Procedural Posture - timscotty/timscotty GitHub Wiki

Procedural Posture Defendant corporation appealed the order of the Superior Court of Nevada County (California), which awarded rescission of stock sales and deeds of mineral rights to plaintiff shareholders, in the shareholder's suit against the corporation for breach of contract and fraudulent inducement, which resulted in a failure of consideration for their mineral right deeds given in exchange for stock.

Overview: California auto accident lawyer

The corporation was formed to mine the stockholders' property. The stockholders' conveyed deeds to the mineral rights in exchange for corporate stock. The parties relied upon erroneous advice of the corporation's attorney and failed to secure a permit for sales of the stock. Upon learning that the error invalidated the stock transfer, the shareholders' filed an action for fraud and rescission against the corporation. The superior court granted the recission. The corporation appealed. The court reversed. The court found that the stock transfer was void, but found there was no evidence of fraud, because the parties had proceeded in good faith and that it was absurd to argue that the controlling shareholders had intended to defraud themselves. The court found that while the evidence supported the lack of consideration given for the mineral rights, third parties had relied upon the transfer and therefore rescission was inequitable. The court found that the shareholders were required to seek compensation in law and not in equity.

Outcome The court reversed the order of the superior court which had granted rescission of the shareholders' deeds that had been given in exchange for the voided corporate stock.