Brief Fact Summary. Appellants, William H. Davis and Catherine L. Davis, denied Appellee, James L. Sheerin’s, rights inherent in his 45 percent stock share in W.H. Davis Co., Inc., (the corporation). The trial court found Appellants actions as oppressive and ordered a buy out of Appellee’s shares.
Synopsis of Rule of Law. A court, in equity, may order a buy out of stock if oppressive conduct is found.
A defalcation is a willful neglect of duty, even if not accompanied by fraud or embezzlement.View Full Point of Law
Whether Texas law permits a “buy out” as a remedy?
If so, whether “oppressive conduct” warrants the application of a buy out?
If so, whether oppressive conduct exists in this instant case?
Held. The trial court’s holding is affirmed.
Yes, a buy out is a permitted remedy under the court’s equity power.
Yes, oppressive conduct warrants the application of a buy out.
Yes, oppressive conducts exists in this case to warrant a buy out.
Although the Texas Business Corporation Act (Act) does not expressly provide for a buy out, Texas courts, under their general equity power, may decree a “buy out” in cases where less harsh remedies are inadequate to protect the rights of the parties.
Although the Act does not explicitly provide for a buy out, it does recognize a cause of action for oppressive conduct. Furthermore, other jurisdictions have recognized a buy out as an available remedy for oppressive conduct.
Although the typical oppressive “squeeze out” techniques used in closely held corporations do not exist here, the court finds that Appellants’ actions to deprive Appellee of his interest in the corporation, breach of their fiduciary duties, and attempt to silence Appellee’s voice in the corporation are considered oppressive.