Schwartz v. Marien

Per Curiam. Absent specific provision in the certificaté of incorporation, shares of’treasury stock are not subject to preemptive rights of purchase (Business Corporation Law, § 622, subd. [e], par. [4]). Nevertheless the directors of the corporation owe a fiduciary duty both to the corporation and to its shareholders, and the sale of treasury stock to employees and [308] directors and the refusal to sell similar shares to appellant must accord with the established legal standards of honesty and fair dealing in the' management of the corporation. If the purpose of the board of directors was to diminish plaintiff’s proportionate ownership without benefiting the corporation, then appellant is entitled to relief (Hammer v. Werner, 239 App. Div. 38). It appears from the .moving papers that appellant is not and never has been active in the corporation. She acquired by inheritance the 50 shares" representing her. ownership. They represent 33%% of the authorized stock and 50% of the issued stock. She admits that she has been negotiating with the corporation for its purchase of her holdings and she concedes for purposes of this motion that the price paid by the employees and directors was a fair one. The respondents justify their conduct by affidavits alleging that the sales were necessary to insure the continued employ.ment of key employees and that the corporate policy was to limit further sales of stock to other than active employees of the corporation. Respondents allege that the best interests of the corporation dictated their refusal to sell appellant treasury shares-to restore her 50% stock position at a time when the corporation whs trying to .purchase her present holdings. Obviously the parties are engaged in a contest in which the prize is the change in the price of appellant’s shares which may result by reason of her improved or weakened bargaining position depending upon her relative strength as a stockholder of the corporation. That is the practical consideration behind this action, but be that, as it may, if the directors acted properly in the discharge of their fiduciary duties by issuing the treasury stock, their actions are unassailable. Evaluation of their conduct requires development of the facts upon q trial. The order denying summary judgment should be affirmed.