Security National Bank v. Peters, Writer and Christensen, Inc.
Colorado Court of Appeals
569 P.2d 875 (1977)
- Written by Eric Miller, JD
Facts
Directors and common shareholders of Peters, Writer and Christensen, Inc. (PWC) (defendant) held a meeting in which they agreed on a plan to liquidate and dissolve the company. Although PWC’s articles of incorporation required the redemption of the company’s preferred stock, the preferred shareholders (plaintiffs) received no notice of the meeting or the plan. PWC owned stock in another company, Atlantic Improvement Corporation (Atlantic), that could have been sold to cover the full cost of redeeming the preferred shares. However, PWC’s four directors (defendants), who owned a majority of PWC’s common voting stock, decided to refrain from selling the Atlantic stock, which they expected to increase significantly in value at a later date. Again, there was no communication of this decision to the preferred shareholders. Redemption of the preferred shares never occurred. The preferred shareholders brought a class-action suit against PWC and its directors, alleging fraud and breach of fiduciary duty. The trial court held that, although PWC’s directors had violated their company’s articles of incorporation, the preferred shareholders failed to prove actual fraud. The court thus entered a judgment of dismissal. The preferred shareholders appealed to the Colorado Court of Appeals.
Rule of Law
Issue
Holding and Reasoning (Berman, J.)
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