Zion v. Kurtz

— Order, Supreme Court, New York County, entered March 31, 1978, reversed, on the law, without costs, but with disbursements for reproducing the record to be shared equally, plaintiff-appellant-respondent’s motion for partial summary judgment on the first cause of action granted to declare in favor of plaintiff-appellant-respondent as prayed for and to enjoin continuance of forbidden conduct pursuant to such declaration, and the motion of plaintiff-appellant-respondent to dismiss the counterclaim of defendants-respondents-appellants granted; and the cross motion of defendants-respondents-appellants for summary judgment dismissing plaintiff-appellant-respondent’s second cause of action granted, and that cause dismissed. Plaintiffs-appellants-respondents moved at Special Term, in connection with their action for declaratory and injunctive relief against defendants-respondents-appellants, for summary judgment on their first cause of action and severance thereof, claiming violation of a shareholders’ agreement between the parties, one of the provisions of which interdicted "business or activities” (emphasis supplied) on the part of a holding company, subject of the agreement, without the consent of a majority of class A stockholders. The latter are the plaintiffs. In short, it appears that, unless consented to by plaintiffs, the holding company was to have no function save as a repository. Defendants-respondents-appellants, however, caused the holding company to enter into an escrow agreement, which obligated it to pay substantial interest thereunder, and this without consent of plaintiffs. There is no issue of fact as to any of the matters described above. Special Term, however, misreading the quoted provision without the connective word "or” as "business activities,” held that the activities were not unequivocally forbidden and that there is an issue as to the meaning of the agreement. Accordingly, summary judgment was denied to plaintiffs. In our view, there was no such issue, and plaintiffs were entitled to declaratory judgment that defendants had violated the agreement and that the violation should be enjoined as continuing irreparable harm. Defendants alleged in an affirmative defense and counterclaim that the words, as quoted, do not represent "the actual understanding and agreement of the parties,” and seek reformation. This naked conclusory allegation sets out no cause for reformation, and in our view the motion to dismiss it should have been granted. Further, Special Term denied defendants’ motion for summary judgment dismissing plaintiffs’ second cause, which had asserted a further violation in that, without consent of plaintiffs, defendants had caused the holding company to form two subsidiary corporations. The record shows clearly and unequivocally, as defendants claim, that consent was actually given by plaintiffs’ indorsements at the foot of letters dated October 15, 1976, separately as to each of the two subsidiaries. Concur — Murphy, P. J., Lane and Markewich, JJ.; Sullivan, J., dissents in a memorandum, and Lynch, J., dissents in part in a memorandum, as follows: