Court Opinion

ID: 5862834
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:24:04.225374+00
Date Added: 2024-06-11T08:44:29.314582
License: Public Domain

Murphy, P. J., and Carro, J.,
concur in part and dissent in part in a memorandum by Carro, J., as follows: While we agree that summary judgment should be granted to Kelly Construction, Inc., Carlin-Kelly-Lawson, Carlin Construction and Development Corp. (CCDC) and William V. Lawson, we believe more survives than just the first and second causes of action against Kelly Consultants (Consultants). Specifically, we believe plaintiff’s fourth cause of action is viable (wrongful discharge by Consultants) and we find the facts adduced in the record support a cause of action against Fred Kelly, personally, for tortious interference with plaintiff’s employment contract or, possibly, prima facie tort. Although the complaint is drawn so inartfully as to be almost unintelligible the facts that coalesce from the two records (read, as they must be on a motion for summary judgment, in the light most favorable to the party opposing the motion) indicate a willful course of conduct by Kelly to appropriate the consultant corporation’s business opportunity for the sole purpose of cutting out plaintiff. Consultants is (was) a closely held corporation, with Kelly owning 60% of the stock and plaintiff, 40%. It was formed by Kelly convincing Rossi that he, Kelly, could land a number of lucrative construction *453management accounts, if only he had sufficient operating capital. Rossi agreed to this, loaned the corporation $25,000, guaranteed some other loans and deferred receipt of his own salary to the payment of the loans and Kelly’s expenses. As the financial officer, Rossi wrote most of the checks and could monitor somewhat Kelly’s activities. At a deposition Rossi acknowledged writing the corporate checks for Kelly’s rental car, golf course, Metropolitan Club and other expenses, because “A. Basically, Fred was in a tight financial situation. And he needed the money. So the monies went to Fred to pay his rent, to pay his existence. I mean he was the basic part of the company. I mean we needed him to get business and couldn’t do business if he had to sleep in the park. So we gave him the money. Q. So you knew Fred’s financial circumstances, and you made a voluntary decision to pay him and not you, is that correct? A. That’s correct.” This went on for a little over a year, with what business Kelly did drum up being insufficient to cover even his expenses. In October of 1981, however, Kelly landed a lucrative deal with Carlin Construction and Development Corporation (CCDC) whereby Consultants would participate as joint venturers with CCDC, and CCDC would underwrite expenses. This was formally set forth in an agreement dated November 25,1981 and the record also shows a check from Carlin to Consultants, dated October 7, 1981, labeled “loan.” CCDC is a huge, well-financed concern and at last Consultants had a business opportunity that promised to bring in enough money to pay Rossi both his back salary and the $25,000 he had loaned Consultants — this deal justified the faith he had in Kelly. In late January of 1982, however, Kelly signed an agreement, personally, to participate in the joint venture and initially receive at least $50,000. CCDC conditioned payment to Kelly upon his first obtaining “general releases of any and all claims from the stockholders of Fred J. Kelly Consultants, Inc.” Of course, we know he did not. Instead, by letter of April 8, 1982 Kelly purported to terminate Rossi’s employment with Consultants, effective a week later, and demanded that plaintiff tender his shares in Consultants for their $1 par value. The only reason given by Kelly was that “the Corporation is, and has been, virtually bankrupt for a considerable period of time and such services as you would have been called upon to perform never did materialize.” Since, by the terms of his employment contract plaintiff was to serve as financial officer of Consultants as well as be a management consultant (with Kelly) on projects under contract to Consultants, and since the November, 1981 agreement with CCDC provided a live opportunity for both sound capitalization of Consultants and a chance for Rossi to actually be a management consultant, Kelly’s stated reasons for firing plaintiff were patently false. The real reason, it must be presumed, was to recover the Consultants stock from Rossi so that Kelly could conclude his appropriation from Consultants of the joint venture opportunity. As mentioned, the complaint is poorly drafted. In his fifth cause of action plaintiff “as a shareholder of defendant Consultants on behalf of himself and all of the shareholders of Consultants similarly situated and in the right of Consultants” alleges that Kelly “and the other defendants named” entered into a “scheme whereby all of the assets of Consultants * * * were assigned to Carlin-Kelly-Lawson.” While Rossi certainly has standing to assert a stockholder’s derivative suit for harm done to the corporation (Business Corporation Law, § 626), it is questionable as to whether he may do so in the same lawsuit in which he seeks to recover personally for harm done to him. And beyond that, a derivative suit really makes little sense in the context of this corporation. In fact, plaintiff disaffirmed such a characterization of his suit in the court below, so notwithstanding his readoption of that position on appeal, we may ignore it. That does not mean, however, that plaintiff is barred from asserting that the corporation was harmed, with the direct result that he was, too. As 60% *454shareholder of Consultants, Kelly did not harm the corporation to harm it, but to specifically deprive plaintiff. So really, Kelly only took for himself the opportunity of Consultants (thereby harming the corporation) because he would otherwise have had to share his profits with Rossi. We do not believe the law intends the limitation on liability for a corporation to be utilized in this particular way. The choice between allowing a cause of action for prima facie tort or interference with contract largely depends on whether Kelly’s action was “improper.” In Guard-Life Corp. v Parker Hardware Mfg. Corp. (50 NY2d 183,189), Judge Jones adopted the section 766 of the Restatement of Torts 2d definition of interference with contract: “ ‘One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.’ ” Judge Jones explained that “ ‘improperly’ ” was selected in preference to the phrase, “ ‘without justification’ ” and the factors to be considered include the nature of the conduct of the interferer, the interests of the party interfered with, the relationship between the parties, “the motive and interest sought to be advanced by the one who interferes, the social interest in protecting the freedom of action of that person as well as the contractual interests of the party interfered with, and the proximity or remoteness to the interference of the conduct complained of.” (50 NY2d, at pp 189, 190, n 2.) While Kelly’s conduct certainly seems to come within the definition of this tort, note that it is not a requirement that one who “improperly interferes” be guilty of any illegal act, although illegality would fit. Prima facie tort, on the other hand, requires “the infliction of intentional harm, resulting in damage, without excuse or justification, by an act or series of acts which would otherwise be lawful.” (Ruza v Ruza, 286 App Div 767, 769 [quoted in ATI, Inc. v Ruder & Finn, 42 NY2d 454, 458 (per Cooke, J.)].) We are not sure whether Kelly’s acts amounted to criminal or even civil violation of Federal or State law. We also do not think that question needs to be decided now. Instead, we would merely allow the first, second and fourth causes of action against Consultants, with leave to plaintiff to replead his cause of action for interference with contract against Kelly. (Rossi’s third cause of action stated this against CCDC and Lawson only.)