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Allen
Supreme Court of New York 25 N.Y.S.2d 667 (1940)
HELD V2
DISCUSSION
The court held trust company had no interest in third-party
corporation; thus, defendant officers had not breached their
duty.
FACTS V2
Alleghany Corporation held $23,500,000 in unsecured bonds
in Missouri Pacific. Alleghany purchased several properties,
and in 1930 still owed over $10,000,000 on the purchase
price. Alleghany was unable to borrow the money, and
instead, on November 18, 1930, sold $10,000,000 in its
Missouri Pacific bonds to banking firm J.P. Morgan & Co. for
cash at par value, with an option for Alleghany to buy back
the bonds within six months for the price at which they were
sold to J.P. Morgan. Guaranty Trust Company (Trust Company)
made a written commitment to J.P. Morgan to participate in
the purchase, and Guaranty Company of New York (Guaranty
Company), a subsidiary of Trust Company, agreed to take
over the bonds upon expiration of the six month repurchase
option, if Alleghany failed to exercise the option. The bonds
had already been steadily declining in value in 1930. On
November 5, 1930, when the board of directors of Trust
Company approved the transaction, the bonds were selling at