Rossi v. Kelly

96 A.D.2d 451, 465 N.Y.S.2d 1, 1983 N.Y. App. Div. LEXIS 18962

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: July 7, 1983
• Status: Published

Opinions

— Order, Supreme Court, New York County (Louis Kaplan, J.), entered on November 18, 1982, which denied the motion of the defendants Carlin Construction & Development Corp., Carlin-Kelly-Lawson and William V. Lawson for summary judgment and the cross motion of the defendants, Fred J. Kelly Construction, Inc., and Fred J. Kelly for like relief, is modified, on the law, to the extent of granting summary judgment and dismissing the complaint as against Fred J. Kelly, Fred J. Kelly Construction, Inc., Carlin-Kelly-Lawson, Carlin Construction & Development Corp., and William V. Lawson, and dismissing the third, fourth and fifth causes of action as against Fred J. Kelly Consultants, Inc., and severing the first and second causes of action against Fred J. Kelly Consultants, Inc., without costs. Plaintiff became an employee of Fred J. Kelly Consultants, Inc. (Consultants) on October 1, 1980, under a two-year employment contract at a salary of $50,000 a year. The contract was signed by Fred J. Kelly on behalf of Consultants. At the time the contract was signed, plaintiff loaned Consultants $25,000. The loan was secured by a six-month note at 15% interest and was signed by Kelly as president of Consultants. In return, plaintiff apparently received shares of Consultants and acted as Consultants’ chief financial officer. Plaintiff alleges that he never received any salary or any repayment on this note. Plaintiff’s employment was terminated by notice dated April 8, 1982. By that time, Fred J. Kelly, president and major shareholder in Consultants had entered into a joint venture with Carlin Construction & Development Corp. (Carlin-Kelly-Lawson). The complaint alleges seven causes of action, asserted variously against Consultants, Kelly individually and as a member of a joint venture with Carlin Construction & Development Corp. (CCDC), Carlin Construction & Development Corp., and William V. Lawson, an official of CCDC. The first and second causes of action are the only ones that state viable causes of action however, and those have vitality only against Consultants. In the first cause of action repayment of the $25,000 loan is sought. Clearly Consultants as the borrower and maker of the note is the only one liable for its repayment. As indicated earlier, Kelly signed the note in his representative capacity as president of Consultants and incurred no individual liability thereby. Plaintiff’s allegations regarding Kelly’s agreement to indemnify him in respect to payments he may be called upon to make to liquidate an $18,000 loan to Consultants by Citibank are irrelevant to the $25,000 loan he made to Consultants. Moreover, there is no indication or claim that Rossi has been called upon to make payment on the Citibank loan. The second cause of action which apparently seeks recovery of unpaid salary, likewise has vitality only against Consultants, the employer and the only one obligated to make salary payments. To the extent that causes of action may exist against Lawson and CCDC for wrongfully inducing Kelly to breach his employment contract with Consultants as alleged in the third cause of action and for the alleged rape of Consultants’ assets as set forth in the fifth cause of action, they belong to the corporation Consultants and not to the individual stockholder, Rossi (Berzin v Litton Inds., 24 AD2d 740). Even if it were appropriate, under other circumstances, for Rossi to assert a derivative action on behalf of himself and “all other shareholders” of Consultants, the unquestionable thrust of his objective here is to vindicate his personal rights as an individual and not as a stockholder on behalf of the corporation. (Greenfield v Clermont Cravat Co., 6 NY2d 867, revg 6 AD2d 263.) The fact that plaintiff had disavowed the allegations characterizing the fifth cause of action as a “derivative” suit is unavailing to salvage that cause of action. So too, is the characterization of the claim set forth therein as a “prima facie tort” or “tortious interference with * * * contract” as discussed by our dissenting colleague. The fact is inescapable that the allegations assert a derivative suit since the harm done, if any, by the “defendant Fred J. Kelly and the other defendants * * * entering] into a scheme whereby all the assets of Consultants past, present and future, were assigned to Carlin-Kelly-Lawson”, was done to Consultants and if improperly, wrongfully or tortiously done, is actionable by the corporation. The critical allegations of the cause of action are those asserting plaintiff’s status as a holder of 40 shares of common stock of Consultants. Completely missing is any allegation that he “had been the victim of fraud, deceit or bad faith practiced upon him * * * so that he — not the corporation — shares in less than the full value of his stock interest * * * [or that the conduct of the defendants] resulted in individual damage to him, as contrasted with damage to the corporation, or were in breach of [a] personal stockholders’ agreement or some other determined personal relationship [that would confer upon him] an individual cause of action.” (Greenfield v Denner, 6 AD2d 263,270 [dissenting opn of Breitel, J.],revd on dissenting opn [Breitel, J.], 6 NY2d 867). The sixth and seventh causes of actions asserted against Fred J. Kelly likewise must be dismissed. There are no allegations that there was a contract between Fred J. Kelly individually and plaintiff that could be breached as alleged in the sixth cause of action nor are there any allegations in the seventh cause of action sufficient to sustain an action for fraud (see CPLR 3016, subd [b]). Concur — Ross, Fein and Alexander, JJ.