Goldblum v. Boyd
| Decision Date | 06 December 1976 |
| Docket Number | No. 13040,13040 |
| Citation | 341 So.2d 436 |
| Parties | Blue Sky L. Rep. P 71,347 Belle Virginia GOLDBLUM, Testamentary Executrix of the Succession of George J. Woolhandler, Plaintiff-Appellee, v. C. Elmo BOYD et al., Defendants-Appellees, and Doctors' Hospital, Inc., Defendant-Appellant. |
| Court | Court of Appeal of Louisiana — District of US |
Appeal from First Judicial District Court, Parish of Caddo, Louisiana; Hon. William J. Fleniken, Judge.
Wiener, Weiss & Madison by Jacques L. Wiener, Shreveport, for defendant-appellant.
Simon Herold, Shreveport, Alston, Miller & Gaines by Robert W. Miller, Jonathan W. Lowe, John K. Train, III, Atlanta, Ga., Law Offices of James A. Van Hook by James A. Van Hook, J. Patrick Hennessy, Shreveport, for plaintiff-appellee.
Blanchard, Walker, O'Quin & Roberts by Robert Roberts, Jr., John T . Cox, Shreveport, for defendants-appellees.
Before PRICE, HALL and MARVIN, JJ.
This suit arises out of a struggle between two opposing groups of shareholders for the control and operation of Doctors Hospital in Shreveport. Majority control of Doctors Hospital, Inc. hinges upon 946 shares (less than four percent of 25,880 outstanding shares) originally held by Dr. George J. Woolhandler, whose testamentary executrix (Belle Virginia Goldblum) is plaintiff-appellant.
To preserve their control against dissident shareholders who had united behind Charter Medical Corporation (Charter) and caused the stock struggle, defendant Dr. C. E. Boyd, Dr. Woolhandler, and others, who enjoyed the management of the corporation, marshalled forces in early March, 1971, and entered into three agreements. Dr. Woolhandler died about seven months after the first of these agreements was executed. After some fruitless negotiations with Dr. Boyd, Dr. Woolhandler's testamentary executrix aligned with the dissident shareholders behind Charter and brought this suit to 'free' the Woolhandler stock from the effect of the three agreements . 1
The validity of these agreements--a 'voting trust,' a proxy and option to purchase, and a 'shareholder's agreement' restricting transfer of shares--raise several complex issues relating to state and federal law affecting corporate stock and 'securities.' 2 The lower court upheld the validity of each agreement. The reconventional demand for damages against Mrs. Goldblum was rejected. Both parties appeal. We affirm in part and reverse in part.
Defendant Dr. Boyd, with other doctors and individuals, incorporated Doctors Hospital in 1959. Dr. Boyd has served as its principal executive officer, Chairman of the Board, since incorporation. He is the chief of the hospital's medical staff. His son, Charles E. Boyd, is the hospital's administrator. Dr. Boyd maintains a private office in his medical clinic at 6815 Southern Avenue, approximately five miles from Doctors Hospital.
Dr. Woolhandler was the hospital radiologist whose only professional office was in the hospital. He was active in the management of the corporation as its Treasurer, as a member of the executive committee, and as vice-chairman of its Board of Directors for several years before the stock struggle arose.
In August, 1970, Doctors Hospital solicited Charter to negotiate with the corporation for the purpose of Charter's acquiring the hospital or the stock of the corporation 'in the neighborhood of $2,000 per share.' 3 Other hospital management companies similar to Charter were also solicited. After negotiations for this purpose proved fruitless, dissident shareholders, including medical doctors who were members of the Board of Directors and the Executive Committee, united behind Charter and Charter began to acquire shares or proxies and options to purchase shares from persons owning stock in Doctors Hospital.
On February 28, 1971, Dr. Boyd and the management of the corporation learned of Charter's efforts to acquire control of a majority of the shares. Dr. Boyd, Dr. Woolhandler, with three other doctors who were members of the executive committee of Doctors Hospital, met with other shareholders friendly to them (hereafter Boyd group) to devise and implement means to thwart the efforts of the dissident group.
The Boyd group adapted to their purposes the six-month option-proxy form which Charter was using in its efforts. The Boyd group also pooled or pledged to pool approximately $100,000 with which to acquire shares from shareholders uncommitted to either group. Dr. Woolhandler contributed to the pool of funds and received his ratable share of the stock so purchased.
