upholding validity of stock transfer restrictions among family members where there was no evidence of fraud or deceit when the agreement was created, and the agreement operated to the mutual benefit of all parties
How later courts described this case
- upholding validity of stock transfer restrictions among family members where there was no evidence of fraud or deceit when the agreement was created, and the agreement operated to the mutual benefit of all parties
- held: agreement which required shareholder to offer stock to remaining shareholders for $1 was valid even though the fair market value of the stock was $1,060
- interpretation of written stock option agreement
Written by the judges who cited it.
The opinion
Dissenting Opinion by
Me. Justice Cohen:
The majority here fails to recognize, and hence does not discuss, the manner in which this agreement differs from the usual first option agreement. Here, the agreement creates an absolute restraint against transfers and provides for a first refusal price which is unconscionably nominal in relation to the value of the shares at the time the arrangement was made. I would hold where an agreement entered into at a time when the actual value of the stock is $50 or more a share, which agreement prohibits the sale of shares by any party during his lifetime without first offering the same to the other shareholders at a price of $1 per share, that the imposition of this nominal and unvariable pre-emption price creates an unreasonable restraint upon the alienability of the shares and imposes an invalid restriction on their transfer. See Sparks, Future Interests, 32 N.Y.U. Law Rev. 1434 (1957); Baker and Cary, Cases and Materials on Corporations, 322-26 (3rd ed. 1958).
*373 The fact that the parties have entered into the agreement of their own free will cannot validate provisions which are void as against public policy; nor does the fact that there was no overreaching or that Gilbert Mather himself bought shares at $1 per share from Victor Mather’s executors legalize an unreasonable restraint on alienation.
I dissent.