Smith v. Tele-Communication, Inc.

This is an appeal from a judgment of dismissal entered after the court sustained without leave to amend the demurrer of the parent corporation defendant Tele-Communication, Inc. (TCI), and the directors of the subsidiary, Crystal Brite Television, Inc. (Crystal Brite) (the individual defendants). The fifth amended complaint filed by plaintiff John Smith, the minority shareholder of the subsidiary, alleged fraud, breach of fiduciary duties, and sought an accounting. For the reasons set forth below, we reverse.

The novel question is whether, without the consent of the minority shareholder, the parent was entitled to appropriate all of the tax savings produced as a result of consolidated tax returns filed with the subsidiary.

Accepting, as we must in the procedural posture of the case, the truth of the factual allegations of the fifth amended complaint, the following appears: TCI is a Colorado corporation doing business in California; Crystal Brite is a California corporation. Since July 1, 1970, Smith has been the owner and holder of 20 percent of the outstanding stock of Crystal Brite; between July 1, 1970, and October 30, 1975, TCI acquired the remaining 80 percent of…