Brief Fact Summary. Appellants, Carl Pedro et al., appealed a lower court judgment that awarded Respondent, Alfred Pedro, damages stemming from a breach of Appellants’ fiduciary duty towards Respondent.
Synopsis of Rule of Law. Majority shareholders who buy back shares from another shareholder are obligated to pay fair market value if they have breached a fiduciary duty owed to the shareholder.
Clearly erroneous findings are manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole.View Full Point of Law
Issue. The issue is whether Appellants violated a fiduciary duty owed to Respondent by the termination of Respondent and the subsequent buyout of his shares below market value.
Held. The court affirmed the trial court, holding that Appellants did breach their duty to Respondent. The duty can be breached in more ways than just a diminishing of the stock value, such as by terminating Respondent and forcing a share sale at the agreement’s stated price of 75% market value. There was also evidence that, in the facts surrounding the structure of this close corporation, that there was an expectation of lifetime employment for the shareholders.
Discussion. The facts of the case at issue demonstrated a compelling case for the appraisal and sale of shares back to the corporation from a shareholder who was treated unfairly.