Yates v. Bridge Trading Co.

In 1974, James Yates (plaintiff) and others (the other founders) (defendants) founded Bridge Holding Company (Holding), a Missouri corporation. Holding owned two closely related subsidiary corporations, Bridge Trading Company (Old Trading) (defendant) and Bridge Data Company (Data), which were both organized under Delaware law and had their principal places of business in Missouri. Additionally, most of Old Trading’s shareholders lived in Missouri. In 1977, Holding sold all its stock in Old Trading to a brokerage firm, though Old Trading remained closely affiliated with Holding and Data. In 1983, Yates entered into a stock-purchase agreement in which Yates agreed to pay for shares of Old Trading with a promissory note. The stock-purchase agreement also contained a choice-of-law clause specifying Missouri law to govern the agreement. In June 1987, Old Trading had begun the process of dissolution. Yates had not yet made any payments on the promissory note. Thereafter, Yates attempted to sell the shares that he agreed to purchase to an outside company but could not do so because the other founders refused to release the stock certificate. Moreover, Old Trading refused to accept Yates’s check for the balance of the promissory note and refused to deliver the shares. Accordingly, Yates sued Old Trading to obtain the disputed shares. The trial court applied a Missouri law that voided the stock-purchase agreement because the consideration exchanged for the stock was a promissory note. However, under Delaware law, the promissory note exchanged as consideration would have rendered the contract merely voidable rather than void. Yates appealed and argued that the internal-affairs doctrine mandated the application of Delaware law.