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Ramos v. Estrada - 8 Cal. App. 4th 1070

Rule:

It is not in violation of any rule or principle of law for stockholders, who own a majority of the stock in a corporation, to cause its affairs to be managed in such way as they may think best calculated to further the ends of the corporation, and, for this purpose, to appoint one or more proxies who shall vote in such a way as will carry out their plan. Nor is it against public policy for two or more stockholders to agree upon the officers whom they will elect, and they may do this either by themselves, or through their proxies.

Facts:

In 1986, Broadcast Corp. merged with a competing applicant group, Ventura 41 Television Associates (Ventura 41), to form Costa del Oro Television, Inc. (Television). The merger agreement authorized the issuance of 10,002 shares of Television voting stock. Members of Broadcast Group subscribed for shares of Television in their respective proportion of ownership pursuant to written subscription agreements attached to the Master Shareholder Agreement. Under the June Broadcast Agreement and the Merger Agreement, each of the groups were required to vote for the directors upon whom a majority of each respective group had agreed. The terms of that agreement expressly state that failure to adhere to the agreement constitutes an election by the shareholder to sell his or her shares pursuant to buy/sell provisions of the agreement. The agreement also calls for specific enforcement of such buy/sell provisions. On October 15, 1988, the Broadcast Group noticed another meeting to decide how its members would vote their shares for directors at the annual meeting. All members attended except defendant Estradas. The group agreed to nominate another slate of directors which did not include either of the Estradas. The Estradas were notified of the results of this meeting. The Estradas unilaterally declared the June Broadcast Agreement null and void. Plaintiffs, the Ramoses and other shareholders, sued defendant Estradas for breach of the June Broadcast Agreement. The superior court ruled that the Estradas materially breached the valid June Broadcast Agreement, and it ordered their shares sold in accordance with the specific enforcement provisions of the June Broadcast Agreement. It further restrained the Estradas from voting their shares other than as provided in the June Broadcast Agreement. The Estradas appealed.

Issue:

Was the June Broadcast Agreement void because it constituted an expired proxy which the Estradas revoked?

Answer:

No

Conclusion:

On appeal, the court affirmed, finding that the corporate shareholders' voting agreement was valid even though the corporation was not technically a close corporation. The court further found that the agreement, including its buy/sell provisions, was unanimously executed after defendants had a full and fair opportunity to consider it in its entirety. Finally, the court found that defendants violated the agreement voluntarily, aware of the consequences of their acts, and that they were provided full compensation, per the agreement.

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