The individual defendants, two of the three shareholders in a close corporation, terminated the employment of the plaintiff, the third shareholder, pursuant to an
The defendants moved to dismiss the plaintiff’s complaint, pursuant to Mass. R. Civ. P. 12 (b) (6),
In 1988, the plaintiff and the individual defendants created the defendant corporation for the purpose of conducting a group medical practice devoted to obstetrics and gynecology.
“2. Employment Period. The Corporation hereby hires the Employee to render services for it from the date set forth above to December 31, 1990 and continuing thereafter from year to year until either party shall have given written notice to the other that he (it) wishes to terminate the contract. Such notice shall be effective to terminate this Contract on*406 the last day of the sixth month following the month in which notice was given. This contract may also be terminated as hereinafter provided.”
The contract also contained a termination provision which stated as follows:
“10. Termination of Agreement. This Agreement shall terminate upon the disability (as provided in Section 9 hereof), retirement (as provided in Section 11 hereof), entrance into military service or death of the Employee, upon the disqualification of the Employee from the practice of medicine for any reason or upon the discontinuation of the Employee’s policy of insurance insuring the Employee against acts of malpractice and negligence, or until terminated by either party upon serving proper written notice as hereinabove provided.
“Upon termination, the Employee shall be paid his salary earned to and including the date of termination and his salary for vacation days earned but not yet taken to the date of termination.”
The parties also entered into a stock purchase agreement which provided that, in certain circumstances, the corporation would repurchase a shareholder’s stock at the book value of each share, as determined by the independent accountant of the corporation. According to this Agreement, the obligation of the shareholder to sell and of the corporation to purchase the shares accrues on certain circumstances, including “[u]pan the termination by the Shareholder or by the Corporation of the employment of the Shareholder by the Corporation for any reason whatsoever.”
On Friday, January 28, 1994, sometime after 5 p.m., the defendant, Edward M. Lipman, president of the corporation (president), delivered to the plaintiff a written notice stating that there would be a special meeting of the board of directors of the corporation on the following Monday, January 31, 1994. The notice stated that the purpose of the meeting was to consider the termination of the plaintiff’s employment and the repurchase of the plaintiff’s stock. At the board of director’s meeting the president gave the plaintiff a notice, which
In evaluating the allowance of a motion to dismiss, we are guided by the principle that a complaint is sufficient “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Nader v. Citron, ill Mass. 96, 98 (1977), quoting Conley v. Gibson,
This case places in stark contrast certain generally accepted principles of contract and corporate law. First, there is an implied covenant of good faith and fair dealing between parties to a contract. Anthony’s Pier Four, Inc. v. HBC Assocs.,
Second, the relationship among stockholders in a close corporation must be one of trust, confidence, and absolute loyalty if the enterprise is to succeed. In this regard, a close corporation resembles a partnership. Donahue v. Rodd Electrotype Co.,
Third, the fact that a stockholder has entered into an employment agreement or the fact that stockholders execute a valid stock purchase agreement does not relieve stockholders of the high fiduciary duty owed to one another in all their mutual dealings. See King v. Driscoll,
Because there is a stock purchase agreement, the method of determining the value of the plaintiff’s shares on proper termination is not subject to question. A duty of good faith and fair dealing exists during the course of events leading up to and including termination, but that duty is to be evaluated
Thus, we are faced with a termination without cause on proper notice, in accordance with the plaintiffs employment contract freely and mutually agreed to at the outset of his employment. The plaintiff received all that he had bargained for, i.e., the book value of his stock and six-months’ notice of his termination.
Judgment affirmed.
Notes
A fourth doctor was also one of the founders of the corporate defendant, but subsequently left the practice and is not a party to this litigation.