Blank v. Blank

• Decision Date: 03 December 1998
• Citation: 681 N.Y.S.2d 377
• Parties: 1998 N.Y. Slip Op. 11,188 Stephen P. BLANK, as Personal Representative of Leo Blank, Deceased, Appellant, v. Robert BLANK et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 377

681 N.Y.S.2d 377

1998 N.Y. Slip Op. 11,188

Stephen P. BLANK, as Personal Representative of Leo Blank Deceased, Appellant, v. Robert BLANK et al., Respondents.

Supreme Court, Appellate Division Third Department.

Dec. 3, 1998.

Scott T. Horn, New York City, for appellant.

Rivelis, Pawa & Blum LLP (Barry Golomb, of counsel), New York City, for Robert Blank, respondent.

Before CARDONA, P.J., and MERCURE, WHITE, SPAIN and GRAFFEO, JJ.

GRAFFEO, Justice.

Appeal from an order of the Supreme Court (Torraca, J.), entered November 3, 1997 in Sullivan County, upon a decision of the court in favor of defendant Robert Blank.

The nonjury trial of this action involved the Sullivan County business dealings of the Blank brothers and their associates spanning several decades. Leo Blank (hereinafter decedent) and his younger brother, defendant Robert Blank (hereinafter defendant), have been embroiled in protracted litigation since 1977 regarding decedent's claims that defendant mismanaged and misappropriated corporate assets. After decedent's death on February 28, 1992, plaintiff was substituted as the personal representative for decedent. Plaintiff seeks a declaration, inter alia, of the parties' interests in four closely held corporations. ¹ Trial proceedings commenced on January 19, 1988 and concluded on January 7, 1992, prior to decedent's death. Supreme Court dismissed the complaint, declared defendant the sole stockholder of the corporations at issue and found that defendant had not engaged in wrongful conduct toward decedent. Plaintiff appeals.

Before examining the points raised on appeal, a synopsis of the history of corporate formation, adduced from testimony at trial, is necessary since a multitude of transactions underlie the decades of business relationships between the parties. Decedent began building his commercial enterprises in Sullivan County in the 1940s. After World War II, decedent incorporated Sullivan County Building Material Company Inc. with his older brother, Bernard Blank (hereinafter Blank), and defendant Irving Miller, each holding a one-third interest, with decedent serving as president of the corporation. When defendant returned from his service in the Army in 1951, he operated Triangle Service Station, a retail gasoline business situated on premises owned by one of decedent's businesses. In 1952 the first of the subject corporations, County Petroleum Products Inc. (hereinafter County), was incorporated for the purpose of acquiring a gasoline and home heating oil franchise in Sullivan County. Decedent, defendant, Blank and Milton Levine served as corporate subscribers and officers.

At this juncture in the chronology of events, the parties' testimony diverged into contradictory versions as to the ownership interests and intentions of the parties as their business interests evolved. Decedent claimed that at the time of County's formation, the involved parties agreed that Levine would acquire 25% and decedent, defendant and Blank would share equally the remaining 75%. Defendant contested this ownership allocation and instead apportioned the parties' interests one third to Levine, one third to defendant and the remaining one third to decedent, Blank and Miller. Defendant further claimed that none of these individuals paid for corporate shares. It is undisputed, however, that there was no written shareholder agreement or stock certificates issued.

The parties also disagreed on the original financial obligations of the individuals involved with County's creation. Decedent averred that his contribution to County consisted of his negotiations to secure the franchise, his customer list from another business and a $20,000 loan. In contrast, defendant claimed that each individual was to invest one third of $35,000, the operating capital needed on deposit in order to consummate the franchise purchase. Although he paid his share, defendant stated that decedent's and Levine's contributions to County were withdrawn a day later. County's accountant, defendant Ralph Rappaport, testified that corporate records indicated that almost the entire sum on deposit was thereafter withdrawn from County's account and the accounting records revealed no capital contribution by any of the business owners. Years later, in 1956, Levine received a payment from County, with defendant attributing the payment as moneys paid for legal services rendered while decedent characterized the transaction as a buyout of Levine's ownership interest.

