Goode v. Ryan

Supreme Judicial Court of Massachusetts · 1986 · Corporations

489 N.E.2d 1001 (1986)

Updated August 22, 2026

CorporationsClose corporationsShareholder fiduciary dutiesStock redemptionclose corporationfiduciary dutyminority shareholdermajority shareholder

Facts

The Marr estate owned 800 shares of Gloucester Ice & Cold Storage Co., a close corporation, while the defendants collectively owned 8,125 shares, or 71.6% of the stock. No articles, by-laws, or shareholder agreements required redemption of shares on a shareholder's death or otherwise restricted transfer. The plaintiff repeatedly asked that the estate's shares be purchased or redeemed, but the majority only made and later withdrew one offer, and ultimately refused to redeem the shares. The estate later received the same per-share liquidating distributions as other shareholders when Gloucester sold its assets and dissolved.

Issue

Does the fiduciary duty that shareholders in a close corporation owe one another require majority shareholders, or the corporation, to purchase or redeem the shares of a deceased minority shareholder upon the estate's request when no agreement or corporate governance provision imposes that obligation?

Rule

In a close corporation, shareholders owe one another a fiduciary duty of utmost good faith and loyalty, but that duty does not by itself require majority shareholders or the corporation to purchase or redeem a minority shareholder's shares on death or upon request. In the absence of an agreement among shareholders, a corporation-shareholder agreement, or a provision in the articles of organization or by-laws, there is no obligation to buy out the minority's shares unless there is oppressive conduct or other misconduct violating fiduciary duties.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeview Marine Supply, Inc., a close corporation in Portland, Maine, has six shareholders. After minority shareholder Nora Kim dies, her estate asks the two controlling shareholders to buy the estate's shares immediately so the executor can close probate, but the articles, by-laws, and all shareholder agreements are silent on death-triggered redemptions, and the estate continues to receive all notices and distributions given to other shareholders.

If the estate sues claiming the controllers' fiduciary duty of utmost good faith and loyalty requires them or the corporation to purchase the shares, how should the court rule?

Explanation. The majority rule is that shareholders in a close corporation owe one another fiduciary duties, but those duties do not by themselves create a compulsory buyout right. Where there is no agreement, no charter or by-law provision requiring redemption, and no oppression or self-enrichment at the minority's expense, the majority's refusal to purchase a deceased shareholder's shares is not a breach.