HARUVI v. Simry Realty Corp., Nominal–Defendant–Respondent. (2024)

Order, Supreme Court, New York County (Andrew Borrok, J.), entered January 16, 2024, which granted defendants’ motions to dismiss the complaint, and denied plaintiff's cross-motion for summary judgment on the first and eighth causes of action, and order, same court and Justice, entered April 26, 2024, which cancelled certain notices of pendency, unanimously modified, on the law, to deny defendants’ motions to dismiss and to cancel the notices of pendency, and otherwise affirmed, without costs.

Plaintiff is a minority shareholder of Simry Realty Corp. She alleges that defendants violated Business Corporation Law § 909, which prohibits the sale of all or substantially all of a business’ assets, other than in the regular course of business, without certain procedural protections, including notice to each shareholder of record.  The transaction at issue here divested Simry of its real property assets and left it with a 10% indirect ownership stake in those properties.  We agree with plaintiff that this transaction was a sale or disposition subject to Business Corporation Law § 909(a) (see Barasch v. Williams Real Estate Co., Inc., 33 Misc.3d 1219[A], 2011 N.Y. Slip Op. 51979[U], *7, 2011 WL 5386252 [Sup. Ct., N.Y. County 2011], affd 100 A.D.3d 562, 954 N.Y.S.2d 527 [2012]).  Furthermore, given that Simry's sole business had been the ownership and operation of the residential properties, the sale of the properties was not in the ordinary course of its actual business, regardless of the fact that the certificate of incorporation provided that it could engage in real estate sales (see M.L.C. Constr., Inc. v. Hui Ru Zhang, 162 A.D.3d 410, 410–411, 75 N.Y.S.3d 30 [1st Dept. 2018]).  In addition, as the motion court acknowledged, there are issues of fact as to what information plaintiff received about the transactions.  Therefore, neither side was entitled to judgment on the causes of action under Business Corporation Law § 909.  Accordingly, the notices of pendency should not have been cancelled at this stage.

Contrary to defendants’ assertion, at this stage of the litigation, plaintiff may still seek rescission.  Where, as here, the underlying transaction is alleged to be in violation of Business Corporation Law § 909, a shareholder is not limited to appraisal rights as a remedy (see Alpert v. 28 Williams St. Corp., 63 N.Y.2d 557, 568, 483 N.Y.S.2d 667, 473 N.E.2d 19 [1984]).  Moreover, transactions in violation of Business Corporation Law § 909 are not voidable but void (see Sardanis v. Sumitomo Corp., 282 A.D.2d 322, 324, 723 N.Y.S.2d 466 [1st Dept. 2001]).

The court also erred in finding that defendant Peter Hungerford could not be personally liable because he executed the transaction documents in his corporate capacity.  Plaintiff alleges his personal participation in aiding and abetting breach of fiduciary duty and slander of title.  Such personal participation is not insulated from liability simply because defendant was also acting as a corporate officer (see Peguero v. 601 Realty Corp., 58 A.D.3d 556, 558–559, 873 N.Y.S.2d 17 [1st Dept. 2009]).