Goldberg v. Goldberg

• Decision Date: 25 April 1988
• Citation: Goldberg v. Goldberg, 527 N.Y.S.2d 451, 139 A.D.2d 695 (N.Y. App. Div. 1988)
• Parties: Mark S. GOLDBERG, etc., Appellant, v. Leon GOLDBERG, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 451

527 N.Y.S.2d 451

139 A.D.2d 695

Mark S. GOLDBERG, etc., Appellant, v. Leon GOLDBERG, et al., Respondents.

Supreme Court, Appellate Division Second Department.

April 25, 1988.

Zalman and Schnurman, New York City (Jeffrey M. Schwartz, of counsel), for appellant.

Wingate and Cullen, Jericho (Stephen R. Finkelstein, Thomas J. McNamara and Sherry S. Laird, of counsel), for respondents.

Before THOMPSON, J.P., and LAWRENCE, SPATT and HARWOOD, JJ.

MEMORANDUM BY THE COURT.

In an action, inter alia, to recover damages for breach of fiduciary duty, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Suffolk County (Cannavo, J.), dated May 11, 1987, as, upon treating the defendants' motion to dismiss the complaint as one for summary judgment, granted the motion to the extent of dismissing the first two causes of action.

ORDERED that the order is modified by deleting the decretal paragraph thereof granting the defendants' motion to the extent of dismissing the first two causes of action and substituting therefor a provision granting the defendants' motion to the extent of dismissing the second cause of action and denying that branch of the motion seeking to dismiss the first cause of action; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

This action involves a close corporation in which all the parties are related. The plaintiff is a minority shareholder and the defendants are majority shareholders. The Supreme Court converted the defendants' motion to dismiss the complaint pursuant to CPLR 3211(a)(7) into one for summary judgment and granted the defendants summary judgment dismissing both the first and second causes of action. We disagree with regard to the dismissal of the first cause of action.

In the first cause of action the plaintiff contends that the defendants violated their fiduciary duty to him when they issued stock options and bonuses to themselves without at the same time granting him the opportunity to purchase shares on the same terms in proportion to his shares. The defendants claim that they were properly granted summary judgment because they established, as a matter of law, a bona fide business purpose for their actions. As to the second cause of action the defendants argue that no provision for preemptive rights was contained in the certificate of incorporation. We find that on this record questions of fact are raised which preclude granting the defendants' motion for summary judgment dismissing the first cause of action.

Preemptive rights as such do not attach to stock in the absence of a specific provision in the certificate of incorporation (see, Business Corporation Law § 622[e][4] ). Therefore the Supreme Court properly granted summary judgment to the defendant dismissing that cause.

With regard to the first cause of action, members of a corporate board of directors have a fiduciary responsibility to treat all shareholders fairly and evenly ( see, Alpert v. 28...