Schwartz v. Marien
New York Court of Appeals
37 N.Y.2d 487, 373 N.Y.S.2d 122, 335 N.E.2d 334 (1975)
Albert Smith, August A. Marien, and Girard Dietrich owned 50 shares each of Superior Engraving Co., Inc. (Superior) stock, which constituted all of Superior’s stock. Smith died. Superior purchased Smith’s shares and held them in treasury. Marien died, passing 26 shares to his wife, and eight shares each to his sons, Robert, Edward, and August, Jr. Prior to Dietrich’s death, Dietrich, his daughter Margaret A. Schwartz (plaintiff), Robert, and August, Jr., comprised Superior’s board of directors. Dietrich died. Schwartz received notice of the board’s upcoming special meeting to fill the board vacancy and consider the purchase of Dietrich’s stock and sale of treasury stock. At the meeting, Robert and August, Jr., elected Edward to the board (the Marien directors) (defendants). Thereafter, the Marien directors authorized negotiations to purchase Dietrich’s stock and voted to sell five shares of treasury stock. The Marien directors purchased one share each of treasury stock, and two long-time Superior employees, Edward Kasprzak and Louis A. Zimmerman, bought one share apiece. Consequently, the Marien directors secured corporate control by at least one share. Schwartz demanded rescission of the treasury stock sales and offered to purchase five shares of treasury stock at the same price. The board ignored Schwartz’s demand, rejected her offer, and explained that it was not consistent and not in the best interests of the corporation to sell more shares to the Dietrich estate while the estate was negotiating to sell its existing shares. Schwartz sued the Marien directors for fraud and conspiracy to deprive the Dietrich estate of its equal stock ownership, and for an injunction to prevent the Marien directors from holding another special meeting to elect directors. The trial court denied injunctive relief, and the Marien directors elected Kasprzak to replace Schwartz. The lower courts denied cross motions for summary judgment. Schwartz appealed.
Rule of Law
Holding and Reasoning (Jones, J.)
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