Court Opinion

ID: 6762120
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:32:39.822743+00
Date Added: 2024-06-11T16:02:37.248807
License: Public Domain

Wright, J.,
concurring in part and dissenting in part. I heartily agree with the majority’s discussion of the effects of stock ownership in a close corporation, as compared to equity ownership in a corporation with a large number of *111stockholders where the stock is publicly traded. Ofttimes the relationship between the shareholders in a close corporation is premised upon mutual confidence and trust. Ownership in a close corporation does indeed expose a minority stockholder to oppression by the majority. The trend of the law in this country is represented by Donahue v. Rodd Electrotype Co. of New England, Inc. (1975), 367 Mass. 578, 328 N.E. 2d 505. In that case the Massachusetts Supreme Court held that majority stockholders in a close corporation should be held to a strict standard of fiduciary duty when minority stockholders were, in effect, “frozen out” through exorbitant salaries, self-dealing and the like, and their ability to receive reasonable dividends was obviously undermined. There certainly is no ready market for the stock of a minority shareholder in a close corporation. The modern trend in the law has been to provide relief to a minority stockholder in a close corporation who is forced into an unfair situation from which he cannot extricate himself. Donahue, supra, at 591-592, 328 N.E. 2d at 514-515.
Accordingly, I accept the concept that in situations such as we may have here, we should impose upon majority shareholders a heightened fiduciary duty to minority shareholders in a close corporation and sanction a direct action against the alleged wrongdoers. Construing the pleadings in this case in the most liberal fashion, I believe Count 7 of plaintiff’s complaint may state a cause of action for what amounts to a freeze-out. However, I am not prepared to accept the third paragraph of the syllabus announced by the majority outside the context of the facts alleged in this case. I am concerned that applying the third paragraph of the syllabus to a situation where there is no potential of demonstrating a freeze-out will amount to repeal of Civ. R. 23.1 as it relates to all actions by disgruntled minority shareholders in close corporations. To my mind this would be both unwise and outside our authority to, in effect, amend the Civil Rules in this manner. Thus, I would limit the syllabus law in this case to situations where the plaintiff can demonstrate an effort to “freeze him out” as a stockholder or where he is directly affected through loss of dividends, company employment or the like. Thus, I can concur only in paragraphs one and two of the syllabus in this case and in the judgment announced by the majority.