England

We hold in this case that the purchase by the corporation out of stated capital of the shares issued by it was not made to compromise a controversy between said corporation on the one hand and the selling shareholders on the other and was therefore unauthorized and unlawful. As we explain, the trial court erroneously interpreted the statutes authorizing such a purchase and imposing liability upon selling shareholders for their violation. While we deem it unnecessary to order a new trial, our holdings on the fundamental issue of the legality of the transaction under scrutiny and on the related issues of the liability, if any, of the selling shareholders and directors resulting from such transaction will require the court on remand to make adequate findings of fact and conclusions of law in conformity with our views. We therefore reverse the judgment with directions to the trial court as detailed infra.

In early 1958 defendant Andrew Christensen (Andrew) and his son, defendant Harold Christensen (Harold), were, and for several years prior thereto had been, partners operating a general contracting and cabinet making business in Sausalito under the name of A. G. Christensen and Son.…