In re MacDougall , 150 A.D.2d 160 ( 1989 )

Order, Supreme Court, New York County (Michael Dontzin, J.), entered on or about September 6, 1988, which granted the petition for judicial dissolution of Manhattan Ad Hoc Housewares, Inc. and Ad Hoc Softwares, Inc. pursuant to section 1104-a (a) of the Business Corporation Law to the extent of, inter alia, directing respondents to buy out shares of the petitioners, referring the issue of looting to a Judicial Hearing Officer, and directing an appraisal of the corporate entities, unanimously reversed, on the law and the facts, the aforesaid directions vacated and the matter remanded for a hearing on oppressive conduct and looting, without costs.

Petitioners Mary MacDougall and Peter Coan, minority stockholders in a close corporation, brought a petition for dissolution pursuant to Business Corporation Law § 1104-a (a) on the grounds of oppressive conduct and looting by the corporate directors and majority stockholders Julia McFarlane and Judith Kress, also known as Judith Auchincloss. The allegations in the petition included exclusion of the petitioners from management, refusal to hold meetings, unjustified raises in salaries, refusal to permit inspection of the books and financial records, wasting of property, appropriation of corporate money for personal use, and looting of corporate assets.

The motion court, while stating that a hearing on all of the issues "might be appropriate”, determined that the best course of action was to have an appraisal of petitioners’ shares and direct the respondents to buy them. This determination was error. A hearing on the allegations was required before a remedy could be fashioned. (Matter of Rosen [Hofteller Enters.], 102 AD2d 855 [2d Dept 1984].) (It should be noted that a report by a Judicial Hearing Officer, apparently on the issue of looting, has not been accepted or read by the court in its determination. The report was not considered or even available to the motion court.) Concur—Ross, J. P., Asch, Rosenberger, Wallach and Smith, JJ.