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Brenner v. Berkowitz12/14/1992
This is an appeal by a minority shareholder in a closely held corporation from a judgment denying her requests to buy out the majority, to have the defendants purchase her minority interest, or in the alternative, for involuntary dissolution of the corporation pursuant to N.J.S.A. 14A:12-7(1)(c) and 7(8). We reverse and remand.
I
In 1973, plaintiff's father Irving Resnick formed defendant Arbee Associates, Inc., a New Jersey corporation, to operate an
office furniture business. One hundred shares of the corporate stock were distributed: 35 shares to plaintiff Judith R. Brenner, Resnick's daughter, 36 shares to plaintiff's sister Ruth Berkowitz, 19 shares to Ruth's husband Howard Berkowitz (Berkowitz), and 10 shares to Resnick. The minutes of the first shareholders meeting, held on June 1, 1973, reveal that all shareholders were appointed as directors and Berkowitz was named president, and his consent was required for any action taken by the board. Berkowitz was given complete managerial and supervisory responsibility for the company. A quorum consisted of Berkowitz plus any other one member of the board. As might be expected, shareholder dealings were informal. Apparently, no formal meeting of the board or shareholders was held between 1981 and 1984.
Resnick became ill in October 1984 and died on December 10, 1984. Upon his death, his 10 shares were distributed evenly between his two daughters, thereby vesting 60% interest in Howard and Ruth Berkowitz. After the death of Resnick, the relationship between plaintiff's family and the Berkowitz family declined. Plaintiff's son and future daughter-in-law who had been employed in the business, were terminated in September 1987. Soon thereafter, plaintiff instituted the present litigation.
On November 14, 1987, plaintiff filed a verified complaint alleging that defendants Howard and Ruth Berkowitz as directors and officers of Arbee, "have mismanaged Arbee, abused their authority as officers and directors of Arbee and acted illegally, oppressively and unfairly toward plaintiff" as a minority shareholder of Arbee in violation of N.J.S.A. 14A:12-7(1)(c). She sought "appointment of a custodian and the eventual dissolution of Arbee." The specific misconduct alleged in the complaint consists of: (1) the unauthorized $560,000 salary of Berkowitz, (2) the denial of plaintiff's request to have her attorney present at a board of directors meeting scheduled for November 3, 1987, (3) precluding plaintiff from "participating in the decision making process and operation of Arbee," and (4)
the failure of defendants to "provide plaintiff with any other effective notice of the affairs of Arbee."
Plaintiff was permitted on September 15, 1989, to file an amended complaint. In it she repeated the allegations contained in the complaint and the following additional allegations were made: that Berkowitz (1) committed fraud against Arbee and one of its "franchisors," Steelcase, (2) illegally misappropriated proceeds from cash sales to employees, (3) illegally failed to pay sales taxes to the State of New Jersey on cash sales to employees, (4) failed to pay proper taxes on temporary workers, and (5) misrepresented some of Arbee's nonunion employees as union workers. Plaintiff sought appointment of a custodian, an order permitting plaintiff to purchase the stock of Howard Berkowitz and Ruth Berkowitz, an order permitting the corporation or Howard and Ruth Berkowitz to purchase her stock, dissolution of the corporation and payment of plaintiff's attorney's fees and expe
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