80 A.D.2d 764 | N.Y. App. Div. | 1981
Order and judgment, Supreme Court, New York County, entered June 6, 1980, which, inter alia, granted plaintiffs’ motion for partial summary judgment to the extent of declaring a provision of a stockholders’ agreement of no force and effect, and dismissed defendant’s first counterclaim for reformation of a certificate of incorporation, reversed, insofar as appealed from, plaintiffs’ motion for partial summary judgment denied, the dismissal of defendant’s first counterclaim vacated, defendant’s motion for partial sumary judgment on his first counterclaim for reformation granted, and judgment on the first counterclaim severed from the remainder of the action, with costs to defendant-appellant. Plaintiffs Adler and Shaw, and defendant Svingos, each own an equal number of shares of the 891 First Ave. Corp. which operates a successful restaurant at that address. A basic certificate of incorporation was filed in November, 1978. On December 4, 1978, the parties executed a stockholders’ agreement explicitly expressing their intention to run the business as a “closely held corporation.” The agreement, provided, as relevant herein, that all corporate operations, including changes in corporate structure, would require unanimous consent of the parties (par 8); no corporate stock would be sold by any stockholder without express written consent of the other stockholders (par 9); and if the parties did not mutually agree on a sale among themselves or to a third party, then an application could be made for judicial dissolution of the corporation (par 13). The agreement also provided that each stock certificate would bear a legend that it was governed by the provisions and restrictions in the stockholders’ agreement (par 7). When plaintiffs later sought to sell the business, defendant objected, relying upon the stockholders’ agreement. Plaintiffs thereupon brought this action seeking to strike paragraph 8 of the agreement as void under subdivision (b) of section 620 of the Business Corporation Law. Defendant counterclaimed, seeking reformation of the certificate of incorporation to reflect the unanimity provision of the stockholders’ agreement (first counterclaim) and for other relief not relevant herein. Special Term granted plaintiffs’ motion for partial summary judgment, declaring in the judgment that “the paragraph in the stockholders’ agreement requiring unanimous consent is of no force and effect.” (We assume this refers only to paragraph 8 since that is the only paragraph plaintiffs sought to strike, although as phrased the order ambiguously could apply to other provisions as well.) Special Term further denied defendant’s cross motion for summary judgment dismissing the co.m-plaint, and dismissed his first counterclaim, relying essentially on subdivision (b) of section 620 of the Business Corporation Law which provides: “A provision in the certificate of incorporation otherwise prohibited by law because it improperly restricts the board in its management of the business