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F.B.I. Farms, Inc. v. Moore
Indiana Supreme Court
798 N.E.2d 440 (2003)
F.B.I Farms, Inc. (F.B.I.) (defendant) is a close corporation formed and initially wholly owned by Ivan and Thelma Burger, their children Linda and Freddy, and the children’s spouses. In 1977, F.B.I.’s board, which included Linda’s husband Birchell Moore (plaintiff), adopted several stock transfer restrictions. They prohibited any stock transfers without board approval, and granted right of first refusal for any stock purchases first to the corporation, then to any shareholders, and finally to any blood member of the family. Linda and Moore divorced in 1982. As part of the settlement, Linda acquired all of Moore’s F.B.I. shares, and Moore acquired a monetary judgment of over $150,000 secured by a lien on Linda’s stock. Moore’s judgment remained unsatisfied in 1998. He successfully executed on the lien and brought the stock to sheriff’s sale, where he purchased it. F.B.I. attempted to cancel Moore’s stock arguing that the restrictions were violated. Moore then filed suit against F.B.I., seeking a declaratory judgment that the attempted cancelation was invalid, and that Moore owned the shares rightfully and free of the transfer restrictions. The trial court granted partial summary judgment in favor of Moore, agreeing that Moore was the rightful owner and finding that the restrictions requiring director approval and granting first refusal to blood family members were unreasonable and unenforceable. The appellate court affirmed, partially on the grounds that transfer restrictions do not apply to involuntary transfers such as a sheriff’s sale.
Rule of Law
Holding and Reasoning (Boehm, J.)
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