Matter of Joseph v. Desroches, Joseph & Scott, M.D., P.C., 2008 NY Slip Op 33333(U) (N.Y. Sup. Ct. 11/19/2008)
| Decision Date | 19 November 2008 |
| Docket Number | Motion Cal. No. 16,30222/07,Motion Seq. No. 1,Motion Cal. No. 17 |
| Citation | 2008 NY Slip Op 33333 |
| Parties | In the Matter of the Application of ANTONIO JOSEPH, JR., M.D., as an Officer, Director and Shareholder of more than twenty percent of the shares of DESROCHES, JOSEPH & SCOTT, M.D., P.C., and LIONEL E. DESROCHES, M.D., as an Officer, Director and Shareholder of more than twenty percent of the shares of DESROCHES, JOSEPH & SCOTT, M.D., P.C., and collectively owning more than fifty percent of the shares in DESROCHES, JOSEPH & SCOTT, M.D., P.C., Petitioners, v. For the Dissolution of DESROCHES, JOSEPH & SCOTT, M.D., P.C., a domestic professional corporation, DAVID SCOTT, III, M.D., Individually, and as an as an Officer, Director and Shareholder of DESROCHES, JOSEPH & SCOTT, M.D., P.C., The People of New York, Respondents. |
| Court | New York Supreme Court |
This is a special proceeding instituted by Order to Show Cause and Petition on December 13, 2007, pursuant to sections 1104 and 1104-a of the Business Corporation Law of the State of New York, seeking the judicial dissolution of Desroches, Joseph & Scott, M.D., P.C., a medical practice formed on April 7, 2006, with its principal places of business being 134-55 Springfield Boulevard, Jamaica, New York, and 2015 Linden Boulevard, Elmont, New York, in which petitioners Desroches and Joseph, and respondent Scott, each hold a one-third (1/3) interest. The Order to Show Cause directed the parties, by the January 30, 2008 return date, to furnish the Court with financial information, including a statement of the corporate assets and liabilities, and the names of each creditor and claimant of the corporate entity, and specifically directed respondent, by January 9, 2008, to make the financial books and records in his possession available to petitioners for inspection and copying. At the calendar call on the return date of the motion, respondent, who appeared pro se, submitted a verified answer with counterclaims, and thereafter, the parties entered into a written three page stipulation dated January 30, 2008, which the provisions thereof were read into the record by this Court for the purpose of allocution, and states as follows:
1) That there be an accounting of the corporation Desroches, Joseph & Scott, M.D., P.C., whereby the parties agree to use an accounting firm that is mutually acceptable to both parties and the parties agree to share the cost of the accountant. Petitioners will be responsible for 1/3 each of the cost and respondent will be responsible for 1/3 of the cost. That in order to properly account for the expenses, revenues and outstanding liabilities of the corporation, all parties agree to provide to the other and the accountant a list of all expenses incurred from the formation of the corp. to date, as well as all revenue earned for the months of Jan., Feb. and March of 2007, which are the three months that the parties operated under the corporate entity Desroches, Joseph & Scott, M.D., P.C. The parties must provide all written agreements including all lease agreements in relation to the above matter. All documents shall be provided to the accountant within 30 days from the date hereof.
2) Upon the completion of a full accounting of Desroches, Joseph & Scott, M.D., P.C. and proper allocation of monies due and owing to outside vendors and to the parties themselves, the parties will enter into a stipulation to dissolve the corporation upon consent of the shareholders.
3) The parties agree that all parties will be restrained from depositing and withdrawing monies from any bank accounts of Desroches, Joseph & Scott, M.D., P.C. However, the parties do recognize that outside vendors may deposit and withdraw monies from the account, particularly HSBC Bank account # 955906008.
4) The parties agree to use the accounting firm Manzi, Pino & Company, 1895 Walt Whitman Road, Melville, New York, 11747, (631) 420-5620, to perform the accounting of Desroches, Joseph & Scott, M.D., P.C., pending confirmation that neither [respondent nor petitioners] have ever utilized this accounting firm for any other purpose besides to handle the affairs of Desroches, Joseph & Scott, M.D., P.C. If the accounting firm of Manzi, Pino & Co. proves to be unacceptable, then the parties shall agree to choose another mutually acceptable firm. The accounting shall be completed within 60 days of the date hereof, pending the accountants approval of such date.
