[154 NJSuper Page 70] This is an action by representatives and/or beneficiaries of the estate of certain deceased stockholders of defendant corporation Seaview Country Club.
Plaintiffs seek an order compelling defendant to transfer those shares of stock registered in decedents' names either to the executors and/or trustee of the decedent's estate or the beneficiaries of the testamentary transfer of the stock made by decedents.
The certificates of stock in question were issued on April 18, 1942 subject to certain restrictions on transfer. The restriction is set forth in an addendum printed on the certificate which states:
This certificate can be sold, assigned, transferred pledged or otherwise disposed of, provided that the stockholder holding the certificate shall be first obliged to offer the stock represented by this certificate for sale to this company, and this company shall have the right and option to purchase the same before said stock is offered for sale to some third party by any stockholder of the company.
The restriction placed upon the certificate is not the same restriction contained in defendant's certificate of incorporation, as amended and filed on April 2, 1942. This amendment included a resolution of the board of directors, adopted January 18, 1942, and reads as follows:
Be it resolved that it is for the best interests of this company that the Certificate of Incorporation be amended so that the total and sole authorized stock of this company shall be 190 shares of par value of $500 each with the restriction that the stockholder holding said stock of this company shall be first obliged to offer said stock for sale to this company and this company shall have the first right and option to purchase the same before said stock is offered for sale to some third party by any stockholder of this company * * * [Emphasis supplied]
Plaintiffs submit that the amendment authorizes only restrictions on the sale of defendant's stock to some third party. It is plaintiffs' position that since the transfers involved here are testamentary in nature, not sales, these transfers are not within the scope of the restriction.
Defendant contends that the transfers are not governed by the N.J. Business Corporations Act, N.J.S.A. 14A:1-1 et
seq. because the restrictive agreement was placed upon the stock 27 years before the statute was enacted and the statute should not be given retrospective application. In Tully v. Mott Supermarkets, Inc. , 337 F. Supp. 834 (D.N.J. 1972), the District Court applied the provisions of N.J.S.A. 14A:7-12 to a right of first refusal created by agreement three years prior to the enactment of the Business Corporations Act. At common law our courts were less amenable to restrictions on transfers than under the statute. See, e.g., Prindiville v. Johnson & Higgins , 92 N.J. Eq. 515 (Ch. 1921) aff'd 93 N.J. Eq. 425 (E. & A. 1921) (void as against public policy); Morris v. Hussong Dyeing Machine Co. , 81 N.J. Eq. 256 (Ch. 1913) (unreasonable restrain upon alienation). The restriction upon transfer which defendants here assert is essentially a right of first refusal which has been upheld in this State as the first step in an agreement of sale. Baumohl v. Goldstein , 95 N.J. Eq. 597 (Ch. 1924).
I do not find it necessary to rule on the validity of the restriction or the applicability of the statute, for plaintiffs do not challenge the validity of the restriction; rather, they contend that it does not apply to the transfers involved in their situation. Plaintiffs are the executors and/or beneficiaries under the will of deceased stockholders in defendant corporation. It is plaintiffs' position that the restriction was not intended by the board of directors to include these testamentary transfers which plaintiffs wish to make in accordance with the wishes of the testators.
The language on the stock certificates indicate that any stockholder may sell, transfer, assign, pledge or otherwise dispose of his share, provided he offers it for sale to the corporation prior to offering it for sale to some third person. The language of the restriction is clear and its meaning is unambiguous. It does not use the broad term "transfer" to describe the stockholder's action which triggers the company's right of first refusal. Rather, the language refers to offering ...