MANZO v. SCANLON (2026)

DECISION & ORDER

In an action, inter alia, to recover on a promissory note and for declaratory relief, the plaintiffs appeal from an order of the Supreme Court, Westchester County (Janet C. Malone, J.), dated February 20, 2025.  The order granted the defendant's motion for summary judgment dismissing the complaint and, in effect, declaring that any shares of stock in the plaintiff LRM Properties, Inc., issued to the defendant are not a nullity and that the plaintiff Lucio Manzo is not the sole shareholder of the plaintiff LRM Properties, Inc., and denied, as academic, the plaintiffs' cross-motion for summary judgment on the complaint and, in effect, declaring that any shares of stock in the plaintiff LRM Properties, Inc., issued to the defendant are a nullity and that the plaintiff Lucio Manzo is the sole shareholder of the plaintiff LRM Properties, Inc.

ORDERED that the order is reversed, on the law, with costs, the defendant's motion for summary judgment dismissing the complaint and, in effect, declaring that any shares of stock in the plaintiff LRM Properties, Inc., issued to the defendant are not a nullity and that the plaintiff Lucio Manzo is not the sole shareholder of the plaintiff LRM Properties, Inc., is denied, and the matter is remitted to the Supreme Court, Westchester County, for a new determination of the plaintiffs' cross-motion for summary judgment on the complaint and, in effect, declaring that any shares of stock in the plaintiff LRM Properties, Inc., issued to the defendant are a nullity and that the plaintiff Lucio Manzo is the sole shareholder of the plaintiff LRM Properties, Inc., in accordance herewith.

In 2005, the defendant allegedly agreed to invest a certain sum in LRM Properties, Inc. (hereinafter LRM), in exchange for shares of stock in LRM. On March 26, 2012, the defendant executed a note in the sum of $300,000 in favor of LRM (hereinafter the note), allegedly representing amounts the defendant owed for shares of LRM that had been issued to him without payment by the defendant.  In October 2019, LRM, and its president, Lucio Manzo, commenced this action, inter alia, to recover on the note and for a judgment declaring that any shares of stock in LRM issued to the defendant are a nullity and that Manzo is the sole shareholder of LRM.

Thereafter, the defendant moved pursuant to CPLR 3211(a)(3) to dismiss the complaint for lack of capacity.  The plaintiffs cross-moved, among other things, for summary judgment on the complaint.  In an order dated July 13, 2022, the Supreme Court denied the defendant's motion and the plaintiffs' cross-motion (hereinafter the prior order).

Subsequently, the defendant moved for summary judgment dismissing the complaint and, in effect, declaring that any shares of stock in LRM issued to the defendant are not a nullity and that Manzo is not the sole shareholder of LRM. The plaintiffs cross-moved for summary judgment on the complaint and, in effect, declaring that any shares of stock in LRM issued to the defendant are a nullity and that Manzo is the sole shareholder of LRM. In an order dated February 20, 2025, the Supreme Court granted the defendant's motion and denied, as academic, the plaintiffs' cross-motion.  The plaintiffs appeal.

Pursuant to Tax Law § 203–a, the Secretary of State may dissolve a corporation by proclamation for the nonpayment of franchise taxes (see 80–02 Leasehold, LLC v CM Realty Holdings Corp., 123 AD3d 872, 873).  Upon dissolution, the corporation's legal existence terminates and it is prohibited from carrying on new business and no longer has the right to bring suit in the courts of this State, except in specific circumstances permitted by statute (see id.;  Moran Enters., Inc. v Hurst, 66 AD3d 972, 975).  However, Tax Law §§ 203–a(7) and (8) permit retroactive nullification of a corporate dissolution upon payment of accrued tax arrears.  Once accrued tax arrears are paid, the corporation is reinstated to de jure status nunc pro tunc, and any contracts entered into during the period of delinquency are retroactively validated (see Flushing Plaza Assoc. # 2 v Albert, 31 AD3d 494, 495).

Here, the defendant established, prima facie, that LRM lacked capacity to bring this action to recover on the note executed in 2012 and for associated relief, as LRM was dissolved on January 26, 2011, by proclamation by the New York Secretary of State for failure to pay taxes (see Moran Enters., Inc. v Hurst, 66 AD3d at 976).  In opposition, however, the plaintiffs raised a triable issue of fact as to whether LRM had capacity to bring this action by submitting evidence that LRM was restored to active status upon its payment of tax arrears.

Furthermore, the Supreme Court improperly determined that Manzo lacked capacity to bring this action based upon a determination as to Manzo's capacity in the prior order.  The doctrine of the law of the case seeks to prevent relitigation of issues of law that have already been determined at an earlier stage of the proceeding (see Cotto v. Robinson, 244 AD3d 1183, 1185).  The law of the case doctrine applies only to legal determinations that were necessarily resolved on the merits in a prior decision and to the same question in the same case (see U.S. Bank N.A. v Moss, 186 AD3d 1753, 1753;  Matter of Chung Li, 165 AD3d 1105, 1106).  Here, the court determined in the prior order that the plaintiffs were not entitled to summary judgment on the complaint insofar as asserted by Manzo on the ground that “Manzo is not permitted individually to seek a claim for a wrong to the corporation.”  However, the court did not determine in the prior order whether Manzo had a direct claim for harm to him individually, as opposed to on behalf of LRM (see generally Valyrakis v 346 W. 48th St. Hous. Dev. Fund Corp., 161 AD3d 404, 405;  Collins v Telcoa Intl. Corp., 283 A.D.2d 128, 133).  Thus, that issue was not barred by the doctrine of law of the case, and the court improperly granted that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted by Manzo based on the law of the case doctrine.

Accordingly, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint and, in effect, declaring that any shares of stock in LRM issued to the defendant are not a nullity and that Manzo is not the sole shareholder of LRM, for lack of capacity.

In light of our determination, the plaintiffs' cross-motion for summary judgment is no longer academic.  Under the circumstances, we remit the matter to the Supreme Court, Westchester County, for a new determination of the plaintiffs' cross-motion, including the threshold issue raised by the defendant as to whether the cross-motion was untimely and should not be considered.

The parties' remaining contentions either need not be reached in light of our determination or are without merit.

BRATHWAITE NELSON, J.P., WOOTEN, LOVE and MCCORMACK, JJ., concur.