Opinion ID: 1322005
Heading Depth: 1
Heading Rank: 5

Heading: business corporation act

Text: Furthermore, plaintiff contends that the majority incorrectly concluded that the Business Corporation Act defeats his claim. We agree with plaintiff. The Court of Appeals determined that the agreement between plaintiff and defendant was essentially a stock subscription pursuant to G.S. 55-43. Since G.S. 55-43(b) requires such agreements to be in writing, that court concluded that this agreement was unenforceable. We do not agree with the court below that G.S. 55-43 is applicable to the present case. A stock subscription is defined in relevant part in G.S. 55-43(a) as follows: A preincorporation subscription is a promise or contract to take shares in a corporation to be organized and to pay the agreed price thereof to the corporation or to others for its benefit.... (emphasis added.) This is not an action in which defendant is trying to enforce plaintiff's promise to take shares. Rather, we view plaintiff's present action as an attempt to enforce defendant's promise or contract to issue shares to plaintiff, the number of shares to represent a certain percentage of ownership within a corporation to be formed. This seems evident from plaintiff's testimony on direct: Q. What did she say to you, Mr. Penley, about the ownership of the stock in that corporation? A. Well, she agreed that we would split it fifty-fifty. Q. Did you discuss it again with her after that? A. We talked about it before we went to the attorney's office, and she wanted to give her son a few shares, and I told her it didn't make any difference to me. Q. How did she want it divided at that time? A. She wanted itwe were talking in terms of fifty shares andwhich would've been twenty-four for her, twenty-four for me, and two for her son. .... Q. Did Mrs. Penley make any statement to him, to the attorney, in your presence, about what she wanted done with the stock? A. I can't remember what was said. Defendant-wife testified on direct as follows: Q. What, if any, interest was your husband getting out of the corporation? .... A. Forty-eight percent. Q. And how much percentage were you getting? A. Forty-eight percent. Q. And were you giving any to anybody else? A. The son three, or four.... This testimony also indicates that plaintiff was endeavoring to enforce defendant's agreement to have issued to him a number of shares representing his ownership interest in the corporation to be formed. Therefore, we reject the reasoning, analysis, and ultimate conclusion reached by the Court of Appeals on this particular issue. The majority in the Court of Appeals also considered the oral agreement between the parties to be a shareholder's agreement, unenforceable because not in writing as required by G.S. 55-73(b). Pigeonholing plaintiff's theory of recovery in such a narrow and inflexible fashion is incorrect in these circumstances. G.S. 55-73(b) provides, inter alia, that [N]o written agreement to which all of the shareholders have actually assented... which relates to any phase of the affairs of the corporation, ... shall be invalid ... on the ground that it is an attempt by the parties thereto to treat the corporation as if it were a partnership or to arrange their relationships in a manner that would be appropriate only between partners. Subsection (b), like the other two subsections of G.S. 55-73, simply abrogates, as to agreements within its purview, certain judicial doctrines which had formerly invalidated particular shareholders' agreements on those grounds which this section now disallows. Blount v. Taft, 295 N.C. 472, 246 S.E.2d 763 (1978). While G.S. 55-73 has been referred to as the heart of the North Carolina Business Corporation Act with respect to close corporations, see Latty, Close Corporations and the New North Carolina Business Corporation Act, 34 N.C.L.Rev. 432, at 438-440 (1956), we do not view this statute as plaintiff's exclusive legal remedy. Plaintiff has properly chosen an alternate legal theory, premised primarily on defendant's oral agreement to convey an interest in the corporationa question of simple contract law. Accordingly, we do not view the parties' agreement as an unenforceable shareholders' agreement.