Courtland Manor, Inc. v. Leeds
Delaware Court of Chancery
347 A.2d 144 (1975)
In 1967 Leonard Leeds (defendant) and his accountant, Samuel London, formed Courtland Manor, Inc. (Courtland) (plaintiff), a nursing-home operation. In 1968 nine investors invested in Courtland, including Bertram Widder (plaintiff). Leonard and the investors were made directors. Leonard was elected president, Widder was elected secretary, and London was elected assistant secretary. The stockholders were informed of the anticipated construction cost of $900,000 with the rental rate of 12.5 percent or $112,000 per year. Courtland Manor Associates (CMA) (defendant) was formed as a limited partnership to manage the construction and ownership of the facility. Leonard was the general partner, and Leonard’s father, William Leeds, was a limited partner. The rest of CMA was sold to other individuals, including Widder. A lease was drafted and discussed at a directors’ meeting. The lease was revised to include rent as 12.5 percent of the total construction cost, not to exceed $150,000 per year. On November 6, 1968, the lease was executed, with Leonard signing on behalf of CMA. Construction was completed, and Cortland immediately experienced a cash shortage. By October 1970, Leonard was removed as Courtland’s president. No Courtland stockholder brought action against Leonard before his removal. Widder and two other investors, Joseph and Murdoch, acquired control of Courtland by purchasing most of the existing stock for $4,000, elected themselves directors, authorized issuance of additional shares of stock, and purchased 500 shares each. On November 6, Widder, Joseph, and Murdoch caused Courtland to file suit against Leonard and William, then against Leonard as CMA general partner and CMA. The chancery court consolidated the cases and held trial. Courtland sought judgment against Leonard, alleging the lease was unfair to Courtland and favorable to CMA. Courtland alleged that the annual profit for CMA exceeded $30,000, as opposed to the anticipated profit of $7,000, and that the excessive rent resulted in Courtland’s cash shortage. Courtland alleged that because Leonard stood on both sides of the transaction, he had the burden to demonstrate the lease was fair. Courtland also alleged Leonard withheld a Federal Housing Administration analysis that demonstrated Courtland’s cash shortage under the terms of the lease. Leonard, William, and CMA disputed the allegations, arguing that the lease was fair to Courtland and CMA based on the high-risk nature of the business and investment.
Rule of Law
Holding and Reasoning (Brown, 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 705,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead 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.Learn about our approachRead more about Quimbee
Here's why 705,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 44,300 briefs, keyed to 983 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.