A group of stockholders

[Saim Khan]

Procedural Posture

Plaintiffs, a group of stockholders, brought an action to recover investments in preferred shares of stock and to retain shares of a reissued new common stock, and a declaratory relief action seeking a determination of the validity of the preferred and common stock. Plaintiffs sought review from a judgment of the Superior Court of San Diego County (California), which entered judgment for defendants.

Overview: California litigation lawyers

Plaintiff stockholders brought an action to recover investments in preferred shares of stock and to retain shares of a reissued new common stock, and a declaratory relief action seeking a determination of the validity of the preferred and common stock. The trial court entered judgment for defendants. On appeal, the court stated that the permit was ambiguous as to whether it required physical surrender and cancellation of the two certificates for old common prior to issuance of the new common. There was no clear and unequivocal violation of the condition of the permit by reason of the failure to cancel physically the certificates for the old common before issuance of the new. The court held that the failure to cancel physically the old common certificates, as distinguished from the shares themselves, before issuance of the new, did not invalidate the sale and issuance of the preferred stock. However, the court concluded that the permit did not make the deposit or retention in escrow of the new common share certificates a condition precedent to the sale of preferred.

Outcome

The court reversed the judgment of the trial court and remanded the cause to the trial court to make findings on certain matters of fact.