Part II The Business Judgment Rule under Connecticut Corporation Law And Commentary On Joy V. North

Abstract

]oy v. North 48 is a shareholder's derivative action against City­ trust, Citytrust Bancorp Inc.'s wholly owned bank subsidiary. Citytrust currently owns an office building in a Norwalk redevelopment area. Its involvement with that building began in 1967, when it signed a 20-year term lease agreement for approximately 9% of the building, which was then still in the planning stage. By the time the building was completed, approximately five years later, it was only half rented and Citytrust had provided unsecured construction financing approximating a million dollars. Thereafter, Citytrust participated in a variety of re-financing arrangements in which it obtained various mortgages in return for further extensions of credit. Various portions of these loans were classified as doubtful and charged off against earnings, once at the behest of the bank examiners. In 1976, approximately a year before it took title to the building, Citytrust extended to the builder loans which exceeded 10 percent of the bank's share­ holder equity and capital, a federal statutory maximum on lending.