Miller v. Magline, Inc.

Michigan Court of Appeals · 1981 · Corporations

306 N.W.2d 533 (1981)

Updated August 22, 2026

Corporationsdissenter's rightscorporate term extensionreserved powershareholder oppressionminority shareholdersappraisal rightsredemption

Facts

Magline was incorporated in 1947 for a 30-year term, which was then the maximum duration allowed by Michigan law, and extending that term originally required approval by two-thirds of the outstanding shares. After constitutional limits on corporate duration were removed and the Michigan Business Corporation Act allowed duration changes by a simple majority vote, Magline's shareholders in 1975 approved an amendment extending the corporation's life perpetually by majority vote. Plaintiffs owned about 41% of the shares and voted against the amendment. They claimed dissenter's rights under MCL 450.1621 and also sought relief for unfair and oppressive conduct under MCL 450.1825.

Issue

Did a majority-approved amendment extending the corporation's term from 30 years to perpetual materially alter a redemption right or other qualifying right so as to give dissenting minority shareholders dissenter's rights under MCL 450.1621? Also, did the statutory change from a two-thirds vote requirement to a simple majority for extending corporate duration unconstitutionally impair plaintiffs' vested contractual rights?

Rule

Under MCL 450.1621, dissenter's rights are available only in the specific situations identified by statute, including amendments that materially alter a preferential right or create, alter, or abolish a material provision or right respecting redemption of shares. A shareholder's general expectation of a pro rata distribution of assets upon dissolution is not a redemption right, and absent a specific statutory grant, dissenting shareholders have no appraisal right for an extension of corporate existence. Under Michigan's reserved power clause, the Legislature may alter corporate rights and privileges, so long as it does not impair vested property rights or contractual obligations of third parties; a shareholder's prior ability to block extension of corporate life is not a vested contractual right.

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Lakeview Toolworks, a Michigan corporation based in Grand Rapids, was formed in 1950 with a 40-year stated duration. In 1985, after Michigan law had been amended to allow duration changes by majority vote, 58% of the shareholders approved an amendment making the corporation perpetual. Nina Patel, who owns 42% of the shares, voted no and demands payment for her shares, arguing she lost her expected right to receive a pro rata distribution when the corporation otherwise would have dissolved.

Is Nina most likely entitled to statutory dissenter's rights on these facts?

Explanation. Dissenter's rights are purely statutory and arise only in the specific situations the statute identifies. The majority opinion held that a shareholder's general expectation of receiving a pro rata distribution of assets on dissolution is not a 'redemption' right. Because an amendment extending corporate duration does not, by itself, create, alter, or abolish a material redemption right or preferential right, Nina is not entitled to appraisal on that basis.