## Facts

- W.H. Davis Co., Inc. was a closely held corporation formed in 1955 with William H. Davis owning 55% and James L. Sheerin owning 45%; Davis controlled daily operations.
- Davis and Sheerin also formed a general partnership in 1960 to acquire real estate; six tracts later became disputed as to whether they were partnership assets.
- In 1985, Davis refused Sheerin access to corporate books unless Sheerin produced his stock certificate.
- Davis and his wife, Catherine L. Davis, asserted Sheerin had gifted his 45% corporate stock to them in the late 1960s, allegedly eliminating Sheerin’s shareholder rights.
- Sheerin sued individually and derivatively for oppressive conduct and fiduciary breaches, and sought declarations of his ownership interests in the corporation, the partnership, and the six tracts.
- A jury found, among other things, that the Davises conspired to deprive Sheerin of his stock and willfully breached fiduciary duties by taking “informal dividends” through a profit-sharing plan that excluded Sheerin.
- The trial court declared Sheerin a 45% owner of the corporation and partnership (including the six tracts as partnership property), found oppression, ordered a buyout of Sheerin’s shares for $550,000 (fair value), and awarded additional monetary relief including about $20,893 for informal dividends.

## Issues

1. Whether Texas courts may order a compulsory buyout of a minority shareholder’s interest as equitable relief for oppressive conduct in a closely held corporation.
2. Whether the evidence supported a finding of “oppressive conduct” warranting a forced buyout on these facts.
3. Whether the evidence supported findings that Sheerin retained a 45% ownership interest in the corporation and partnership and that the six real-estate tracts were partnership assets.

## Decision

- The court of appeals affirmed the challenged portions of the judgment.
- It held that Texas courts, exercising general equitable powers, may order a buyout as relief for shareholder oppression even without express statutory authorization.
- It upheld the oppression finding and affirmed the order requiring Davis to purchase Sheerin’s 45% stock interest for $550,000 (fair value).
- It upheld the determinations that Sheerin did not gift away his stock, that he owned 45% of the partnership, and that the six tracts were partnership property.

## Legal Principles

- Texas courts sitting in equity may grant relief for minority-shareholder oppression beyond remedies expressly enumerated in corporate statutes.
- A court may order a majority shareholder to purchase a minority shareholder’s interest when necessary to protect the minority’s rights and when liquidation or other relief would be inappropriate.
- “Oppressive conduct” in a close corporation can include actions that deny a minority owner core incidents of ownership, such as recognition of ownership status, access to information, and participation in distributions.
- Appellate review of ownership and property-characterization determinations is highly dependent on evidentiary sufficiency; fact findings supported by the record will not be disturbed.

## Conclusion

The court approved a court-ordered buyout as equitable relief for minority-shareholder oppression in a closely held corporation and affirmed findings that the minority owner retained his ownership interests and that disputed real estate belonged to the partnership.


Davis v. Sheerin, 754 S.W.2d 375 (Tex. App.—Houston [1st Dist.] 1988, writ denied)