Ramos v. Estrada

California Court of Appeal · 1992 · Corporations

Corporationsshareholder voting agreementsclose corporationsproxiesspecific performanceshareholder voting agreementproxyclose corporation

Facts

Broadcast Group shareholders, including the Estradas, executed the June Broadcast Agreement as part of implementing a merger that formed Costa del Oro Television, Inc. The agreement required the shareholders to consult, attempt consensus, and if necessary vote their own shares in the manner voted by a majority of the shareholders; it also provided that failure to comply would constitute an election to sell the shareholder's stock under specified buy/sell provisions. Tila Estrada later voted with the Ventura 41 group to remove Ramos as president and refused to recognize a later majority Broadcast Group vote replacing her as a director. The Estradas then sent a letter declaring the June Broadcast Agreement null and void, and Ramos sued for breach.

Issue

Whether the June Broadcast Agreement was void as an expired and revoked proxy, or instead was a valid shareholder voting agreement enforceable against the Estradas even though the corporation was not technically a close corporation. Also at issue was whether the agreement's forced-sale remedy could be specifically enforced.

Rule

A written agreement among shareholders requiring them to vote their own shares according to agreed procedures, including the will of the majority if consensus fails, is a shareholder voting agreement rather than a proxy when it does not authorize another person to vote their shares. Under Corporations Code section 706, subdivision (d), such agreements are not invalid merely because the corporation is not a close corporation, so long as they are not otherwise illegal; under section 709, subdivision (c), they may be specifically enforced, including by determining voting rights and enforcing related remedies.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

In San Diego, six shareholders of Harbor Mesa Media, Inc. sign a written agreement stating that before any shareholder vote they will confer, try in good faith to reach consensus, and, if consensus fails, each will vote his or her own shares in the manner chosen by a majority of the signers. Months later, Owen Pike votes his shares against the majority and argues the arrangement was merely a proxy that he could revoke at will.

How should a court most likely characterize the agreement?

Explanation. The majority opinion distinguishes a proxy from a shareholder voting agreement by asking whether the instrument gives another person the power to vote the shareholder's shares. Here, no one else is authorized to vote; each shareholder must vote his or her own shares according to the agreed procedure. Under the opinion, that makes the arrangement a shareholder voting agreement, not a proxy, and it is not invalid on the theory that it was revocable as a proxy.