Failure to Request Hearing is Fatal to Dissolution Action

In most lawsuits, there is a presumption that the matter will, in most circumstances, go to trial.  A party involved in a dissolution action involving a closely held New York corporation needs to request a hearing, however, or risk having the matter resolved in a summary fashion.

That is the reminder from this decision of the Fourth Department of the Appellate Division affirming the decision of a trial court granting dissolution and the appointment of a temporary receiver for Brady Farms, Inc. in western New York.  (Opinion in Brady v. Brady)

The record does not include a request from respondents for an evidentiary hearing and, on appeal, respondents concede that they failed to make such a request. Consequently, respondents’ contention that the court abused its discretion in ordering dissolution summarily, without a hearing, is unpreserved.

The decision relies on a series of opinions interpreting the special proceedings provided for in Article 11 of the Business Corporations Law holding that a hearing, as opposed to a summary resolution on the papers, is a procedure that must be requested and which it is in the trial court’s discretion to deny.  It is critical at the outset of a dissolution litigation to identify the contested issues that may change the outcome of the matter, bring them to the attention of the court and request a hearing.

Contrary to respondents’ contention, even if there is a disputed issue of fact with respect to the extent of petitioner’s ownership interest in the company, there was no need to resolve that issue at a hearing prior to determining whether dissolution is appropriate. Respondents do not dispute that petitioner is a shareholder and that he owns at least a 20% interest in the company, which is the requisite ownership interest needed to have standing to commence the proceeding in appeal No. 1 pursuant to Business Corporation Law § 1104-a …  Contrary to respondents’ related contention, we conclude that the court properly determined on the record before it that dissolution was required inasmuch as respondents engaged in “oppressive actions toward the complaining shareholder[ ],” i.e., petitioner (§ 1104-a [a] [1]).

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