Court Opinion

ID: 5864013
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:27:23.013488+00
Date Added: 2024-06-11T08:44:31.515505
License: Public Domain

Mangano, J. (concurring in part and dissenting in part).
I concur in so much of the majority opinion as (1) affirms *256the granting of the motion to dismiss the complaint in the instant action brought pursuant to section 611 of the Business Corporation Law; (2) denies the motion to dismiss the instant proceeding commenced pursuant to section 619 of the Business Corporation Law; and (3) recommends that Special Term, upon application, should consolidate or join the instant proceeding with the pending action commenced by appellant and his wife against Magnetic Head Corporation for rescission and reformation of a shareholders’ agreement dated April 30,1978 (Schmidt v Magnetic Head Corp., 97 AD2d 151).
However, I am compelled to clarify my disagreement with the remainder of the majority’s opinion.
As noted by Special Term, the order to show cause in the instant proceeding apparently also sought a determination regarding the validity of the two resolutions which authorized an increase in the number of Magnetic Head Corporation’s common shares, and the creation of a new class of preferred shares. Special Term properly held that this issue was not “a proper subject for this BCL 619 summary proceeding”. Indeed, such an issue can only be raised in a plenary action (Matter of Goldfield Corp. v General Host Corp., 29 NY2d 264). Although the majority agrees with Special Term on this point, it would not dismiss that part of the petition which alleges that these new share authorizations are invalid. Rather, under the authority of CPLR 103 (subd [c]), it would convert that part of the petition into a plenary action to determine the validity of the new share authorizations.
I do not agree with this approach.
The petition and supporting papers are totally silent as to the exact gravamen of appellant’s allegation regarding the proposals authorizing the issuance of the new shares. It is only in the appellant’s brief that the precise nature of his ■ attack on these proposals can be discerned, viz., that irrespective of the fact that the holders of the irrevocable proxies were entitled to vote at the corporate election of October 6,1981, “for whatsoever purposes”, they nevertheless breached a fiduciary duty to their shareholders in voting for the resolutions authorizing the issuance of new *257shares, since those resolutions had the effect of creating “fundamental or radical changes in basic corporate structure”.
Since this particular theory was not raised at all in the petition, I do not agree with the majority’s decision to (1) invoke CPLR 103 (subd [c]) and convert a part of this summary proceeding under section 619 of the Business Corporation Law to a plenary action and (2) comment, however so briefly, on the merits, of such a theory.
Accordingly, I concur in part and dissent in part.
Lazer, J. P., and Gulotta, J., concur with Gibbons, J.; Mangano, J., concurs in part and dissents in part, with an opinion.
Order of the Supreme Court, Nassau County, dated January 29, 1982, affirmed, without costs or disbursements.
Judgment of the same court, entered March 16, 1982, reversed, without costs or disbursements, motion to dismiss denied, so much of the proceeding pursuant to section 619 of the Business Corporation Law as pertains to the new share authorizations is deemed converted into an action to determine the validity of these authorizations and for other appropriate relief, and matter remitted to the Supreme Court, Nassau County, for further proceedings consistent herewith.