## Facts

- Shareholders associated with Leopoldo L. Ramos formed a corporation to pursue an FCC construction permit for a Spanish-language television station.
- That corporation later merged with a competing applicant to form Costa del Oro Television, Inc., with an ownership and governance structure designed to allocate board control between the two sides and later shift majority control based on issuance of additional shares.
- To obtain FCC approval and Subchapter S tax treatment, the parties modified the structure so shares in the new corporation would be issued directly to individual owners rather than to the predecessor entities.
- In connection with that modification, members of the Ramos-affiliated shareholder group (including Tila and Angel Estrada) entered a written shareholder voting agreement requiring each member to vote shares according to the majority decision of the group.
- The agreement included a buy-sell provision requiring a member who failed to vote with the majority to offer their shares for sale to the other group members.
- After initial corporate organization, Tila Estrada voted with the opposing shareholder bloc to remove Ramos as president and install a replacement.
- The Estradas asserted the voting agreement was invalid and not binding; the Ramos group treated the nonconforming vote as a breach triggering the buy-sell provision.

## Issues

1. Whether a shareholder voting agreement is valid and enforceable when the corporation is not technically a statutory close corporation.
2. Whether the agreement should be treated as a proxy subject to revocation and statutory expiration, rather than an enforceable contract among shareholders.
3. Whether specific performance compelling a share sale is an appropriate remedy to enforce the buy-sell provision triggered by breach of the voting commitment.

## Decision

- The Court of Appeal affirmed the judgment enforcing the shareholder voting agreement.
- The court held that shareholder voting agreements may be valid even if the corporation is not technically a close corporation.
- The court rejected the characterization of the agreement as a proxy, concluding it was a contractual commitment among shareholders to vote as a block based on the group’s majority decision.
- The court upheld the finding that Estrada breached the agreement by voting contrary to the group majority.
- The court affirmed specific performance requiring the Estradas to sell their shares pursuant to the buy-sell provision.

## Legal Principles

- A shareholder voting agreement is generally an enforceable contract among shareholders and is distinct from a proxy arrangement.
- Statutory provisions expressly authorizing voting agreements in close corporations do not, by implication, invalidate similar voting agreements in other corporations.
- Courts may enforce a buy-sell clause tied to compliance with a voting agreement where the agreement is supported by consideration and is not contrary to public policy.
- A shareholder voting agreement that governs how shareholders vote their shares does not improperly constrain directors’ business judgment merely because it affects election outcomes.

## Conclusion

The court enforced a shareholder voting agreement requiring bloc voting by majority rule and upheld a buy-sell remedy for breach, holding that such agreements can be valid outside statutory close corporations and are enforceable as contracts rather than revocable proxies.


Ramos v. Estrada, 8 Cal. App. 4th 1070 (Ct. App. 1992)