of that contract. 21