Farber v. Servan Land Company, Inc.

662 F.2d 371 (5th Cir. 1981)

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Nature of the Case

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Facts

Servan, Inc. (D) acquired 180-acres upon which they wanted to build a golf course. Servan, Inc. refrained from voting upon whether they wanted to buy an additional 160-acres that were adjacent to the 180-acres. Servan, Inc. wanted to investigate further the additional 160-acres before they decided to buy it. Two major shareholders (Ds) of Servan, Inc. bought the 160 additional acres for themselves. Farber (P) brought suit against the two shareholders for taking a corporate opportunity that belonged to Servan, Inc. P claims that the land the two shareholders purchased was of interest to the corporation and that it was, therefore, the duty of the two shareholders to first offer the land to the corporation and allow disinterested shareholders to vote on the matter. The court found that P was entitled to an appraisal to determine whether the corporation should have received a larger portion of the total sale price of the properties than the $5 million allocated by Serianni and Savin. It also held that Serianni and Savin should have informed the directors of the opportunity to purchase Mr. Farquhar's 160 adjoining acres.' But the court also noted that their purchase, 'worked to the distinct advantage of the corporation and not to its detriment because it enhanced the value of the major corporate asset the golf course.' It also held that the 160 acres did not constitute a corporate opportunity nor was its acquisition adverse to the interests of the corporation. The mere fact that the land was adjacent to the corporate land in itself does not support a conclusion that therefore the acreage was a corporate opportunity. The property had no substantial relation to the corporation's primary purpose of operating a golf course, and the individual purpose was not antagonistic to any significant corporate purpose and thus the facts do not fall within the general proposition that an officer of a corporation cannot acquire title to or an interest in property prejudicial to the corporation. P was not entitled to recover for preemption of a corporate opportunity. P appealed. The case was remanded. The district court failed to explain why it found that Serianni and Savin had a duty to offer the opportunity to purchase the 160 acres to the corporation, but it reaffirmed its finding that 'they had satisfactorily sustained the burden of establishing the propriety of the transaction.' The corporation had taken no action to acquire it at a previous annual meeting of the corporation, Ds' actions were ratified and approved by a special meeting of the stockholders and Ds were not taking advantage of the corporation. This appeal resulted.