Fought v. Morris, 543 So. 2d 167 (Miss. 1989)

Facts

Fought, Morris, Strong, and Peyton formed Vicksburg Mold and Die.  Each had 25 shares and they had a stock redemption agreement where if selling your shares, they would be offered to the company first.  Strong left and the three remaining divided the shares.  When Peyton was going to leave, Morris sought to buy all of Peyton’s shares and thus release Peyton as a guarantor of a note.

Procedural History

Fought sued but the chancellor concluded that Morris had not breached his fiduciary responsibility and denied all relief prayed for by Fought.

Issue(s)

Did the chancellor err in finding that Morris did not breach his fiduciary duty?

Holding(s)

Yes.

Reasoning/Analysis

The Court found that where a majority shareholder stands to benefit as a controlling stockholder, the law requires the majority’s action to be intrinsically fair to the minority interest.  Blind adherence to corporate statutes may not be used to circumvent corporate agreements.  Morris’ intent in buying Peyton’s stock was to freeze out Fought.  Morris therefore breached his fiduciary duty in purchasing all of Peyton’s stock, contrary to the Stock Redemption Agreement.

Judgment/Outcome

The Court reversed the judgment of the trial court.