ATR-Kim Eng Financial Corp. v. Araneta
Delaware Court of Chancery
2006 WL 3783520 (Del. Ch. 2006)
ATR-Kim Eng Financial Corp. and ATR-Kim Eng Capital Partners, Inc. (ATR) (plaintiffs) owned 10 percent of PMHI Holdings Corp. (PMHI) shares. Carlos Araneta (defendant) controlled 90 percent of PMHI shares and served as chairman of the board. ATR alleged that Araneta caused PMHI to transfer its key asset, LBC Operating Companies (LBC), which was worth more than $35 million, to his family members, leaving ATR's minority stock ownership in PMHI worthless. ATR alleged that not only had Araneta violated his fiduciary duties, but also that the other PMHI directors, Hugo Bonilla and Liza Berenguer (defendants), were jointly and severally liable for this harm, because they failed to monitor Araneta and prevent his self-dealing. Neither Berenguer nor Bonilla participated in, approved of, or directly profited from Araneta's transfer of LBC. Bonilla and Berenguer worked for Araneta. Berenguer was Araneta's niece and worked as the chief financial officer for LBC, and Bonilla was the head of Araneta's other company. Both Bonilla and Berenguer admitted that they regarded themselves as mere employees of Araneta and entirely deferred to Araneta in corporate matters. There was no corporate information-and-reporting system in place. The directors did not have regular board meetings. Neither Berenguer nor Bonilla knew about the corporate activities. Neither even knew that the company name was changed. Berenguer stated that she would take Araneta's word as authoritative if Araneta said that he had agreed with ATR on certain matters. Bonilla stated that he took Araneta's word as PMHI's word, and Bonilla would not make an independent inquiry if Araneta said he had an agreement with ATR. Bonilla and Berenguer did nothing when they knew that the assets were gone. A trial was held.
Rule of Law
Holding and Reasoning (Strine, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 175,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 14,000 briefs, keyed to 188 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.