Smith v. Atlantic Properties, Inc.
Massachusetts Appeals Court
12 Mass. App. Ct. 201, 422 N.E.2d 798 (1981)
Louis Wolfson (defendant), Paul Smith, Abraham Zimble, and William Burke each owned 25 percent of the outstanding shares of Atlantic Properties, Inc. (Atlantic). Atlantic’s bylaws stated that no corporate action could be taken without an affirmative vote of 80 percent of the outstanding stock. This provision effectively meant that any decision could be vetoed by one of the four partners. When Atlantic began to turn a profit, Smith, Zimble, and Burke (plaintiffs) wanted to declare dividends. Wolfson, however, repeatedly voted against declaring dividends, instead wanting to devote the funds to repairs on the property. The plaintiffs agreed to devote a moderate amount of the funds to repairs, but maintained that declaring dividends was the correct approach. Eventually, Atlantic accumulated so much profit that they were in excess of the IRS limits, which provided that at a certain point of profit, corporations must declare dividends. Wolfson still refused to vote in favor of declaring dividends and because of the 80 percent provision, Atlantic was not able to do so. The IRS accordingly assessed penalties against Atlantic for seven straight years, with Wolfson still refusing to give in. After about four years of the IRS penalties, the plaintiffs brought suit, seeking reimbursement to Atlantic from Wolfson for the IRS penalties. The Massachusetts Superior Court found in favor of the plaintiffs, holding that Wolfson’s actions were based in part on a desire to avoid tax payments and that Wolfson failed to present a definite program for repairs that would satisfy an IRS inquiry into the dividend matter. Wolfson appealed.
Rule of Law
Holding and Reasoning (Cutter, 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 724,000 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 724,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 45,600 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.