Retiring contract terms

Pennington, Fields, and Phillips each owned 1/3 of the shares of Advantage Marketing & Labeling, Inc. Pennington argued that under their shareholder agreement he other two were required to buy his stock when he decided to sell his full interest and become a “retiring shareholder” under that agreement. Fields and Phillips resisted, pointing out that Pennington was employed by another business when he made his demand; thus, “because he was not ‘retired’ from any and all employment, he could not be a ‘retiring shareholder’ for purposes of the CPA.” The Fifth Court disagreed based on two basic contract-construction principles: “This construction . . . assigns a definition to only one of the two words the parties used to describe who must comply with the paragraph’s provisions. It also disregards the context. The paragraph imposes requirements for the disposition of shares by a ‘retiring shareholder’ in the context of an agreement that imposes restrictions on stock transfer.” Pennington v. Fields, No. 05-19-00149-CV (May 22, 2020) (mem. op.)