Coyle vs. Schwartz

Issue: Is Coyle legally entitled to the stock purchasing price of $250? (Is the stock-valuation provision in the cross-purchase agreement considered a penalty?)

Rule of Law: Limited Partnerships; Agency Law & Limited Liability, Dissolution, Winding Up, and Termination of a General Partnership

Application:
Case Facts: * March 21, 1986: Coyle and Schwartz execute a share-transfer agreement wherein Schwartz transferred 2% of his American Scale share to Coyle. * Coyle then owned 51%; Schwartz owned 49% Coyle is majority shareholder and it was specifically stated in the argument. * August 25, 1988: Both agreed upon a buy-sell agreement that they titled, “Stockholder’s Cross-Purchase Agreement” * The agreement provided for the repurchase of a shareholder’s stock in the event of death, disability, or voluntary withdrawal of that shareholder. * Specifically: * It stated that if Coyle or Schwartz died or otherwise attempted to dispose of his shares, the other shareholder would have the right to purchase those shares. * Also, the agreement gave the majority shareholder an option to purchase all of the minority shareholder’s stock at any time upon a 60-day written notice. * As of August 25, 1988, the fair market value of each share was $250 after a stock-valuation method was completed. * Case states: “UNLESS ALTERED AS HEREIN PROVIDED, for the purpose of determining the purchase price to be paid for the stock of a Stockholder, the fair market value of each share of stock shall be, as of August 25, 1988, $250.” * “The stockholder’s shall redetermine the value of the stock within 60 days following the end of EACH fiscal year. If the stockholders fail to make the required annual redetermination of value for a particular year, the last previously recorded value