Opinion
July 15, 1996
Appeal from the Supreme Court, