Court Opinion

ID: 9576246
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:22:10.225712+00
Date Added: 2024-06-11T13:03:26.729401
License: Public Domain

GARTZKE, P.J.
(dissenting). Restrictions on a stockholder's right to dispose of shares are generally strictly construed. See Rench v. Leihser, 487 N.E.2d 1201, 1203 (Ill. App. 1986); Louisiana Weekly Publishing Co. v. First Nat'l Bank of Commerce, 483 So. 2d 929, 932-33 (La. 1986); Durkee v. Durkee-Mower, Inc., 428 N.E.2d 139, 141 (Mass. 1981); Castonguay v. Castonguay, 306 N.W.2d 143, 145 (Minn. 1981); Rockowitz v. Roab, 132 A.D.2d 916, 918, 518 N.Y.S.2d 251, 253 (N.Y. App. 1987); Avrett & Ledbetter Roofing & Heating Co. v. Phillips, 354 S.E.2d 321, 323 (N.C. Appp. 1987); and Renberg v. Zarrow, 667 P.2d 465, 469-70 (Okla. 1983).1
This rule of construction is the result of "a presumption that shares, as a form of property, ought to be freely alienable." T. Andre, Restrictions on the Transfer of Shares: A Search for a Public Policy, 53 Tul. L. Rev. 776, 823 (1979). Imposition of restrictions on the transferability of stock complicates and increases the cost of *104such transfers. Frandsen v. Jensen-Sundquist Agency, Inc., 802 F.2d 941, 946 (7th Cir. 1986). The increased costs are not limited to those who draft or consent to such restrictions, but are borne in part by those who must ascertain the meaning and effect of the restriction, such as the court system and potential stock transferees. Id.
The stock alienation restriction agreement between the Sherman Plaza shareholders refers only to "sale." It should not be read to include merger. A transfer by merger is accomplished by operation of law. Schweiner v. Hartford Accident & Indemnity Co., 120 Wis. 2d 344, 349, 354 N.W.2d 767, 770 (Ct. App. 1984); sec. 180.62, Stats. "[Restrictive provisions must clearly indicate that the restraints apply (if they are intended to do so) to . . . transfers by operation of law . . .." F. O'Neal & R. Thompson, Close Corporations sec. 7.21, at 100 (3d ed. 1988) (footnotes omitted). This agreement makes no reference to merger or other transfer by operation of law.
A different understanding may have existed between the original shareholders, but the trial court displayed considerable skepticism that this could be true. The court noted that the record supports the inference that the plaintiffs' objection to Walgreen's acquisition "was an afterthought generated by the creation of new tax advantages for plaintiffs some years after the merger occurred." The court also noted that the plaintiffs recognized Walgreen as Rennebohm's successor at annual stockholder meetings, made no reference to the merger at their own shareholder meetings from 1980 through 1985, and voiced no objection to the merger until they learned of the change in tax law.
*105If the intent of the original shareholders was that the agreement cover mergers, the agreement does not express it. I therefore would affirm.

 But see Sorlie v. Ness, 323 N.W.2d 841, 845 (N.D. 1982) (strict construction should not be applied to defeat intent of restriction on transfer of "close corporation" stock).