Merchants & Planters Bank v. Spears

Citations: 219 Ark. 492; 243 S.W.2d 751; 1951 Ark. LEXIS 551Docket: 4-9693

Court: Supreme Court of Arkansas; November 5, 1951; Arkansas; State Supreme Court

Lead Opinion SummaryLead Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

A legal dispute arose between two factions at the Merchants Planters Bank of West Memphis, with the appellants representing the majority of the Bank's directors and the appellees constituting the minority faction. The appellees sought recognition as stockholders after the appellants refused to transfer shares following a voting trust agreement established by the majority faction in 1949. This agreement, involving 285 shares, mandated that stock be voted as a unit and restricted sales to non-parties. The remaining 215 shares were held by Jack Rich and B. G. Dickey. After learning of the agreement, Rich resigned from the Board and sold five shares each to four appellees for $1,250 per share, despite the book value being significantly higher. Rich instructed the Bank to reissue a specific stock certificate for these shares, but the appellants refused. Furthermore, at a directors' meeting, the majority faction changed the stockholder meeting schedule and adopted a resolution restricting director eligibility based on affiliations with competing banks. The appellees subsequently filed suit, demanding the transfer of shares and acknowledgment as shareholders.

On January 25, 1951, appellees amended their complaint, claiming that during the annual stockholders' meeting on January 3, 1951, the appellants, as the majority faction, wrongfully denied their admission as stockholders and failed to count votes for directors, despite the appellees receiving more votes than some elected by the appellants. The appellees sought to have their five shares of stock issued, to declare the January 3 meeting void, and to call a new meeting. The Chancery Court ruled in favor of the appellees, stating that the appellants did not provide sufficient justification for their refusal to recognize the stock transfer. The court acknowledged the integrity of the transferees, noting the appellants' concerns were based on the transferees being seen as representatives of a supposedly hostile stockholder. The court ordered the cancellation and reissuance of Stock Certificate Number 32 to the appellees and mandated a stockholders' meeting for a legitimate director election. The appellants appealed, contending that the stock certificate was never legally delivered, that the appellees were not genuine stockholders but merely representatives of Rich, and that the majority had the right to deny the appellees' directorship based on Resolution No. 4. The appellants argued that the situation was exceptional and warranted their protective actions against Rich, who was acquiring stock with potential harmful intent towards the Bank. The court emphasized its focus on the legal rights of the parties rather than personal grievances, suggesting a need for resolution for the Bank's benefit.

The Chancery decree is affirmed unanimously. The directors were authorized to change the annual stockholders' meeting date from January 9 to January 3, 1951. It is assumed, though not decided, that the directors could legally close stock books against transfers for up to 40 days prior to the meeting, but such actions must be executed in good faith and not undermine the rights of the appellees established before the December 12, 1950 meeting. The appellants' refusal to transfer stock to the appellees and their actions to alter the meeting date were determined to be efforts to prevent Rich’s associates from participating in the Bank's management. The appellants lacked valid grounds for denying the stock transfer and recognizing the appellees as shareholders. The stock should have been transferred per Rich’s November 27 letter, and the appellees should have their votes counted at the upcoming annual meeting. The Chancery Court originally ordered a special stockholders' meeting in October 1951 to elect directors; however, this is deemed unnecessary given the imminent January 1952 meeting. Thus, the provision for a special meeting is removed from the decree, which is otherwise fully affirmed. Additionally, the State Bank Commissioner indicated approval for the stock transfer to the appellees. The term "compose" is defined as to calm or settle.