Toms v. Cooperative Management Corporation
Louisiana Court of Appeals
741 So. 2d 164 (1999)
In 1988, Cooperative Management Corporation (CMC) (defendant) redeemed 150 shares of stock owned by Janet Evans Toms (Toms) (plaintiff) for $22,500. The shares were removed from CMC’s accounting, the total of outstanding shares was reduced by 150, and the stated capital was reduced. In 1997, Toms sued to rescind the redemption on the grounds that the stock was redeemed for less than fair market value. CMC’s Articles of Incorporation required approval by 85 percent of shareholders before the CMC’s stated capital could be increased or reduced. In 1997, a majority less than 85 percent of CMC’s shareholders voted to issue 150 shares of stock to Toms for $22,500 in order to settle the suit. CMC’s Board voted over objections that any consideration paid would be deemed capital surplus instead of stated capital. CMC’s minority shareholders intervened to stop the sale on the grounds that the sale would increase CMC’s stated capital and there had been no 85 percent majority vote approving the increase. The trial court granted a writ of mandamus to stop CMC from issuing the stock to Toms. Toms appealed to the Louisiana Court of Appeals.
Rule of Law
Holding and Reasoning (Peatross, J.)