Friday, November 22, 2013

Marciano v. Nakash case brief

Marciano v. Nakash case brief summary
535 A.2d 400 (1987)

Appellants challenged a decision of the Court of Chancery (Delaware), which held that interested director loans made by appellees were not voidable as self-dealing transactions.

Both parties had entered into a joint venture to market designer jeans. Stock ownership and the composition of the board were shared equally by the parties. Ultimately the board deadlocked over policy issues and a court-approved plan of liquidation followed. Appellees had made loans to the corporation upon which they asserted claims at liquidation. Appellants argued that the debt was voidable under Del. Code Ann. tit. 8, § 144 because it originated in self-dealing transactions.


  • On appeal, appellants argued that the chancery court applied the wrong standard of review for self-dealing transactions and thus its finding of full fairness was erroneous. 
  • The court held that relationship alone was not the only factor to determine if an interested director transaction was void. 
  • Since the loans were made on favorable terms, the loans were not automatically void under the intrinsic fairness test.
The court affirmed the decision of the chancery court, because although appellees' loans originated in self-dealing transactions, the test of intrinsic fairness supported the validity of the loans in light of the financial circumstances of the corporation.

Recommended Supplements for Corporations and Business Associations Law

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