Katzowitz v. Sidler case brief

Katzowitz v. Sidler case brief summary
249 N.E.2d 359 (1969)

CASE SYNOPSIS

Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department (New York) which affirmed as modified a judgment of the trial court dismissing the complaint of plaintiff as untimely because of his failure to exercise his pre-emptive right to purchase additional stock.

CASE FACTS
Plaintiff instituted a declaratory judgment action to establish his right to a proportional interest in assets of a closed corporation in liquidation. The trial court found plaintiff's protest untimely because of failure to exercise his pre-emptive right to purchase additional stock and the reviewing court affirmed.

DISCUSSION

• The instant court reversed, holding that defendants should recover their additional investment before distribution. 
• Judicial review of a stockholder's right not to purchase was limited to whether the additional offering should be condemned because the sale price was not fixed with reference to financial considerations respecting the ready disposition of securities. 
• Plaintiff's right not to purchase was seriously undermined if the stock offered was worth substantially more than the offering price, since any such purchase diluted his interest and impaired his original holding.

CONCLUSION
Reversed because plaintiff's right not to purchase was seriously undermined if the stock offered was worth substantially more than the offering price, since any such purchase diluted his interest and impaired his original holding.

Recommended Supplements for Corporations and Business Associations Law