Keene v. Brookhaven Academy, Inc.

Summary

The Mississippi Supreme Court affirmed summary judgment dismissing Dudley Keene's challenges to Brookhaven Academy, Inc.'s formation of a nonprofit foundation, lease of property to the foundation, and transfer of educational activities. The court held that the Academy was a general-purpose corporation, its actions were not ultra vires, shareholders had properly ratified the actions, and the notice for the ratification meeting was adequate.

Holdings

1. The shareholders properly ratified the formation of the solely owned nonprofit Foundation, the lease of Academy property to the Foundation, and the transfer of educational activities.
2. The challenge to the Foundation's voting of Academy shares failed because the record did not establish that the Foundation was a subsidiary of the Academy, and the statute governing a corporation's acquisition of its own shares was inapplicable.
3. The stock-transfer arrangement was not coercive because shareholders had the option either to transfer two Academy shares or to pay $750 for Foundation membership and school enrollment.
4. The Academy was a general-purpose corporation, not a special-purpose corporation limited to operating schools, and its articles authorized the challenged formation, leasing, and asset-related activities.
5. The Academy Board's challenged acts were not void ultra vires acts because they were within the powers conferred by the Academy's articles; in any event, the shareholders ratified the acts.
6. The shareholders received adequate notice because the notice, proxy materials, and referenced meeting materials described the purposes and specific matters to be ratified, satisfying Mississippi Code section 79-4-7.05.

Questions Presented

1. Whether shareholders properly ratified the Academy Board's formation of the Foundation, lease of Academy property to the Foundation, and transfer of educational activities.
2. Whether the Foundation's acquisition of Academy shares was unlawful because it was allegedly a subsidiary of the Academy and could not vote shares in the parent corporation.
3. Whether the stock-transfer and membership requirements coerced shareholders into transferring Academy shares.
4. Whether the Academy was a special-purpose corporation whose charter limited it from forming the Foundation, leasing its assets, or transferring educational activities.
5. Whether the Academy Board's challenged acts were void or merely voidable ultra vires acts.
6. Whether shareholders received adequate notice of the purposes of the special meeting at which the challenged acts were ratified.

Disposition

affirmed