Opinion ID: 70923
Heading Depth: 2
Heading Rank: 1

Heading: The sale of FSC treasury stock

Text: FSC proposed to sell about 88,000 shares of its stock held in trusts for which the bank was trustee, including plaintiff's trust. Some, if not all, of the shares were to be purchased by officers and directors of the bank and of FSC. Plaintiff and others consented but withdrew their consent after securing legal counsel, and the proposal was cancelled. Quickly thereafter FSC sold 100,000 shares of its treasury stock in a public offering. The bank asserts that the objects of the offering were to broaden ownership of its stock, increase public trading, and to serve as a mandate to rebuff potential purchasers of FSC. Plaintiff contends that there was no legitimate purpose, that the motive to chill any possible purchase or merger was improper, that the sale diluted his interest as represented by the shares in his trust, that his interests had to be considered, and that the bank failed to make any effort to stop the offering. Murphy testified that FSC did not consider the interests of trust beneficiaries in the sale of FSC treasury stock but rather was taking stock public to enhance the value to all shareholders. He could not say whether the trust committee of the bank—of which he was a member—ever discussed or considered the matter. For the reasons we have discussed we hold, with respect to the sale of treasury stock, that the failure of the bank to consider and assert the interests of beneficiaries of trusts owning FSC stock was a breach of the bank's fiduciary duty as a matter of law. This was a firm and defined transaction, and the responsibility to beneficiaries was clear. The trustee's obligation of undivided loyalty to plaintiff was not eliminated by the fact that dilution of his interests, measured statistically, was not great, or that the decision may have been a reasonable pursuit of FSC's desire for self-preservation, or the argument that after the treasury stock was sold the market value of plaintiff's stock increased.