Appeals, Nos. 149, 150, 151, March T., 1957, from decree of Court of Common Pleas of Butler County, June T., 1956, No. 3, in Equity, in case of Leah Rush et al. v. Butler Fair & Agricultural Association et al. Decree reversed.
Carmen V. Marinaro and Leonard L. Scheinholtz, with him Robert J. Dodds, Jr., and Reed, Smith, Shaw & McClay, for appellants.
Lee C. McCandless, for appellees.
Before Jones, C.j., Bell, Chidsey, Musmanno, Arnold, Jones and Cohen, JJ.
OPINION BY MR. JUSTICE COHEN
For purposes of this appeal by plaintiffs from the dismissal of their complaint on preliminary objections, the following allegations will be assumed to be true.
On October 22, 1945, the Board of Directors of the Butler Fair and Exposition voted to dissolve the corporation and sell the assets thereof to one of the directors for $14,110. A special stockholders' meeting was called for December 10, 1945, to approve the proposed dissolution and sale of assets. Among the principal assets of the exposition was a leasehold interest in a tract of land in Butler County where annual fairs were conducted. This lease was to expire in November, 1949, and in a letter sent to each shareholder giving notice of the special stockholders' meeting, mention was made of the expiration. However, on November 30, 1945, four days after mailing the notice and eleven days before the meeting, a renewal of the lease was executed by the president and one of the directors of the corporation for an additional period of twenty-five years. Although the original lease had been recorded, the renewal was not. In fact, no notice was ever given to the shareholders of the renewal of the lease notwithstanding that it had a material bearing upon their decision whether to ratify the proposed sale of the assets at the agreed upon price. Consequently, at the special meeting the shareholders voted in favor of the voluntary dissolution and sale of assets although the price paid to them was grossly inadequate
being considerably less than fair market value in view of the extension of the lease.
The corporation was duly dissolved, and in its place a non-profit corporation, The Butler Fair & Agricultural Association was formed. Most of the officers and directors of the Association were formerly officers and directors of the Exposition. Since 1946 annual fairs have been organized and conducted by the Association on the leased property.
In 1955, the School District of the City of Butler purchased the fee of the fair ground and condemned the leasehold interest and facilities owned by the Association. The Association was awarded $160,000 as the fair market value for its interest in the land. In April, 1956, as a result of the publicity given to the award, plaintiffs, shareholders in the dissolved corporation, learned for the first time that officers of the Exposition had secretly entered into the long term lease.
A summons in equity was filed by the plaintiffs on November 12, 1956, and on June 13, of the Following year, they filed the present complaint. The complaint avers that the acts of the individual defendants, former officers and directors of the Exposition, pertaining to the sale of assets and voluntary dissolution constituted a fraud upon the shareholders. The relief sought includes, inter alia, the setting aside of the agreement for the sale of the assets of the Exposition and their assignment to the Association, a declaration that the shareholders of the Exposition are entitled to receive the profits ...