When defendant entered the bottled gas market, another corporation was formed, Premium Gas Service Inc. (hereinafter Premium), as evidenced by a certificate of incorporation dated December 8, 1953. Benjamin Goldstein, the attorney who handled the incorporation, testified that decedent requested the corporate formation and intended defendant to manage the business. A formal shareholder agreement was executed on March 7, 1954, with defendant and Alan Laskin each owning 50% interest. With the execution of a written buyout agreement in 1958, defendant acquired Laskin's interest in Premium. Decedent, nevertheless, asserted that he was integrally involved in Premium's business dealings and rescued the corporation from its financial problems in 1958, the same year that County's fuel franchise agreement was due to expire. Decedent claimed credit for attracting and negotiating a franchise deal with a new supplier, Esso, which revitalized the fuel business and made County a heating oil distributor and Premium a gasoline agent for Esso in Sullivan County. In contrast to decedent's testimony, defendant alleged that he initiated the early meetings with Esso representatives; although he acknowledged seeking decedent's assistance, defendant insisted that he negotiated the eventual terms of the franchise agreement. The negotiations culminated in two agreements, signed by defendant as president of Premium and County, with a personal guarantee from decedent on behalf of County and a personal guarantee for Premium executed by defendant.

In 1960 another enterprise, Premium Holding Corporation, was renamed Shelley Realty Corporation (hereinafter Shelley), and its purpose was to manage the real estate assets of the fuel and gasoline businesses operated by Premium and County. Again, there was no shareholder agreement or corporate books. Defendant contested decedent's ownership of Shelley, while 1962 accounting records reflected that its 100 shares were allocated 40% to defendant, 20% to Blank, 20% to Miller and 20% to decedent, which documentation supported decedent's testimony. Rappaport testified that he capitalized Shelley with a transfer of funds from County and Premium, moneys derived from loans made by decedent, Blank, defendant and Miller.

The last corporation at issue, Zenith Services Inc. (hereinafter Zenith), was incorporated in May 1961 as a successor to Premium Service Station, a partnership in which decedent, defendant and Miller each held a one-third interest. Goldstein prepared the incorporation documents but no shareholder agreement or corporate books were located. Rappaport testified that the accounting records showed the capital stock was credited 60% to defendant and 40% to decedent, Blank and Miller.

At trial, decedent essentially relied upon the corporate accounting records, tax returns and financial statements from over 20 years as the basis for his claim of ownership in interest in the four corporations. ² In refutation, defendant insisted that decedent was not a stockholder of any of the subject corporations, that decedent never possessed stock certificates and that there were no agreements to vest decedent with stock. Defendant claimed that any moneys received by decedent from the corporations were merely gifts or distributions, rather than payments or dividends made to a stockholder. Supreme Court determined that the proof established there was no issuance or transfer of stock to decedent nor any agreement to do so, and therefore declared defendant the sole stockholder of the four corporations. The court also found that defendant had not violated any fiduciary obligation toward decedent and denied any compensatory or punitive damages or other equitable relief to decedent.

On this appeal, plaintiff contends that res judicata and/or collateral estoppel barred Supreme Court from declaring defendant the sole shareholder of the four corporations, premised on orders or judgments in prior proceedings between the parties. Section 29 of Restatement (Second) of Judgments defines issue preclusion ³ as "[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim". The applicability of collateral estoppel requires an identity of issue which has been decided in the prior action and is determinative of the instant action, and there must have been a full and fair opportunity to contest the issue on which the estoppel is sought (see, Matter of Juan C. v. Cortines, 89 N.Y.2d 659, 664, 657 N.Y.S.2d 581, 679 N.E.2d 1061; Schwartz v. Public Adm'r of County of Bronx, 24 N.Y.2d 65, 71, 298 N.Y.S.2d 955, 246 N.E.2d 725; La Duke v. Lyons, 250 A.D.2d 969, ----, 673 N.Y.S.2d 240, 243; Jung v. Gemmette, 249 A.D.2d 827, ----, 671 N.Y.S.2d 862, 864, lv. denied 92 N.Y.2d 807, 678 N.Y.S.2d 593, 700 N.E.2d 1229; Lake George Park Commn. v. Salvador, 245 A.D.2d 605, 607, 664 N.Y.S.2d 847, lv. dismissed, lv. denied 91 N.Y.2d 939, 670 N.Y.S.2d 402, 693 N.E.2d 749).

Plaintiff relies on prior Supreme Court and appellate decisions establishing decedent's shareholder status. In January 1977, decedent commenced a CPLR article 78 proceeding to compel Premium and defendant to permit inspection of the corporate books and records in accordance with Business Corporation Law § 624. Supreme Court granted...