Mintz, Matter of

• Decision Date: 09 September 1985
• Citation: 493 N.Y.S.2d 488,113 A.D.2d 803
• Parties: In the Matter of Maybelle MINTZ, Appellant; Astoria Holding Corp., Respondent.
• Court: New York Supreme Court — Appellate Division

Page 488

493 N.Y.S.2d 488

113 A.D.2d 803

In the Matter of Maybelle MINTZ, Appellant Astoria Holding Corp., Respondent.

Supreme Court, Appellate Division Second Department.

Sept. 9, 1985.

Dollinger, Gonski and Grossman, Carle Place (Dennis M. Gonski and Matthew Dollinger, Carle Place, of counsel), for appellant.

Schreiber and McBride, New York City (The Jacob D. Fuchsberg Law Firm, New York City, of counsel), for respondent.

Before LAZER, J.P., and MANGANO, BROWN and O'CONNOR, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to Business Corporation Law § 1104-a to dissolve the Astoria Holding Corp. (Astoria) and for the appointment of a receiver pursuant to Business Corporation Law § 1113, petitioner appeals from a judgment of the Supreme Court, Kings County, dated February 3, 1984, which dismissed the proceeding.

Judgment reversed, on the law, with costs, petition reinstated, and matter remitted to Special Term for further proceedings in accordance herewith.

In this proceeding, petitioner Maybelle Mintz, a minority stockholder in Astoria, a close corporation, seeks the dissolution of that corporation (Business Corporation Law § 1104-a) and the appointment of a receiver (Business Corporation Law § 1113). The subject corporation, which is principally a real estate holding company, was originally organized in 1958 by certain members of the Mintz family, including petitioner's husband, Lewis Mintz. Its principal assets are a shopping center in Brooklyn and a 20-acre parcel of land in Lake Mohegan, New York, which is in the process of being developed as a garden apartment complex.

Petitioner acquired her interest in the corporation--now approximately 30% of the outstanding shares--in 1959 when her husband formally transferred his shareholder interest to her. Although petitioner apparently was never involved in the day-to-day operations or management of Astoria, her husband served as a corporate officer until 1968, when the first of a series of strokes forced him to withdraw from active participation in the business. Apparently, petitioner's son, Alan Mintz, was indirectly involved in the business for a short period of time as a principal of a management company, Management Associates, which managed the assets of Astoria. The services of this company, the principals of which were Alan Mintz and Max Mintz, one of the original shareholders of Astoria, were terminated in 1972 based upon a decision that Astoria could more economically manage its affairs on its own. This was the last active participation by petitioner's immediate family in the corporate business.

The last dividends paid by Astoria were in 1970 and 1971, in the total amount of over $1,500,000 representing funds acquired from the sale of certain surplus properties.

In July 1972, Astoria, acting pursuant to a shareholders agreement (which petitioner signed), acquired the Lake Mohegan property for the purpose of developing an apartment complex. The same agreement designated Max Mintz to act with full authority in all matters pertaining to the development of that property. Over the course of the next 11 years, Astoria expended over $700,000 in developing this property. Due to numerous delays in obtaining the necessary permits and approvals, occasioned by challenges arising from, inter alia, the New York State Departments of Health and Environmental Conservation, however, construction had not yet begun as of July 1983, when this proceeding was commenced.

In 1977, Astoria obtained a new mortgage on the Brooklyn property in the amount of $4,400,000. While this transaction netted the corporation a cash excess of over $1,600,000, those funds were retained for financing of the Lake Mohegan project rather than being distributed as dividends. That same year, however, Astoria repurchased 27 shares of stock from one shareholder as treasury stock for the sum of $1,400,000.

Following a successful effort begun in 1978 in a proceeding pursuant to Business Corporation Law § 624 to inspect the corporate records, petitioner commenced the instant proceeding in July 1983 seeking dissolution of Astoria pursuant to Business Corporation Law § 1104-a. The petition alleges that the majority shareholders engaged in various forms of oppressive conduct toward her, including the systematic exclusion of her from the day-to-day operations of the company, the failure to authorize dividends or cash distributions for over 10 years, the failure to provide notice of shareholders' and other corporate meetings, the failure to accord her the right to vote for the election of directors, and the failure to regularly account to her with regard to corporate operations and affairs. The "freeze out" of petitioner, it is alleged, constituted a failure to meet the reasonable expectations of petitioner as a shareholder in a close corporation, to participate in its management and operation and to share in its profits. Specifically, she charged that she was never notified of the refinancing of the mortgage on the Brooklyn property, nor of the decision to expend $1,400,000 to acquire the treasury stock. She also noted that the heightened alienation between her and her husband and the other shareholders resulted from a judgment recovered by her husband against the corporation, and alleged that following commencement of that action in 1976, the flow of all information to her regarding corporate affairs ceased. She also pointed out that due to the age of her husband and herself--both being over 70 years of age--the failure to make any cash distribution raised the possibility that they would never have the opportunity to enjoy the fruits of their investment in their lifetimes.

Respondent answered the petition and submitted an affidavit by Max Mintz, its president and a director of Astoria, denying petitioner's charges of oppressive conduct. While acknowledging the failure to declare any dividends since 1972, respondent asserted that this decision was based upon a sound good faith business judgment of the corporate directors. Astoria's cash surpluses, it contended, were being retained in order to finance construction of the apartment complex on the Lake Mohegan property and to meet payments connected with refinancing the $4,400,000 mortgage on the Brooklyn shopping center. In response to the claims that petitioner was being systemically excluded from the day-to-day affairs of Astoria, it was noted that Max Mintz had been authorized in writing to handle the affairs of the Lake Mohegan project and it was further asserted that neither petitioner nor her husband were capable of assisting in the day-to-day affairs of either that project or the shopping center. As to the failure to provide notice of stockholder meetings, respondent asserted that, like many family-owned close corporations, Astoria had operated successfully without the necessity of formal meetings. A request by petitioner for an indefinite postponement of a formal meeting of which she was notified was noted as evidence of her lack of interest in such meetings. (This meeting was scheduled after the commencement of this proceeding.) Respondent also asserted that petitioner had never indicated, from the inception of Astoria's existence or thereafter, that it was her intention or expectation to participate in the day-to-day affairs of the corporation. It alleged further that petitioner's expectations to share in the profits had been satisfied by the generous dividends paid up until 1972, when the best interests of the corporation required that all shareholders stop receiving dividends.

In response to claims that the refinancing of the shopping center mortgage in 1977 and the repurchase of 27 shares of stock as treasury shares for $1,400,000, also in 1977, were done without notice to petitioner and without her consent, respondent argued that the refinancing was done for the purpose of obtaining cash to aid financing of the Lake Mohegan project and were carried out under Max Mintz' authority to oversee that project. The repurchase of the stock, it was asserted, was in...