Monty

Corporate shareholders approve an amendment to a corporation’s articles to increase the number of authorized shares. Thereafter the corporation enters into an investment agreement that gives an investor shares of common and preferred stock. The agreement provides that the preferred stock would convert to many more additional shares of common stock. Issuance of these additional shares would require an amendment to the articles.

May the investor use its majority shares after the agreement is signed to amend the articles to allow it to issue to itself these additional shares? We conclude that it may.

Two shareholders in a failing bank sought a preliminary injunction to prevent an investment agreement from closing. The agreement would add $500 million to the bank’s capital. The trial court denied the preliminary injunction. While the matter was on appeal, the transaction closed, rendering the petition for injunction moot. Nevertheless, the shareholders claim the questions raised are still at issue between the parties. We examine the issues raised by the shareholders and conclude they have no merit. We affirm.

FACTS

Pacific Capital Bancorp is the parent company of Pacific…