Within a few days and by about March 2, 1971, the Boyd group had secured sufficient shares or associated a sufficient number of shareholders with their group to insure their majority control for approximately a six-month period. After this initial activity, the Boyd group sought legal counsel and means by which their majority control might extend for a longer time. 4 The result was the three agreements at issue. Dr. Boyd was the moving factor for the Boyd group, but Dr. Woolhandler, to a limited extent, solicited or participated in the solicitation of other shareholders to join the Boyd group by executing the agreements in question or by selling stock to the Boyd group.
After Dr. Woolhandler's death, Charter offered to purchase his shares from his executrix at $200 a share. She in turn, offered to sell the Woolhandler shares to Dr. Boyd or to his group. Dr. Boyd made counter offers to her for approximately $100 per share. When she and Dr. Boyd or his group reached an impasse in negotiations, she agreed to sell to Charter by a written agreement. She agreed to litigate the validity of the three agreements in question but at Charter's limited expense and at Charter's direction. Charter agreed to pay $200 per share for the Woolhandler stock when 'freed' from the three agreements in question. The four Woolhandler heirs also made the same agreement with Charter to sell Doctors Hospital stock they had inherited from their late mother and which they would inherit by bequest from their late father. 5
At this juncture, we recognize the dilemma of the executrix. She stands in the legal stead of the late Dr. Woolhandler while charged on the other hand, with the duty of a prudent administrator to obtain maximum value for the succession asset. The book value of the stock before the struggle came to light was approximately $70 per share. The average price paid by the Boyd group in early 1971 was approximately $93 per share. Average earnings per share of the Woolhandler stock for the five-year period before his death was $7.05. The Woolhandler stock earned only $1.00 per year in dividends . The Woolhandler shares were valued in his succession proceedings and federal estate tax return at $47.30 per share, depreciated because of earnings capitalization and because of the restrictions imposed thereon by the three agreements in litigation.
Two trusts with identical provisions were executed. The first, for a five- year term, was executed on dates beginning March 5, 1971. The second, for an eight-year term, was executed on dates beginning March 19, 1971. Trustees are four doctors, including Dr. Boyd and Dr . Woolhandler, and one attorney. The Trust is for the stated (and only) purpose '. . . of vesting in the . . . trustees all voting and other rights pertaining to (the) shares.'
Other shareholders of Doctors Hospital, Inc. may join the trust at any time with approval of two-thirds of the shareholders in the trust. The trust may be terminated before eight years by two-thirds of the shareholders in the trust. No compensation is provided for the trustees and all dividends received by the trustees are required to be transmitted to the trust certificate holders without any deduction.
About March 20, 1971, Dr. Woolhandler sold to Dr. Boyd an 'option' to purchase his shares '. . . and any other securities' in Doctors Hospital, Inc. Dr. Boyd purchased identical 'options' from other members of the Boyd group about this same time. Dr. Boyd gave a similar 'option' collectively to those of his group to purchase his stock.
The 'option,' for a period of 15 years, was given for a recited consideration of $25.00 which was shown to have been paid Dr. Woolhandler. The 'option' is more correctly a right of first refusal because its only provision is as follows:
(sic).
This agreement was executed on dates beginning June 9, 1971. It provides:
'I. The purpose of this AGREEMENT is to perpetuate control of the corporation in SHAREHOLDERS and each SHAREHOLDER joins herein in consideration of the joinder of the remaining SHAREHOLDERS . . .
HOSPITAL, INC., and all stock owned by each has been placed in the name of the Voting Trustees, who have issued voting trust certificates therefor. The Voting Trust is hereby affirmed and this AGREEMENT shall apply both to SHAREHOLDERS' stock and to their interest in the Voting Trust.
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... ... 3d Cir.1979), writ granted, 376 So.2d 1270 (La.1979), writs dismissed, 377 So.2d 1033 (La.1979); Goldblum v. Boyd, 341 So.2d 436 (La.App. 2nd Cir.1976). Although the antifraud provisions of Louisiana's securities laws and the federal regulatory scheme ... ...
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Louisiana
...not to do business with its competition does not violate § 51:123. Deon v. Kirby Lumber Co., 111 So. 55 (La. 1926). 81. Goldblum v. Boyd, 341 So. 2d 436 (La. Ct. App. 1976). 82. The acquisition is prohibited where the effect (1) may be to substantially lessen competition between the corpora......
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Louisiana. Practice Text
...not to do business with its competition does not violate § 51:123. Deon v. Kirby Lumber Co., 111 So. 55 (La. 1926). 84. Goldblum v. Boyd, 341 So. 2d 436, 448 (La. Ct. App. 1976). 85. The acquisition is prohibited where the effect (1) “may be to substantially lessen competition between” the ......