Meiselman v. Meiselman

Court of Appeals of North Carolina · 1982 · Corporations

295 S.E.2d 249 (1982)

Updated August 1, 2026

Corporationsreasonable expectationsoppressionclose corporationminority shareholderbuyoutfair valuejudicial intervention

Facts

Michael and Ira Meiselman were minority and controlling shareholders, respectively, in a group of closely held family corporations, with Ira controlling Eastern, the parent corporation, since 1968. Michael claimed Ira had totally excluded him from participation in management, fired him, denied him benefits of ownership, and left his substantial stock interest effectively unusable as current income despite the corporations' large and growing book value. Michael sought relief other than dissolution, specifically a buyout at fair value, under G.S. 55-125.1. Separately, Ira formed Republic, a corporation he solely owned, and caused Eastern to enter a management contract with Republic that produced profits solely for Ira over Michael's repeated objections.

Issue

Whether a minority shareholder seeking relief short of dissolution under G.S. 55-125.1 must show bad faith, oppression, deadlock, or mismanagement, or instead need show only that relief is reasonably necessary for his protection because fairness and the equities show real harm. Also, whether a controlling shareholder and director breaches fiduciary duty by causing the corporation to enter a profit-generating contract with a corporation he alone owns over the minority shareholder's objection.

Rule

Under G.S. 55-125(a)(4) and G.S. 55-125.1, a trial court has plenary power to grant relief other than dissolution whenever such relief is reasonably necessary for the protection of the complaining shareholder. A shareholder seeking such relief need not prove bad faith, mismanagement, wrongful conduct, deadlock, or statutory oppression; basic fairness and real harm are enough. Directors, officers, and majority shareholders stand in a fiduciary relation to the corporation and its shareholders and may not obtain for themselves, through corporate action, an advantage not common to all interested parties.

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In Raleigh, Oak Hollow Properties, Inc. is a profitable closely held real-estate company. Nina Alvarez owns 32% of the shares, but her brother Mateo Alvarez controls the board, removed her from employment, excludes her from management decisions, and keeps all earnings in the company so that Nina receives only minimal current return from a multimillion-dollar equity stake.

Nina petitions under a statute authorizing relief other than dissolution whenever it is reasonably necessary for the protection of a complaining shareholder, and seeks a court-ordered buyout at fair value. Mateo argues Nina must prove bad faith, deadlock, or statutory oppression before any relief can be granted. What is the best answer?

Explanation. The majority construed the statute broadly. Relief short of dissolution may be granted whenever it is reasonably necessary to protect the complaining shareholder. The shareholder need not prove bad faith, mismanagement, deadlock, or statutory oppression; basic fairness and real harm suffice.