## Facts

- Superior Engraving Co., Inc. was a closely held corporation whose stock had been owned equally by three shareholders; after deaths and transfers, Girard Dietrich’s estate held 50 shares.
- At Dietrich’s death in March 1968, the board included Dietrich, his daughter Margaret A. Schwartz, and two Marien family members.
- A special board meeting was noticed for May 6, 1968, to fill Dietrich’s board vacancy and to consider purchasing Dietrich’s stock and selling treasury stock.
- At that meeting, the Marien directors elected Edward Marien to the vacant board seat.
- The three Marien directors then voted to sell five treasury shares: one each to the three Marien brothers and one each to two long-time corporate employees.
- After the sale, 105 shares were outstanding: 50 held by the Dietrich estate, 53 held by the Marien family, and one share held by each employee-purchaser, giving the Marien family voting control by one share even if both employees aligned with the estate.
- Schwartz promptly objected and demanded rescission, asserting she was not offered a proportional opportunity to buy treasury shares on the same terms and that the issuance used corporate power to shift control.

## Issues

1. Whether directors of a close corporation breach fiduciary duties by selling treasury shares to themselves and allied purchasers to secure voting control without offering the minority shareholder a proportional opportunity to buy on the same terms.
2. Whether the record permitted summary judgment on the fiduciary-duty claim, or whether disputes about purpose, fairness, and motive required trial.

## Decision

- The court affirmed denial of the plaintiff’s motion for summary judgment.
- The court held the record raised triable issues of fact concerning the directors’ motives, the transaction’s fairness, and whether the issuance served a proper corporate purpose or primarily entrenched control.
- The court declined to declare the issuance unlawful as a matter of law on the summary-judgment record and remitted for further proceedings.
- The dismissal on the merits as to the employee-purchasers was left undisturbed.

## Legal Principles

- Directors owe fiduciary duties of good faith and proper corporate purpose, and may not use stock issuance power as a device to perpetuate control or obtain an unfair advantage over other shareholders.
- Control-shifting issuances of treasury stock are subject to close judicial scrutiny; legitimacy turns on purpose, fairness, and context rather than a categorical rule.
- A shareholder’s “equal opportunity” claim to purchase treasury shares is assessed through fiduciary-duty analysis; a proportional offer to all shareholders is not automatically required in every case.
- Summary judgment is generally improper where intent, fairness, and business purpose are disputed and require fact-finding.

## Conclusion

The court held that a control-affecting sale of treasury shares in a close corporation requires fact-intensive review of directors’ good faith, purpose, and fairness, and that those disputed questions prevented resolving the fiduciary-duty claim by summary judgment.


Schwartz v. Marien, 37 N.Y.2d 487, 373 N.Y.S.2d 122, 335 N.E.2d 334 (N.Y. 1975)