In re Scognamillo ( 1991 )

Judgment, Supreme Court, New York County (Edward H. Lehner, J.), entered February 8, 1990, evaluating petitioners’ shares, under Business Corporation Law § 1118, pursuant to dissolution of the two corporations, unanimously modified, on the law, to the extent of deleting the deductions from appellant’s gross awards for dividend and salary income received after filing of the dissolution petitions, and otherwise affirmed, without costs.

The major differences in the opinions offered by the expert witnesses with regard to valuation of the restaurant corporation had to do with computing "free and clear earnings”, a key component in the "capitalization of income” method utilized. The gross disparity was due in large measure to two factors: (1) an overinflated adjustment by petitioners’ expert to compensate for historic underreporting of income; and (2) the substitution of the much higher market-based rent for actual rent paid by the tenant restaurant corporation to its interlocking landlord corporation, even though actual rent had been utilized in evaluating the latter. We approve the IAS court’s rejection of those adjustments in reaching its gross evaluation of the restaurant corporation.

There is no authority for the income deductions, especially in light of the facts that appellant concededly did nothing illegal, that each disbursement was made while appellant was still an officer of the respective corporation, and that each such disbursement was either approved or subsequently ratified by the respective board of directors. Settle order on notice. Concur—Carro, J. P., Ellerin, Kupferman, Kassal and Rubin, JJ.