Herencia v. Centercut Rest. Corp.

• Decision Date: 09 February 2012
• Citation: 92 A.D.3d 485,2012 N.Y. Slip Op. 00914,938 N.Y.S.2d 286
• Parties: Julio HERENCIA, Plaintiff–Respondent, v. CENTERCUT RESTAURANT CORP., et al., Defendants–Appellants,Ahmet Erkaya, Defendant.
• Court: New York Supreme Court — Appellate Division

2012 N.Y. Slip Op. 00914
92 A.D.3d 485
938 N.Y.S.2d 286

Julio HERENCIA, Plaintiff–Respondent,
v.
CENTERCUT RESTAURANT CORP., et al., Defendants–Appellants,Ahmet Erkaya, Defendant.

Supreme Court, Appellate Division, First Department, New York.

Feb. 9, 2012.

[938 N.Y.S.2d 287]

Stillman & Friedman, P.C., New York (Erik M. Zissu of counsel), for appellants.

Kordas & Marinis, LLP, Long Island City (Peter Marinis of counsel), for respondent.

TOM, J.P., SWEENY, ACOSTA, RENWICK, ROMÁN, JJ.

[92 A.D.3d 485] Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered July 12, 2011, which, to the extent appealed from, denied defendants Centercut Restaurant Corp., Samuel M. Janetta, and Robert Lombardi's (defendants) motion to dismiss the claims for an accounting, access to corporate books and records, breach of fiduciary duty, and fraud, unanimously modified, on the law, to grant the motion as to the fraud claim, and otherwise affirmed, with costs to be paid by defendants-appellants.

Since the terms of the shareholders' agreement were not met, the exercise of redemption rights by defendants was ineffectual ( see Cho v. 401–403 57th St. Realty Corp., 300 A.D.2d 174, 752 N.Y.S.2d 55 [2002]; Tornick v. Dinex Furniture Indus., 148 A.D.2d 602, 539 N.Y.S.2d 68 [1989]; see also Stephenson v. Drever, 16 Cal.4th 1167, 69 Cal.Rptr.2d 764, 947 P.2d 1301 [Cal.1997]; compare Gallagher v. Lambert, 74 N.Y.2d 562, 567, 549 N.Y.S.2d 945, 549 N.E.2d 136 [1989]; Ingle v. Glamore Motor Sales, 73 N.Y.2d 183, 189, 538 N.Y.S.2d 771, 535 N.E.2d 1311 [1989] ).

[92 A.D.3d 486] Under the terms of the agreement, defendants' termination of plaintiff's employment did not divest plaintiff of his status as a minority shareholder. Defendants, majority shareholders who managed the corporation, therefore owed him a fiduciary duty ( see Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 17 N.Y.3d 269, 278, 929 N.Y.S.2d 3, 952 N.E.2d 995 [2011] ). In addition, the sale of his stock to defendants presented a valid reason for plaintiff to inspect financial records relating to the value of his individual holdings ( see Matter of Waldman v. Eldorado Towers, 25 A.D.2d 836, 837, 270 N.Y.S.2d 216 [1966], affd. 19 N.Y.2d 843, 280 N.Y.S.2d 407, 227 N.E.2d 320 [1967] ), particularly since the method of valuation agreed upon in the repurchase agreement was not used ( see Matter of Glassman v. Louis Shiffman, Inc., 56 A.D.2d 824, 824–25, 393 N.Y.S.2d 33 [1977], appeal...