Appeal from a judgment of the Superior Court of Orange County, Josephine Staton Tucker, Judge. Affirmed in part; reversed and remanded in part. (Super. Ct. No. 07CC04588).
The opinion of the court was delivered by: Sills, P. J.
CERTIFIED FOR PUBLICATION
In this case we hold that where the bylaws of a pharmacy corporation provide that one stockholder must give another a right of first refusal on the sale of any stock, it is a breach of fiduciary duty for the selling stockholder to attempt to sell to a third party in violation of the right of first refusal. We thus remand the case back to the trial court to ascertain the proper damages, both to the corporation itself and to the other stockholder, for such a breach.
I. FACTS AND LITIGATION HISTORY
In 2006, Tien Le and his wife Dieu-Hoa Le owned 50 percent of the corporate shares of Newland Pharmacy, while Lieu Pham owned the other 50 percent. Corporate bylaws obligated the Les to give Pham written notice of any intent to sell or transfer. The bylaws also gave Pham a right of first refusal on any sale based on that notice of intent, but did not specify the amount of time in which she could exercise her right of first refusal. Under the bylaws, the shares could not be transferred to someone other than Pham at a price less than, or on terms more favorable than, that stated on the notice of intent to sell or transfer. If so, the transfer would be null and void.
On or about July 18, 2006, Pham sent a letter to the California State Board of Pharmacy to the effect that she would like to buy out the Les' 50 percent share of the business.
Two days later -- on July 20 -- the Les gave written notice to Pham (by certified mail) of their intent to sell their 50 percent share to Paul and Kimngang Hoang for a total of $70,000, cash at transfer. The letter required a written offer from Pham "within 10 days" of the notice.
Pham responded with a letter dated July 27, which was clear that she wanted to buy the Les' shares. In that letter she said that she wished to "retain control of our corporation in my stewardship and will offer to purchase your shares in the corporation." Pham's letter also said, however, that she would need "30 days to locate appropriate legal counsel" and "within which" she would "exercise my option to purchase your share."
Pham's letter of July 27 was not received by Dieu-Hoa Le until August 2. On that day, after receiving Pham's letter, the Les sold their shares to Paul and Kimngang Hoang. However, the price the Les received was $24,000, considerably less than the $70,000 offered to Pham. Nor was it a cash sale. The Hoangs were allowed to make installment payments on the $24,000.
Paul Hoang showed up for a board meeting on September 1, but Pham refused to recognize him as a legitimate director and shareholder and would not allow him to review the corporation's books and records. Paul Hoang did not file a change of ownership form with the California Board of Pharmacy, an omission which prompted a "cease and desist" order from the board that closed the pharmacy down for about three months beginning in March 2007. The pharmacy was also on probation until 2008.
The Les and Hoangs sued Pham, contending that the transfer to the Hoangs was valid in accordance with Newland Pharmacy's bylaws, also alleging that, after the transfer, Pham had failed to permit the inspection of books and records as demanded, failed to file appropriate documents with state agencies, and converted revenue from Newland Pharmacy for her own personal use.
Pham countered with her own cross-complaint, on behalf of herself and the corporation,*fn1 alleging, among other things, breach of fiduciary duty against the Les and fraud against Paul Hoang (based on statements he made that he really was the new owner of fifty percent of the pharmacy's shares).
After a bench trial, Pham prevailed on the Les' and Hoang's complaint, while the Les and Hoang prevailed on Pham's cross-complaint. That is, the court, in its statement of decision, ruled that the Les' attempted transfer of shares to the Hoangs was null and void because it did not comply with the corporate bylaws. It was obvious, after all, that the Les had attempted to sell the shares to the Hoangs for a better price ($24,000 as distinct from ...