Fitzgerald, J. Williams and Coleman, JJ., concurred with Fitzgerald, J. Lindemer and Ryan, JJ., took no part in the decision of this case. Kavanagh, C.j. (dissenting). Levin, J., concurred with Kavanagh, C. J.
1. Corporations -- Directors -- Contracts -- Fairness.
A contract between a corporation and one of its officers or directors must be fair and in the interest of the corporation.
2. Corporations -- Directors -- Contracts -- Fairness -- Burden -- Statutes.
When the validity of a contract between corporations having common directors is questioned, the corporation act puts the burden of proving the fairness of the contract on the party asserting its validity (MCL 450.13, 450.1546).
3. Corporations -- Contracts -- Directors -- Enrichment -- Fairness -- Burden of Proof.
In an instance of alleged enrichment of a director at corporate expense by a contract, the burden resting on the director to establish fairness requires not only a showing of "fair price" but also a showing of the fairness of the bargain to the interests of the corporation; only when a convincing showing is made in both respects can "fairness" be said to have been established under the statute which puts the burden of proving the validity of a contract between corporations having common directors on the corporation asserting the validity of the contract (MCL 450.13, 450.1546).
4. Corporations -- Directors -- Contracts -- Fairness -- Burden.
A plaintiff lessor corporation did not meet its burden of showing fairness of a five-year lease to the interests of the lessee corporation, which had a director in common with the plaintiff, where the proofs showed that the lessee corporation, an insurance company, was in financial trouble, had been warned by the state insurance bureau against over-expansion because of a "surplus drain", and later collapsed, and where no proofs were adduced on the necessity of the lease to the lessee, whether a one-year lease would have been wiser, whether the lessee was in a position to take on additional space in view of its financial condition, whether it was able to pay the rent, what its five-year forecast was, and whether any of these questions had been answered by the lessee's board of directors (MCL 450.13, 450.1546).
Kavanagh, C. J., and Levin, J.
5. Corporations -- Directors -- Contracts -- Ratification.
An unfair contract between a corporation and one of its officers or directors is affirmable at the option of the entity which is treated ...