Gene Kasica v. System Pros, Inc. (2011)

MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT

This is a two-count complaint by Gene Kasica, a fifty percent shareholder, seeking to dissolve the defendant corporation, alleging in Count One that the corporate assets are being wasted and in Count Two that the directors are deadlocked in the management of the corporation.

System Pros, Inc., the defendant corporation denies these claims and has filed a counterclaim based on the conduct of the plaintiff in managing the corporation.

This action was consolidated on February 26, 2010 with an action instituted by the corporation against Kasica (CV 10-6007956).

On August 23, 2010, plaintiff moved for summary judgment on Count Two of his complaint.

I

General Statutes § 33-896 provides four circumstances under which this Court may dissolve a corporation in a proceeding by a shareholder, as follows in pertinent part.

(a) The Superior Court for the judicial district where the corporation's principal office or, if none in this state, its registered office, is located may dissolve a corporation:  (1) In a proceeding by a shareholder if it is established that:  (A)(i) The directors are deadlocked in the management of the corporate affairs, (ii) the shareholders are unable to break the deadlock, and (iii) irreparable injury to the corporation is threatened or being suffered or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;  (B) the directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent;  (C) the shareholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired;  or (D) the corporate assets are being misapplied or wasted.

In moving for summary judgment on Count Two, which alleges misapplication and/or waste of corporate assets and unbreakable deadlock in the management of the corporate affairs, the plaintiff relies on § 33-896(a)(1)(A), and § 33-896(a)(1)(D), which provides for dissolution if it is established that:  “the corporate assets are being misapplied or wasted.”

The statute's use of the word “and” in § 33-896(a)(1)(A) means that all three elements must be present for judicial dissolution, (i) director deadlock, (ii) shareholder inability to break the deadlock, and (iii) irreparable injury/threat of irreparable injury or inability to conduct the business to the shareholders' advantage.

The record contains evidence that the first and second prongs of the statute, director deadlock in management and shareholder inability to break the deadlock, have been established.   Evidence of deadlock can be found in the plaintiff's affidavit, which states that the plaintiff and Majewicz cannot agree on management and operational issues and cannot break deadlock.   There is further evidence contained in Exhibit C of the Kopsick affidavit, which is a copy of the complaint filed by System in the consolidated case, and states that the plaintiff has denied the defendant access to corporate records and assets.   The defendant has not submitted evidence to refute this existence of management deadlock and shareholder inability to break it.

The plaintiff has also submitted evidence under the third prong of § 33-896(a)(1)(A), irreparable injury or threat of irreparable injury.   This evidence can be found in Exhibit C of Kopsick's affidavit, which is a copy of the complaint filed by System in the consolidated case, and contains allegations that the plaintiff failed to submit invoices to clients, collect fees due to System, converted assets and/or used corporate assets for his personal benefit and failed to perform his duties as an officer in good faith to the loss and detriment of System and Majewicz.

However, the defendant has submitted countervailing evidence showing that there is a genuine issue of material fact as to whether irreparable injury to System is threatened or being suffered.   This evidence is contained in the affidavit of Majewicz, which states that whether irreparable injury is threatened or being suffered is information within the exclusive knowledge of the plaintiff because the plaintiff has possession of System's business records.

The third prong of § 33-896(a)(1)(A) contains an alternate ground:  “the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock.”   The plaintiff has submitted evidence of this in Exhibit C of Kopsick's affidavit, which consists of a copy of the complaint filed by System in the consolidated case.   That complaint contains allegations that the plaintiff failed to provide Majewicz with an accounting, payments and access to corporate information and assets, to Majewicz's loss and detriment individually and as a shareholder.

It is concluded that the defendant has submitted sufficient contravening evidence showing that there is a genuine issue of material fact as to whether the business is able to be conducted to the advantage of the shareholders' generally.   This evidence is supported in the affidavit of Majewicz, which states that he is unable to ascertain how much revenue System generated in 2009 and 2010 because the plaintiff has all of the business records.

II

In Count Two of the complaint, the plaintiff also alleges misapplication and/or waste of corporate assets.  General Statutes § 33-896 provides, in pertinent part:  “(a) The Superior Court for the judicial district where the corporation's principal office or, if none in this state, its registered office, is located may dissolve a corporation:  (1) In a proceeding by a shareholder if it is established that ․ (D) the corporate assets are being misapplied or wasted.”

Although the record contains evidence that the corporate assets are being misapplied or wasted, the defendant has submitted countervailing evidence raising a genuine issue of material fact.   The affidavit of Majewicz states that he is unable to ascertain whether the corporate assets are being misapplied or wasted because the plaintiff has all of the business records.

The evidence in the record leaves a genuine issue of material fact as to whether that the corporate assets are being misapplied or wasted.

III

Practice Book § 17-47 provides:  “Should it appear from the affidavits of a party opposing the motion that such party cannot, for reasons stated, present facts essential to justify opposition, the judicial authority may deny the motion for judgment or may order a continuance to permit affidavits to be obtained or discovery to be had or may make such other order as is just.”

The affidavit of Majewicz states that he cannot present facts essential to justify opposition for summary judgment because he has been unable to review System's business records because they are in the possession of the plaintiff.   The plaintiff's affidavit states that he “assumed responsibility for [System's] check book accounts, payroll and other management issues” and that he has “regularly provided bank statements and accounting records to [Majewicz].”

Under Practice Book § 17-47, this Court, has discretion, to deny the motion for judgment.

The motion for summary judgment is denied.

Wagner, J., J.T.R.

Wagner, Jerry, J.T.R.