Katzowitz v. Sidler, 249 N.E. 2d 359 (1969) p.198

SUBJECT

preemptive rights

FACTS

Plaintiff shareholder instituted declaratory judgment action to establish his right to proportional interest in assets in liquidation.

PROCEDURE

instituted declaratory judgment action to establish his right to proportional interest in assets in liquidation. The Supreme Court, Special Term, Westchester County, Joseph F. Hawkins, J., dismissed complaint, and appeal was taken. The Supreme Court, Appellate Division, 29 A.D.2d 955, 289 N.Y.S.2d 324, modified, and as modified affirmed, and appeal was taken.

HOLDING

The Court of Appeals, Keating, J., held that where defendant directors of close corporation made no claim that price set for new shares was fair and offered no business justification to sustain price and stock was admittedly sold at less than book value, fact that all stockholders were given an equal opportunity to purchase additional shares, though plaintiff stockholder elected not to, would not prevent court's granting relief to plaintiff stockholder whose interest in corporation was diluted by the offering and plaintiff was entitled to receive proportionate share on liquidation. Order of Appellate Division reversed and judgment granted in favor of plaintiff shareholder.

RATIONAL

Defendants make no claim that the price set was a fair one. Admittedly, the stock was sold at less than book value. The defendant's argument is fallacious. The obvious disparity in selling price and book value was calculated to force the dissident stockholder in to investing additional sums.

Created on: Friday, October 01, 1999 at 12:20:06 (PDT)