Brunetti v. Musallam

• Decision Date: 14 October 2004
• Docket Number: 3494.
• Citation: 11 A.D.3d 280,783 N.Y.S.2d 347,2004 NY Slip Op 07360
• Parties: JOSEPH BRUNETTI, Appellant, v. RAMI MUSALLAM et al., Respondents.
• Court: New York Supreme Court — Appellate Division

11 A.D.3d 280

783 N.Y.S.2d 347

2004 NY Slip Op 07360

JOSEPH BRUNETTI, Appellant, v. RAMI MUSALLAM et al., Respondents.

3494.

Appellate Division of the Supreme Court of the State of New York, First Department.

October 14, 2004.

Judgment, Supreme Court, New York County (Karla Moskowitz, J.), entered March 6, 2003, which dismissed plaintiff's complaint with prejudice, bringing up for review an order, same court and Justice, entered February 26, 2003, which granted defendants' motion for summary judgment dismissing the complaint, unanimously reversed, on the law, with costs, the motion denied and the complaint reinstated.

In 1993, plaintiff Joseph Brunetti founded and incorporated Total Network Solutions, Inc. (TNS), an information technology company providing network services as a subcontractor. A few years later, plaintiff sought to expand the company and invited the individual defendants to join the company as shareholders. Plaintiff claims that these defendants forced him out of his position as an officer and member of the Board of Directors of TNS, fraudulently induced him to divest himself of 70% of his shares in TNS, and forced him to surrender his employment rights by becoming an at-will employee. Plaintiff claims that defendants accomplished this by fraudulently misrepresenting that Morgan Stanley, a potential financial contributor of TNS, conditioned an investment of millions of dollars in TNS upon plaintiff divesting himself of shares in the company and becoming an at-will employee. Plaintiff further claims that defendants maintained that unless he signed an agreement to this effect, Morgan Stanley would not invest, leaving TNS unable to operate.

Based on these allegations, plaintiff sued all but one stockholder and ThruPoint, Inc., formerly known as TNS, for breach of fiduciary duty, fraud and, alternately, for rescission of the agreement. Defendants answered raising affirmative defenses of waiver, ratification and estoppel.

Defendants moved for summary judgment, and the court granted the motion and dismissed the complaint with prejudice. Judgment was entered accordingly.

We reverse. It is axiomatic that summary judgment is a drastic remedy and should not be granted where triable issues of fact are raised and cannot be resolved on conflicting affidavits (see Millerton Agway Coop. v Briarcliff Farms, 17 NY2d 57, 61 [1966]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]; Epstein v Scally, 99 AD2d 713, 714 [1984]). Summary judgment is "`[i]ssue-finding, rather than issue-determination'" (Sillman, 3 NY2d at 404, quoting Esteve v Abad, 271 App Div 725, 727 [1947]; accord Epstein v Scally, 99 AD2d at 714). We find that the motion court improperly resolved material issues of fact in favor of defendants.

Plaintiff seeks relief against defendants in their capacities as officers and directors for material misrepresentations which occurred prior to plaintiff's termination. The "relationship between shareholders in a close corporation, vis-à-vis each other, is akin to that between partners and imposes a high degree of fidelity and good faith" (Fender v Prescott, 101 AD2d 418, 422 [1984], affd 64 NY2d 1077, 1079 [1985]). This "strict standard of good faith imposed upon a fiduciary may not be so easily circumvented" (id. at 423). Defendant's reliance upon Ingle v Glamore Motor Sales, Inc. (73 NY2d 183, 187 [1989]) is misplaced as there the issue was...