GAZDA v. KOLINSKI
91 A.D.2d 860 (1982)
John Gazda, on Behalf of Himself as Shareholder of T.J.'s Big Boy, Inc., and in the Right of T.J.'s Big Boy, Inc., and on Behalf of All Other Shareholders Similarly Situated, Respondent-Appellant, v. Anthony T. Kolinski et al., Appellants-Respondents John Gazda, Individually and as a Shareholder of T.J.'s Big Boy, Inc., Respondent-Appellant, v. Anthony T. Kolinski et al., Individually and as Corporate Officers and Directors of T.J.'s Big Boy, Inc., et al., Appellants-Respondents
Appellate Division of the Supreme Court of the State of New York, Fourth Department.
December 17, 1982
Present — Simons, J. P., Hancock, Jr., Callahan, Boomer and Moule, JJ.
Judgment unanimously modified, on the law and facts, and, as modified, affirmed, without costs, in accordance with the following memorandum: Plaintiff and the individual defendants each own one third of the outstanding shares of corporate stock of the defendant T.J.'s Big Boy, Inc., a fast food restaurant chain operating in Syracuse and Rochester under an agreement with Big Boy Franchises, Inc., a subsidiary of the Marriott Corporation. The three men began their business in 1972 by executing a written agreement which provided that each of the parties would buy 200 shares of stock in T.J.'s Big Boy, Inc., at $10 per share and each would loan the corporation $8,000 as seed money. The agreement also provided that each of the parties would hold offices in the corporation; that Gazda and Giamartino would share in the duties of managing the corporation's business and receive in return a salary of $12,000 per year, that Kolinski would be employed part time at $6,000 per year and that none of the salaries would be increased without unanimous approval of all the shareholders. In the event one of the shareholders died, resigned voluntarily or was terminated by the board of directors "without the shareholder's consent", the agreement provided a means for repurchase of the shareholder's stock. In 1976 the three men became embroiled in various disputes and the board of directors, on vote of defendants Giamartino and Kolinski, discharged plaintiff Gazda from employment. Plaintiff did not tender his stock to the corporation or the remaining shareholders but remained as a director and the parties have engaged in various disputes ever since. In 1977 plaintiff instituted these two actions seeking a broad variety of relief for himself and for the corporation. After a trial without a jury, the court disposed of the litigation in a judgment containing 17 ordering paragraphs. In general it held that plaintiff had failed to sustain his cause of action to reform the stockholders' agreement to provide that no corporate action could be taken without the unanimous consent of all three stockholders and, accordingly, that the board of directors was free to discharge plaintiff at will and without a showing of fraud or bad faith in his conduct (see Clark v Dodge, 269 N.Y. 410). The court also found that the proof did not warrant removal of defendants Giamartino and Kolinski as directors. It did find, however, that the individual defendants had breached their fiduciary duties to the corporation by using corporate assets, cash and credit, to establish and finance defendant G & K's Big Boy, Inc., a subfranchisee of defendant T.J.'s Big Boy, Inc., in which the individual defendants had an interest but plaintiff did not. It therefore ordered an accounting and enjoined any of the defendants from opening any new restaurants. If the accounting proceeding establishes the improper use of the corporate assets of T.J.'s Big Boy, Inc., for the benefit of the subfranchisee, then T.J.'s is entitled to restitution of any damages sustained. We see no reason, however, why all defendants should be enjoined indefinitely from expanding the restaurant business. It is clear from the agreement that subfranchising was always contemplated by the parties. The handling of the G & K subfranchise may have been irregular but the proof does not establish that such subfranchises will have any adverse financial effects on defendant T.J.'s Big Boy, Inc., in the future. The judgment should be modified to limit the injunction to prohibit the establishment of any further G & K Big Boy restaurants until after the accounting and subject to the further order of
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