James W. Shaffer v. Terrydale Management

The plaintiffs Shaffer and Burrus brought an action for declaratory judgment to determine the right of defendant Terrydale Management Corporation to exercise an option to purchase their shares under the terms of a stockholders agreement. The plaintiff Burrus died during the pendency of the action and the widow as administratrix was substituted as a party. The trial court adJudged that Shaffer and Burrus were not in the employment of the Terrydale Corporation within the sense of the stockholders agreement and so, upon termination of employment, their shares were not subject to the purchase option provision of that document. The court directed Terrydale to reinstate Shaffer and Burrus on the corporate records each as owner of 50 shares of the corporation stock. The trial court adJudged also that under the stockholders agreement Terrydale had the right to exercise the option to purchase the Burrus shares upon his death. The defendant Terrydale Management Corporation appeals only from the declaratory judgment in favor of Shaffer. Terrydale Management Corporation was created to administer the assets of a real estate investment trust of commercial properties owned by J. Russell Gramlich. The trust idea, although original with Gramlich, was given form by the plaintiff Shaffer, an attorney, and the plaintiff Burrus, a financier and banker. The investment trust was made to qualify for public issue and was underwritten by a brokerage house. [The special work to accomplish the SEC certification was done by other law firms in occasional consultation with Shaffer.] The Gramlich assets were transferred into the trust [Terrydale Realty Trust] for an equivalent value of shares. The tax laws required that an entity separate from the trustees manage the investment trust, and the Terrydale Management Corporation was formed to administer those assets. The plaintiff Shaffer performed that work and became the management corporation attorney. Gramlich then directed Shaffer to prepare a document to insure that the corporation remain a family enterprise. The result was the stockholders agreement now in contention.