State of New York

Supreme Court, Appellate Division

Third Judicial Department

Decided and Entered: January 12, 2017 522587 

________________________________

In the Matter of the

Dissolution of GOULD

ERECTORS & RIGGING, INC.

and FLACH CRANE & RIGGING

CO., INC.

HANK DIGESER, MEMORANDUM AND ORDER

Respondent;

JOHN C. FLACH et al.,

Appellants.

________________________________

Calendar Date: November 17, 2016

Before: Peters, P.J., Garry, Devine, Mulvey and Aarons, JJ.

__________

The Baynes Law Firm, PLLC, Ravena (Brendan F. Baynes of

counsel), for appellants.

The Harding Law Firm, Niskayuna (Charles R. Harding of

counsel), for respondent.

__________

Mulvey, J.

Appeal from an order of the Supreme Court (Platkin, J.),

entered November 16, 2015 in Albany County, which, among other

things, granted petitioner's application, in a proceeding

pursuant to Business Corporation Law article 11, to direct the

judicial dissolution of Gould Erectors & Rigging, Inc. and Flach

Crane & Rigging Co., Inc.

Petitioner, a shareholder of respondent Gould Erectors &

Rigging, Inc. (hereinafter GER) and respondent Flach Crane &
-2- 522587 

Rigging Co., Inc. (hereinafter FCR), commenced this special

proceeding in April 2013 seeking judicial dissolution of GER and

FCR. Following a nonjury trial, Supreme Court determined that

petitioner had established grounds for dissolution of both

corporations under Business Corporation Law § 1104-a (a) (1),

finding that respondent John C. Flach engaged in oppressive

actions toward petitioner. Respondents appeal, and we affirm.

"Business Corporation Law § 1104-a provides for relief to

shareholders of a close corporation when the directors or those

in control of the corporation have been guilty of illegal,

fraudulent or oppressive actions toward the complaining

shareholders" (Matter of Upstate Med. Assoc., 292 AD2d 732, 733

[2002] [internal quotation marks and citation omitted]). 

"Although the term 'oppressive actions' is not statutorily

defined, the Court of Appeals has held that 'oppression should be

deemed to arise . . . when the majority conduct substantially

defeats expectations that, objectively viewed, were both

reasonable under the circumstances and were central to the

[shareholder's] decision to join the venture'" (id. at 733,

quoting Matter of Kemp & Beatley [Gardstein], 64 NY2d 63, 73

[1984]). "Our review of Supreme Court's determination . . . 'is

not limited to whether [its] findings were supported by credible

evidence; rather, if it appears that a finding different from

that of Supreme Court is not unreasonable, we must weigh the

probative force of the conflicting evidence and the relative

strength of conflicting inferences that may be drawn, and grant

judgment as warranted'" (Matter of Sunburst Assoc., Inc., 106

AD3d 1224, 1225 [2013], quoting Hunt v Hunt, 222 AD2d 759, 761

[1995]). However, appropriate deference is given to the

credibility determinations and factual findings of the trial

court (see St. Lawrence Factory Stores v Ogdensburg Bridge & Port

Auth., 121 AD3d 1226, 1227 [2014], lv denied 25 NY3d 907 [2015];

Matter of Sunburst Assoc. Inc., 106 AD3d at 1225).

Petitioner is the owner of 24 of 98 issued shares of GER

and 25 of 100 shares of FCR.1 Until shortly before commencement

1 Although respondents highlight discrepancies in the

corporate records and testimony regarding the dates of stock
-3- 522587 

of this proceeding, petitioner served as vice-president of both

corporations while Flach was, and remains, president of both. 

Petitioner, Flach and their respective fathers have all served as

directors of the corporations. As Supreme Court properly found,

petitioner began his employment as a project engineer and vicepresident with GER in 1988 or 1989 and was issued stock two

different times, once before the commencement of his employment

and the other time during his employment. He also received

shares of stock in FCR at or about the time he started his

employment with GER. Over the course of the next 24 years, the

business grew significantly, with petitioner and Flach sharing

responsibilities for the management of both corporations and

receiving equal compensation. The trial testimony clearly

established that FCR was created merely as a liability shield for

GER and that the shareholders, officers and directors treated

both corporations as one integrated economic unit, sharing office

space and employees. Revenues, expenses and tax liabilities – as

between the two corporations – were manipulated for optimum

advantage by mutual agreement of the officers, directors and

shareholders. Since neither GER nor FCR ever declared dividends,

the shareholders' return on their active management was in the

form of salary and annual bonuses.

After a deterioration in the relationship between these

individuals in late 2012, petitioner was terminated as a director

of both GER and FCR and was notified by Flach that his employment

with GER would be terminated upon completion of an important

project. At some point between December 2012 and May 1, 2013,

petitioner was removed from the board of directors and dismissed

as corporate secretary, and, during that period, he was denied

access to his work computer and email, restricted in his

interactions with GER's customers and employees and excluded from

staff meetings. The project was completed in April 2013, and

petitioner was terminated on May 1, 2013. His children, along

with other employees deemed loyal to petitioner, were also

dismissed. Finally, petitioner was not paid the customary annual

profit-sharing bonus, although a bonus was paid to Flach.

issuance, we accord deference to Supreme Court's credibility

determinations (see Hunt v Hunt, 222 AD2d at 761).
-4- 522587 

Respondents contend that the actions taken against

petitioner were a justified response to his wrongful behavior,

specifically, back-dating corporate documents, "unjustly

leverag[ing]" his role as owner/landlord of the real property

upon which the corporate facilities were located, transferring

GER assets to his son at a loss to GER, and other transactions

that Supreme Court appropriately described as "belated and

unsubstantiated grievance[s]." We agree with Supreme Court that

petitioner's actions with regard to the leasehold relationship

came at a time when the parties were discussing severance of

their business relationship and can reasonably be viewed as a

response to respondents' oppressive conduct and not evidence of

bad faith on the part of petitioner. With regard to the other

transactions benefitting family members, Supreme Court properly

observed that Flach also engaged in similar transactions where

personal interests were advanced at the expense of GER.

On our review of the record, we confirm that the weight of

the evidence supports the finding that petitioner's reasonable

expectations at the time of his acquisition of stock in both

corporations was long-term employment, a role in corporate

management and compensation in the form of profit-sharing, and

that Flach's actions defeated those expectations (see Matter of

Kemp & Beatley [Gardstein], 64 NY2d at 72-73). Accordingly, we

find that the record amply supports Supreme Court's

determinations and, therefore, reject respondents' contentions

that the court's findings were against the weight of the

evidence. Finally, we discern no basis to disturb Supreme

Court's finding that Flach's oppressive acts defeated

petitioner's reasonable expectations that were central to his

involvement with FCR as well, given the close overlap of the two

corporations and that the shareholders, officers and directors

treated both corporations as one integrated economic unit. There

can be no question that the freezing out of petitioner from GER

had the same effect on his interest in FCR.

Peters, P.J., Garry, Devine and Aarons, JJ., concur.
-5- 522587 

ORDERED that the order is affirmed, with costs.

ENTER:

Robert D. Mayberger

Clerk of the Court