In re Dissolution of Twin Bay Village, Inc.

Appeal from an order of the Supreme Court (Muller, J.), entered March 16, 2016 in Warren County, which, among other things, granted petitioners’ application, in a proceeding

Initially, we agree with respondents that Supreme Court erred in finding that Leon Chomiak and Leonora Chomiak have standing to maintain this proceeding. Business Corporation Law § 1104-a (a) provides that “[t]he holders of shares representing [20%] or more of the votes of all outstanding shares of a corporation . . . entitled to vote in an election of directors may present a petition of dissolution” on the basis of, among other things, oppressive action or corporate looting (Business Corporation Law § 1104-a [a] [1], [2] [emphasis added]; see generally Matter of Bernfeld, 86 AD3d 244 , 253-254 [2011]). Here, although the record indicates that respondents have historically treated Leon Chomiak and Leonora Chomiak as shareholders with the right to vote, the certificates of stock and documentary evidence in the record reflect that Leon Chomiak’s 24 shares and Leonora Chomiak’s 24 shares are held by Vladimir Chomiak as custodian and trustee for them. Thus, Leon Chomiak and Leonora Chomiak are beneficial owners of the 48 combined shares and are not the shareholders of record. Inasmuch as beneficial owners of corporate shares “have no right to vote if they are not record holders” (Matter of Stewart Becker, Ltd. v Horowitz, 94 Misc 2d 766 , 771 [Sup Ct. Suffolk County 1978, Lazer, J.]; see Matter of D. J. Salvator, Inc. [Klages], 268 App Div 919 , 919 [1944]; compare Business Corporation Law § 626 [a]), we find that they lack standing pursuant to Business Corporation Law § 1104-a. We agree with Supreme Court, however, that Vladimir Chomiak has the requisite standing inasmuch as he has the power to vote the 48 shares held by him in his capacity as custodian and trustee, and those 48 shares represent more than 20% of all of the outstanding shares (see Business Corporation Law § 1104-a [a]). Contrary to respondents’ contention, the fact that Vladimir Chomiak may have been confused as to whether he was a named petitioner in this proceeding is not dispositive regarding his standing.

Next, we are unpersuaded by respondents’ contention that this proceeding is time-barred. It is well settled that “ ‘New York law does not provide a single statute of limitations for breach of fiduciary duty claims [and] the choice of the applicable limitations period depends on the substantive remedy that the [petitioner] seeks’ ” (Matter of Therm, Inc., 132 AD3d 1137 , 1138 [2015], quoting IDT Corp. v Morgan Stanley Dean

Turning to the merits, respondents contend that Supreme Court erred in determining that they engaged in oppressive actions toward petitioners and that they looted corporate assets. We cannot agree. Preliminarily, “[o]ur review of Supreme Court’s determination ... is not limited to whether [its] findings were supported by credible evidence; rather, if it appears that a finding different from that of Supreme Court is not unreasonable, we must weigh the probative force of the conflicting evidence and the relative strength of conflicting inferences that may be drawn, and grant judgment as warranted” (Matter of Sunburst Assoc., Inc., 106 AD3d 1224 , 1225 [2013] [internal quotation marks and citation omitted]; accord Matter of Gould Erectors & Rigging, Inc., 146 AD3d 1128 , 1129 [2017]; see Matter of Wenger v L.A. Wenger Contr. Co., Inc., 114 AD3d 694 , 695 [2014]). Upon our review, however, we accord due deference to the credibility determinations and factual findings of the trier of fact (see Matter of Gould Erectors & Rigging, Inc., 146 AD3d at 1129 ; Matter of Funplex, Inc., 252 AD2d 923 , 924 [1998]; see also S. Nicolia & Sons Realty Corp. v A.J.A. Concrete Ready Mix, Inc., 137 AD3d 994 , 995 [2016]).

Business Corporation Law § 1104-a permits a court to dissolve a closely-held corporation where, as is relevant here,

Turning first to the allegations of oppressive conduct, Supreme Court found that petitioners reasonably expected respondents to fulfill their fiduciary obligations to the minority shareholders and to equally protect the interests of all of the shareholders, and that respondents’ conduct in 2001, 2004 and 2009 substantially defeated those expectations. In this regard, at the 2001 annual shareholders’ meeting — of which respondents failed to notify petitioners — respondents passed a resolution awarding themselves a total of $80,000 in bonuses to be paid on a yearly basis. The bonuses were not contingent on respondents’ performance or the corporation’s ability to make such payments and were awarded despite the fact that the corporation had not paid dividends to shareholders since 1995. Significantly, because of the financial instability of the corporation, the bonuses were never paid to respondents but, instead, became debts owed by the corporation such that, if the corporation was sold, respondents would receive what they were owed in unpaid bonuses before petitioners received any money in the form of equity.

In addition to this incident, at the 2004 annual shareholders’ meeting, respondents voted to issue an additional 100 shares of corporate stock for the price of $3,000 per share, and then

Respondents’ efforts to dilute petitioners’ ownership interest in the corporation continued after 2004 and ultimately culminated with the 2009 force-out attempt. At the 2009 annual meeting — which petitioners did not attend — respondents amended the corporation’s bylaws to provide that a shareholder who ceased to be actively involved with the corporation, as determined by a majority of the shareholders, could be forced to sell his or her shares. The amended bylaws provided that such a determination is “final, conclusive and binding upon all parties.” After the meeting, petitioners were notified that it was unanimously determined that they had ceased to be actively involved with the corporation and, therefore, they were required to sell their shares back to the corporation for a “fair value” of $1,139 per share. Notably, Supreme Court found that this price was “considerably less” than the fair market value and that when Leo Chomiak ceased to be actively involved in the corporation after the 2009 summer season, the amended bylaws were not invoked against him. Although a contrary finding would not have been unreasonable, after we weigh the probative force of the conflicting evidence and give appropriate deference to the factual findings and credibility determinations (see Matter of Sunburst Assoc., Inc., 106 AD3d at 1227 ), we discern no basis to disturb Supreme Court’s determination that petitioners’ reasonable expectations were substantially defeated by respondents’ oppressive actions in 2001, 2004 and 2009 inasmuch as those actions intentionally diluted and ultimately sought to extinguish petitioners’ ownership interest in the corporation (see Matter of Clever Innovations, Inc. [Dooley], 94 AD3d at 1176-1177 ; Matter of HGK Asset Mgt. [Greenhouse], 228 AD2d 246 , 246 [1996]; compare Matter of Farega Realty Corp., 132 AD2d 797 , 798 [1987]).

The record also amply supports Supreme Court’s conclusion that respondents looted corporate assets. Here, the documentary evidence reflects that, between July 2005 and October

The parties’ remaining contentions, to the extent not expressly addressed herein, have been reviewed and determined to be without merit.

McCarthy, J.P., Garry, Lynch and Devine, JJ., concur.

Ordered that the order is affirmed, without costs.