## Facts

- A closely held corporation owned a significant block of common stock in a profitable, dividend-paying operating company controlled by an individual stockholder-manager.
- The stockholder-manager dominated the operating company’s affairs and caused the company to engage in several disputed transactions.
- In 1967, the operating company donated corporate stock valued at roughly $528,000 to a charitable foundation controlled by the stockholder-manager; the foundation was a recognized charitable organization.
- The plaintiff alleged the donation was excessive, self-interested, and beyond permissible corporate charitable activity.
- The plaintiff also alleged the stockholder-manager diverted corporate benefits by using corporate funds related to the acquisition and later resale of a New York Stock Exchange seat, retaining profits and related brokerage commissions personally.
- Additional transactions (including foreign transfers and other dealings) were challenged as mismanagement and self-dealing.
- The plaintiff sought (i) an accounting for alleged losses to the operating company and improper gains to individuals and (ii) appointment of a liquidating receiver, claiming the conduct threatened the corporation’s existence.

## Issues

1. Whether the alleged conduct constituted gross mismanagement or abuse of control justifying appointment of a liquidating receiver for a solvent corporation.
2. Whether the controlling stockholder-manager had to account to the corporation for profits and commissions connected to a New York Stock Exchange seat acquired with corporate funds.
3. Whether the 1967 stock donation to a charitable foundation was authorized and valid under Delaware law, or instead amounted to ultra vires action or corporate waste.

## Decision

- The court denied the request to appoint a liquidating receiver, finding the extraordinary remedy unjustified for a profitable, solvent corporation.
- The court ordered the controlling stockholder-manager to account to the corporation for profits from the sale of the New York Stock Exchange seat and for certain related brokerage commissions.
- The court upheld the 1967 charitable stock donation as a valid corporate charitable contribution protected by business judgment, not constituting waste on the record presented.

## Legal Principles

- Appointment of a liquidating receiver for a solvent corporation is an extraordinary remedy requiring a strong showing that mismanagement or abuse of control threatens the corporation’s continued existence.
- Delaware law permits corporate charitable contributions; absent self-dealing or waste, the size and wisdom of a charitable gift are generally matters for director judgment rather than judicial second-guessing.
- A corporate charitable contribution may be sustained where made to a bona fide charity and not shown to be so disproportionate to corporate resources or so irrational as to constitute waste.
- A controlling stockholder or officer must account for personal profits derived from corporate assets or opportunities; diversion of resale proceeds and commissions tied to an asset acquired with corporate funds is a breach of fiduciary duty.
- Targeted equitable relief (such as an accounting and restoration) can address fiduciary breaches without dismantling an otherwise successful enterprise.

## Conclusion

The court declined to liquidate a prosperous corporation based on disputed management decisions, required an accounting for the controller’s diversion of Exchange seat-related profits and commissions, and sustained a substantial charitable stock donation as lawful and within protected business judgment rather than waste.


Theodora Holding Corp. v. Henderson, 257 A.2d 398 (Del. Ch. 1969)