Rainwater v. Milfeld

M & D Enterprises, Inc. (M & D) was formed and initially owned by Laurella and Dana Milfeld (defendants) and the Dodsons. The Dodsons, with the consent of the Milfelds, sold their 50 percent of stock to a father and son, with R. S. Rainwater (plaintiff) holding 5 percent and his son, William Rainwater, holding 45 percent. M & D struggled financially. The Milfelds and the Rainwaters had a contentious relationship. The M & D bylaws required that the shareholders of M & D could not sell shares of the company before offering the shares for sale in writing to the corporation and, if declined by the corporation, to other shareholders. In 1970, the Milfelds notified the Rainwaters in writing of their intention to sell and, consistent with the corporate bylaws, offered their shares for purchase to the company and the Rainwaters with the same terms agreed to by the third-party purchaser. The corporation and William declined to purchase the Milfelds’ shares. R. S. agreed to purchase a fraction of the shares, insisting that the bylaws allowed him to purchase only a fraction of the shares held by the Milfelds. The Milfelds refused to sell only a portion of the shares to R. S., as the third-party purchaser was only interested in buying the Milfelds’ entire portfolio of M & D shares. R. S. filed suit, demanding specific performance to require the Milfelds to sell a portion of their shares to him. R. S. argued that when stock was offered for purchase, every stockholder had the absolute right to purchase his proportionate share of available stock. The trial court determined that the Milfelds were not required to end their sale to a third party to sell only a portion of their shares to R. S., and R. S. appealed.