Course material

1. Raphael, a minority shareholder of the Sample Corporation, claims that
ASSIGNMENT1.Brown, the president and director of a corporation engaged in owning and
operating a chain of motels, was advised upon what seemed to be good authority that a
superhighway was to be constructed through the town of X, which would be a most
desirable location for a motel. Brown presented these facts to the board of directors of the
motel corporation and recommended that the corporation build a motel in the town of X at
the location described. The board of directors agreed, and the new motel was constructed.
The superhighway plans were changed, however, after the motel was constructed, and the
highway was never built. Later, a packinghouse was built on property adjoining the motel,
and the corporation sustained a considerable loss as a result. The shareholders brought an
appropriate action against Brown, charging that his proposal had caused a substantial loss
to the corporation and seeking recovery of that loss from Brown. What result?2. A, B, C, D,
and E constituted the board of directors of the X Corporation. While D and E were out of
town, A, B, and C held a special meeting of the board. Just as the meeting began, C became ill.
He then gave a proxy to A and went home. A resolution was then adopted directing and
authorizing X Corporation’s purchase of an adjoining piece of land owned by S as a site for
an additional factory building. As was known by S, the purchase required approval by the
board of directors. A and B voted for the resolution, and A, as C’s proxy, cast C’s vote in favor
of the resolution. X Corporation then made a contract with S for the purchase of the land.
After the return of D and E, another special meeting of the board was held with all five
directors present. A resolution was then unanimously adopted to cancel the contract with S.
So notified, may S recover damages for breach of contract from X Corporation? Explain.3.
Bernard Koch was president of United Corporation, a closely held corporation. Koch, James
Trent, and Henry Phillips made up the three-person board of directors.At a meeting of the
board, Trent was elected president, replacing Koch. At the same meeting, Trent attempted
to have the salary of the president increased. He was unable to obtain board approval of the
increase because, although Phillips voted for the increase, Koch voted against it. Trent was
disqualified from voting by the corporation’s charter. As a result, the directors, by a two-to-
one vote, amended the bylaws to provide for the appointment of an executive committee
composed of three reputable businesspersons to pass upon and fix all matters of salary for
employees of the corporation. Subsequently, the executive committee, consisting of Jane
Jones, James Black, and William Johnson, increased the salary of the president. Will Koch
succeed in an appropriate action against the corporation, Trent, and Phillips to enjoin them
from paying compensation to the president above that amount fixed by the board of

2. directors? Explain.4. Zenith Steel Company operates a prosperous business. In January,
Zenith’s chief executive officer (CEO) and president, Roe, who is also a member of the board,
was voted a $1 million bonus by the board of directors for the valuable services he provided
to the company during the previous year. Roe receives an annual salary of $850,000 from
the company. Black, Inc., a minority shareholder in Zenith Steel Company, brings an
appropriate action to enjoin the company from paying the $1 million bonus. Explain
whether Black will succeed in its attempt.5. Raphael, a minority shareholder of the Sample
Corporation, claims that the following sales are void and should be annulled. Explain
whether Raphael is correct.a. Smith, a director of the Sample Corporation, sells a piece of
vacant land to the Sample Corporation for $500,000. The land cost him $200,000.b. Jones, a
shareholder of the Sample Corporation, sells a used truck to the Sample Corporation for
$8,400, although the truck is worth $6,000.