Zion v. Kurtz

50 N.Y.2d 92, 405 N.E.2d 681 (1980)

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Nature of the Case

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Facts

Kurtz (D) formed Lombard-Wall Group, a Delaware corporation. The Group acquired all of the stock in Lombard-Wall Inc. in a transaction with Zion (P). P made property available and assets to be used as security for a loan to finance the acquisition. P owned all of the Class A stock while D owned all of the Class B stock. P and D executed a shareholder agreement restraining the activity of the Group. The Group's articles of incorporation did not refer to agreement, and the Group's board of directors approved actions over the objection of P violating the shareholder’s consent agreement. P began this action for declaratory and injunctive relief, asking in their first cause of action that the interest and escrow agreements executed without P's consent be declared in violation of the stockholders' agreement and annulled, and in the second cause of action that the formation of the subsidiaries be declared in violation of the agreement and that they be dissolved. Both parties moved for summary judgment. Special Term denied both motions. The Appellate Division reversed, concluding that D were entitled to summary judgment dismissing the second cause of action, but that P were entitled to summary judgment dismissing the counterclaim and on their first cause of action declaring that execution of the interest and escrow agreements violated the shareholders' agreement and should be enjoined. The final payment on the note was made, and the escrow agreement with Chase Manhattan was to be released.