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Keywords

contractfiduciarycorporationfiduciary dutybreach of fiduciary duty

plaintiffdefendanttrialmotionfiduciarycorporationgood faith

Related Cases

Jacobson v. Yaschik, 249 S.C. 577, 155 S.E.2d 601

Facts

Frances C. Jacobson owned 50 shares (25%) of Syndicate, Inc., while Henry Yaschik owned 150 shares (75%) and was the corporation's president and general manager. Jacobson sold her shares to Yaschik for $30,000, unaware that he had a contract to sell all shares of the corporation for $144,000, which valued her shares at $36,000. Jacobson claimed that Yaschik's failure to disclose this information constituted fraudulent concealment and a breach of fiduciary duty.

Frances C. Jacobson, the plaintiff herein, instituted this action against Henry Yaschik, the defendant herein, and in her complaint she set forth two causes of action.

Issue

Did Henry Yaschik breach his fiduciary duty to Frances C. Jacobson by failing to disclose the higher offer for the corporate stock before purchasing her shares?

The issue involved in this case is whether, under the circumstances above set forth, it was the duty of the defendant, acting in good faith, to disclose to the plaintiff the facts bearing upon or which might affect the value of her stock.

Rule

A corporate officer or director has a fiduciary duty to disclose material information affecting the value of stock to minority shareholders, especially when they possess special knowledge that the minority does not.

The majority rule is that an officer or director of a corporation does not stand in a fiduciary relation with a stockholder with respect to his stock and in the absence of circumstances from which fraud or unfair dealings may be inferred, an officer or director of a close corporation is under no duty to volunteer information to a stockholder from whom he purchases stock.

Analysis

The court determined that Yaschik, as a corporate officer and majority stockholder, had a duty to disclose the offer he received for the corporation's stock. His failure to inform Jacobson of this offer, while purchasing her shares at a lower price, constituted a breach of his fiduciary duty. The court emphasized that nondisclosure becomes fraudulent when there is a duty to disclose, particularly in a fiduciary relationship.

We think that the holding in the Black case commits this court to the minority rule above stated, that officers and directors of a corporation stand in a fiduciary relationship to the individual stockholders and in every instance must make a full disclosure of all relevant facts when purchasing shares of stock from a stockholder.

Conclusion

The court affirmed the lower court's decision, holding that Yaschik's actions violated his fiduciary duty to Jacobson, and required her to elect between her two causes of action.

The judgment of the lower court, as modified herein, is affirmed.

Who won?

Frances C. Jacobson prevailed in the case as the court upheld her claims against Yaschik for breach of fiduciary duty.

The only other question for consideration is whether the trial judge erred in granting the motion of the defendant to require the plaintiff to elect.

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