Smith v. Atlantic Properties, Inc.
Appeals Court of Massachusetts
422 N.E.2d 798 (1981)
Wolfson (defendant) held 25% of Atlantic Properties along with three co-owners (plaintiffs), and Atlantic's bylaws required an 80% vote for corporate action, effectively giving Wolfson veto power; he repeatedly blocked declaring dividends even after profits exceeded IRS thresholds requiring distribution, resulting in seven years of IRS penalties against Atlantic. The trial court found Wolfson's motive was partly to avoid his own taxes and held him liable for reimbursing the penalties.
Whether a minority stockholder in a close corporation that requires a unanimous vote for corporate action may repeatedly vote against an action for personal reasons if the action would be in the best interest of the corporation.