Further, at the return date, petitioners submitted the required information they were directed to provide in the order to show cause, as acknowledged on the record by respondent, however, respondent failed to make available for inspection to petitioners the financial books and records in his possession as directed. Nevertheless, the parties agreed that the effect of the stipulation would be dissolution of the corporation on consent, and the ancillary issues asserted in the petition, as well as the counterclaims asserted in the verified answer, shall be severed and continued. The petition was then adjourned to April 2, 2008, to allow the parties to provide all documents to the accountant by February 29, 2008, within thirty days of the stipulation, and for the accounting to be completed. At the April 2, 2008 calendar call, the Court was apprised that despite petitioners' many attempts to obtain respondent's compliance, respondent had neither provided the financial documents to the accountant nor paid his one-third share for the conducting of the accounting, in the amount of $ 1,666.67, and thus, the accounting had yet to be conducted. The matter was again adjourned to May 28, 2008, based upon respondent's constant representation that he was seeking legal counsel and needed more time to provide the requested documents. Thereafter, the motion was adjourned to June 18, 2008, and subsequently to July 16, 2008, before being submitted for determination on September 10, 2008, all without compliance from respondent with this Court's directives, and the conducting of an accounting.
It is upon the foregoing that petitioners seek, upon their order to show cause, an order of dissolution of the corporation known as Desroches, Joseph & Scott, M.D., P.C., pursuant to BCL §§ 1104 and 1104-a, and a further order, upon their notice of motion, compelling respondent to comply with discovery or be prohibited from opposing petitioners' claims, supporting his defenses in the verified answer, or producing any corporate documents or records in support of his position in evidence, pursuant to CPLR §§ 3124 and 3126. Additionally, petitioners seek permission to have the accounting of the corporation be conducted and deemed complete and final without reliance upon the corporate documents and records in respondent's possession, and the striking of respondent's counterclaims which rely upon those documents and records. Lastly, petitioners seek an order awarding costs and reasonable reimbursement of expenses and attorneys' fees resulting from respondent's frivolous conduct.
Petitioners seek judicial dissolution of Desroches, Joseph & Scott, M.D., P.C., pursuant to sections 1104 and 1104-a of the Business Corporation Law. BCL § 1104, entitled "Petition in case of deadlock among directors or shareholders," states, in pertinent part, the following:
(a) [T]he holders of shares representing one-half of the votes of all outstanding shares of a corporation entitled to vote in an election of directors may present a petition for dissolution on one or more of the following grounds:
(1) That the directors are so divided respecting the management of the corporation's affairs that the votes required for action by the board cannot be obtained.
(2) That the shareholders are so divided that the votes required for the election of directors cannot be obtained.
(3) That there is internal dissension and two or more factions of shareholders are so divided that dissolution would be beneficial to the shareholders.
Moreover, "[s]ection 1104-a of the Business Corporation Law empowers a holder of 20% or more of a closely held corporation's stock to file a petition for dissolution of the corporation on the grounds that those in control have either committed `illegal, fraudulent or oppressive actions toward the complaining shareholders' or have `looted, wasted, or diverted for non-corporate purposes' the corporation's assets." Dissolution of Penepent Corp., Inc., In re, 96 N.Y.2d 186, 191 (2001); see, also, Parveen, In re, 259 A.D.2d 389 (1st Dept. 1999).1
In the case at bar, petitioners, one third shareholders individually, who collectively hold more than fifty percent of the shares of Desroches, Joseph & Scott, M.D., P.C., alleged that from the inception of the corporate operation, petitioners deposited revenue that they earned on behalf of Desroches, Joseph & Scott, M.D., P.C. into the joint account of the corporation, in accordance with their agreement. In contravention thereof, they allege that respondent diverted monies from the corporation by charging inappropriate expenses to Desroches, Joseph & Scott, M.D., P.C., for his personal use and benefit, failing to remit payment of his portion of the business loan of the corporation, and failing to make deposits and account for his portion of the revenues generated on behalf of Desroches, Joseph & Scott, M.D., P.C. Based upon the foregoing, the allegations in the petition and its supporting papers are sufficient to establish a prima facie basis for dissolution. Furthermore, as provision two of the January 30, 2008 stipulation, states that the "parties will enter into a stipulation to dissolve the corporation upon consent of the shareholders," upon the completion of a full accounting and proper allocation of monies due and owing, that branch of the order to show cause for dissolution of Desroches,...
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