Shanken v. Lee Wolfman, Inc.

370 S.W.2d 197 (1963)

Facts:  P was a shareholder of D.  P was issued 1/3 preferred shares at the organization meeting.  P alleged that Ds opened a store under a separate corporation named “Wolfman’s Inc.-Spring Branch.”  P filed for suit against Ds for opening the store with “prior consent or approval of the shareholders, Ds, or Lee Wolfman, Inc.  P then called for an investigation of the Spring Branch store.  Shortly after, the Director of Wolfman, Inc. began to acquire all the existing stock in the spring branch store.  The stated purpose of the stock acquisition was to make the Spring Branch a subsidiary of Wolfman, Inc.  A pro-rated increase of each owner’s stock was proposed upon acquisition of the Spring Branch.  P voted against this resolution for a pro rata amendment “thus making it impossible for the remaining stockholders to increase his class of stock against his will.”

P contends the charter amendment vote “required the affirmative vote of 2/3 of all the issued stock of Lee Wolfman, Inc. and in addition thereto the affirmative vote of 2/3 of each class of stick, voting separately as a class.  2/3 of the total shares voted in favor of the charter amendment, but 2/3 of each class did not approve the amendment since appellant voted his Class C stock against the amendment.”  P argues that under TX law he was entitled to vote on the matter because the imposition of new shares would have affected his shares in some manner.


Whether a vote needed to occur for each class of shareholder to complete the merger.


No, P loses.  “The charter (of the company) confers upon the corporation all powers necessary or convenient to further any or all of the purposes for which the corporation is organized.”  The new shares brought in by the merger didn’t change the shares of the stock.  They changed the number of aggregate shares.

  • In the charter the three classes had varying degrees of powers for each shareholder class.  Class A and B had the right to vote on this matter.  “… but Class C shareholders had no such right because the amendment filed did not increase the aggregate number of authorized shares of Class C or change the designations, preferences, limitations, or relative rights of the shares of Class C.”
  • Court believes that articles of organization “merely provides that there cannot be any change in the number of shares of any class, whether by stock split or division or other method without each class voting as a class.”

Comments are closed.