Katzowitz v. Sidler

Facts

Appellant is a director and stockholder with Appellees in Sulburn Holding Corp, (Sulburn), a closely held corporation. The parties had been engaged in several corporate ventures as equal partners receiving equal compensation from the corporations they controlled. Eventually Appellees joined forces to oust Appellant. The parties then entered into a stipulation whereby Appellant withdrew from active participation in the operations of the business but would receive equal compensation and other fringe benefits as that paid to Appellees. In December of 1961, Sulburn was indebted to the parties in the amount of $2,500 each. Appellees wanted Sulburn to loan this money to another corporation instead of repaying the debt. Appellant refused to invest any additional funds in Sulburn. Appellees called a special meeting of the board excluding Appellant and approved the issuance of $75 shares of common stock at $100 per share. The amount to be raised was the exact amount owed by the corporation to its shareholders. The offering was at 1/18th the book value of the stock. Notice was mailed to each stockholder that they had the right to purchase 25 shares and failure to do so by a certain date would constitute a waiver. On August 31, 1962, the directors unanimously voted to dissolve the corporation. Upon dissolution, Appellees received 18,885.52 and Appellant received $3,147.59.