## Facts

- Mather & Co. was a closely held family insurance business incorporated in 1926, with stock owned by family members.
- Family shareholders executed agreements restricting transfer of shares to keep control within the family group.
- A later written agreement required that, during life or at death, a shareholder’s stock first be offered to other signatory shareholders at a fixed price of $1 per share before any sale to outsiders; if no signatory exercised the option, the shares could be sold on the open market.
- Gilbert Mather died owning shares in the corporation, and a family-member shareholder timely tendered the option price to purchase the estate’s shares under the agreement.
- The estate’s executors refused, asserting the agreement was void as an unreasonable restraint on alienation because the $1 price was allegedly far below actual value (alleged to be at least $1,060 per share at the time of tender).
- The pleadings alleged no fraud, deceit, or overreaching in the formation of the agreement.

## Issues

1. Whether a fixed-price first-option agreement restricting transfer of close-corporation stock is an invalid, unreasonable restraint on alienation when the option price is nominal and far below alleged actual value.
2. Whether the agreement may be specifically enforced against the decedent’s estate absent allegations of fraud or overreaching.

## Decision

- The Pennsylvania Supreme Court affirmed the Orphans’ Court’s judgment on the pleadings for the option holder.
- The court held the first-option agreement was valid and enforceable and did not constitute an unreasonable restraint on alienation.
- The court ordered specific performance, requiring the executors to transfer the shares at the option price.
- The court ruled that disparity between option price and alleged value, standing alone and without fraud or overreaching, did not invalidate the agreement.

## Legal Principles

- Stock-transfer restrictions in a close corporation may be enforceable when they serve a legitimate purpose, such as maintaining ownership and management within a defined group.
- A right of first refusal or first-option provision is a partial restraint on alienation and is generally permissible if it does not absolutely bar transfer and allows sale to outsiders if the option is not exercised.
- A fixed-price buy-sell or option term is not void solely because later events make the price highly unfavorable to the seller, absent fraud, deceit, overreaching, or other invalidating conduct.
- Specific performance is an appropriate remedy to enforce a valid stock option agreement against an estate when contractual conditions for exercise are satisfied.

## Conclusion

The court enforced an intra-family, fixed-price first-option agreement for shares of a close corporation, holding that an extreme price-value disparity does not by itself make the restriction an unreasonable restraint on alienation, and ordering specific performance where the agreement was freely made and untainted by fraud or overreaching.


In re Estate of Mather, 410 Pa. 361, 189 A.2d 586 (Pa. 1963)