Court Opinion

ID: 9648399
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:19:13.607605+00
Date Added: 2024-06-11T18:12:00.257569
License: Public Domain

Supplemental Opinion on Denial of Rehearing delivered March 5, 1975 1. Corporations — restrictions upon alienation of stock — statutory provisions. — In the statute providing for restrictions upon alienation of stock, restrictions are permitted that do not unreasonably restrain alienation, and the requirement of a fair price is merely an incident to the permissible restrictions. 2. Appeal & error — remand for further proof — review.—Remand for the taking of proof could not be granted in view of the Supreme Court’s policy against piece-meal trial of cases since appellant had developed the issue of the purpose of the restrictive agreement to the extent it thought best. Appeal from Washington Chancery Court; Thomas F. Butt, Chancellor; affirmed. Smith, Williams, Friday, Eldredge & Clark, by: Jerry T. Light and Lewis H. Mathis, for appellant. Niblock ér Hipp, for appellee. George Rose Smith, Justice, on rehearing. Systematics, in a petition for rehearing, argues that we based our opinion solely upon the unreasonableness of the contractual restraint on alienation. It is then contended that this involves a question of fact which was not really in issue between the parties. Upon that reasoning we are asked to remand the case for the taking of additional proof. We do not find this argument convincing. In its original brief Systematics elected to abstract hardly any of the testimony contained in the 548-page record and to argue almost as a matter of law that the contract price was fair even though it had no relation to market value. It is impossible, however, to consider the issue of fair price, which was argued, without also considering the matter of restraint upon alienation, because the two are so inseparably tied together in the statute as to constitute a single issue. Omitting irrelevant words, here is the language of the statute: “A corporation may provide, in respect to any of its shares which are to be issued, that the future transfer. . . of such shares shall be subject to restrictions (including purchase options) that do not unreasonably restrain alienation — which restrictions, among other things, may require a prior offering to the corporation. . . at a fair price.” Ark. Stat. Ann. § 64-211 (Repl. 1966). It is at once apparent that the matter of a fair price cannot be considered in a vacuum. What the statute actually does is to permit restrictions that do not unreasonably restrain alienation. The matter of a fair price is mentioned only in a subordinate clause explaining possible permissible restrictions. But the thrust of the statute is directed against unreasonable restraints on alienability, the requirement of a fair price being merely an incident to the dominant legislative intention. Systematics was put on notice from the outset that the statute was involved. Mitchell’s counterclaim contained this assertion: “That said first option agreement is void in that under Ark. Stat. Anno. Section 64-211, the prior offering to the corporation [or] a stockholder must be made 'at a fair price’ . . .” As we have indicated, the fairness of the price involves its effect upon alienability; the two cannot be separated. Consequently, the question of a restraint upon alienation was so inherently a part of the dispute from the very beginning that it would not have been possible for us to decide the controversy without taking it into account. In connection with the petition for rehearing we granted a motion to allow several attorneys to file a supporting brief as amici curiae. That brief raises two issues that are not really involved, but since the opinion might otherwise be misunderstood we think it best to touch upon those issues. First, counsel point out that Subsections A and B of the statute (§ 64-211) have to do with restraints that are contained either in the articles of incorporation or in the bylaws. It is then asserted that since the restraints in the case at bar were not so authorized, our decision threatens the validity and enforceability of many agreements made under Subsection C of the statute. It is enough to say that this argument is based upon counsel’s unfamiliarity with the record. At the beginning of the case Mitchell pleaded the statute and directed interrogatories to Systematics, asking whether provisions had been made in the articles of incorporation for the restrictions on the transfer of outstanding shares of stock. Systematics answered that the restrictions were contained in by-laws approved June 15, 1967. (Record, pp. 23-24.) Hence our opinion related only to Subsections A and B of the statute, with no reference to Subsection C. Secondly, the amici curiae brief echoes Systematics’ insistence that the factual issue of restraints upon alienability has not been fully developed. In that connection counsel say: “The Record is totally silent with respect to Appellant’s motive for this transaction. Depending upon Appellant’s motive, these restrictions could well be regarded as ‘reasonable’ under Ark. Stats. § 64-211C.” Apart from the fact that § 64-211C is not involved, this second argument also indicates counsel’s unfamiliarity with the record. Far from being “totally silent,” the record contains much proof about the background for the contract. The terms of the agreement itself pretty well explain its purpose. Mr. Gattis, one of Systematics’ executives, testified that the company used the contract as a “motivator” to show key employees “our intentions to make them a sincere part of our company.” Mr. Smiley, another witness for Systematics, gave similar testimony, stating that the plan allowed the company to compensate executives in a fair manner and that it was made available to “the fourteen key people.” Smiley also volunteered the information that the plan was no longer available, it having become illegal in July, 1970, under an IRS ruling with reference to capital gains. In its original brief Systematics elected not to abstract the foregoing testimony, but that omission obviously does not entitle it to argue that the issue was not developed. The opportunity to develop it not only was presented but also was availed of to the extent that Systematics thought best. Our policy against the piece-meal trial of cases rebuts the suggestion that another opportunity for the taking of proof should be afforded. The petition for rehearing is denied. Fogleman, J., dissents.