The law presumes such transactions to be invalid and imposes upon the director the burden of demonstrating their fairness to the corporation. Id. § 55–8–31(a)(3) ; Green River Mfg. v. Bell, 193 N.C. 367, 367, 137 S.E. 132 (1927).The issues necessarily presented by either cause of action do not support the bankruptcy court's grant of summary judgment, because they are not identical to the issues that must be litigated in a § 523(a)(6) claim.
It is firmly established in our jurisdiction that a person occupying a place of trust, or a fiduciary relation, should not put himself in a position in which self interest conflicts with any duty he woes to those for whom he acts and upon purchasing the property of those to whom he owes a fiduciary duty he must affirmatively show full disclosure and fair dealing. McIver v. Hardware Co., 144 N.C. 478, 57, S.E. 169; Hospital v. Nicholson, 189 N.C. 44, 126 S.E. 94; Manufacturing Co. v. Bell, 193 N.C. 367, 137 S.E. 132. The duty which plaintiff contends has been breached is a duty owed primarily to the corporation.
There is the further rule, which is without dispute, that is, that the burden is always upon the directors in transactions of the type here involved to show that the transaction was fair, in good faith, open, and above board. Chipola Valley Realty Co. v. Griffin, 94 Fla. 1151, 115 So. 541; Schemmel v. Hill, 91 Ind. App. 373, 169 N.E. 678; Hoyt v. Hampe, 206 Iowa 206, 214 N.W. 718, 220 N.W. 45; Witter v. Le Veque, 244 Mich. 83, 221 N.W. 131; Stanton v. Occidental Life Ins. Co., 81 Mont. 44, 261 P. 620; Hine v. Lausterer, 135 Misc. 397, 238 N.Y.S. 276; Green River Mfg. Co. v. Bell, 193 N.C. 367, 137 S.E. 132; Nicholson v. Kingery, 37 Wyo. 299, 261 P. 122. See, also, cases cited in 2 Thompson on Corporations, Third Edition, page 815, note 96. [4-6] Applying these well established rules to the facts before us we must hold, first, that it was the duty of these two defendant-directors to disclose to the other directors everything they knew regarding the value of this Kingsbury County Holding Corporation stock; and, second, the burden was upon these defendants to show that such disclosure was made.
Exum v. Bowden, 2 Ired. Eq., 281; Wilson v. Doster, 7 Ired. Eq., 231; Lemly v. Atwood, 65 N.C. 46." Ruffin v. Harrison, 90 N.C. 569; see Mfg. Co. v. Bell, 193 N.C. 367. It is well settled that he who knowingly participated in the fruits of the misappropriation is responsible.
Upon this principle it is held that a director who exercises a controlling influence over codirectors cannot defend a purchase by him of corporate property on the ground that his action was approved by them." Mfg. Co. v. Bell, 193 N.C. 367; Cotton Mills v. Knitting Co., 194 N.C. 80; Morris v. Y. B. Corp., 198 N.C. at p. 713. The court below charged the jury in the very language of the Hospital case, supra.
Upon this principle it is held that a director who exercises a controlling influence over codirectors cannot defend a purchase by him of corporate property on the ground that his action was approved by them." This statement of the law, and its application to a sale of corporate property to an officer or director is approved in Manufacturing Co. v. Bell, 193 N.C. 367. It is there held that such sale is not void; it is voidable, however, when it is found as a fact that the sale was not properly authorized by the corporation, or that it was not made in good faith for a fair consideration, or that it was not free from the taint of imposition, undue advantage or fraud. The foregoing principle, and its application is not restricted to a sale or conveyance of corporate property to its officer or director personally; it may be invoked to set aside a sale or conveyance made to a corporation in which its officer or director is interested as a stockholder.
The purchaser has the "burden of establishing that the purchase is fair, open, and free from imposition, undue advantage, actual or constructive fraud." Mountain Top Youth Camp v. Lyon, 20 N.C. App. 694, 697, 202 S.E.2d 498, 500 (1974) (quoting Green River Mfg. Co. v. Bell, 193 N.C. 367, 371, 137 S.E. 132, 134 (1927)). While the plaintiffs bore the burden of offering evidence showing invalidity of the 16 June 1962 deed to the corporation, the defendants had the burden of rebutting the presumption of invalidity of the 25 March 1969 deed from the corporation to Mary H. Van Dorp. Consequently, the plaintiffs' failure to offer any evidence as to the invalidity of the 16 June 1962 deed requires the reversal of the trial court's refusal to grant the defendants' motion for directed verdict.
" Hospital v. Nicholson, 189 N.C. 44, 49, 126 S.E. 94, 97 (1924). See also, Underwood v. Stafford, 270 N.C. 700, 155 S.E.2d 211 (1967); Mfg. Co. v. Bell, 193 N.C. 367, 137 S.E. 132 (1927). In Mfg. Co. v. Bell, supra, at p. 371, our Supreme Court succinctly stated several principles of law which govern the determination of the validity/invalidity of a deed made by a corporation to its officers or directors.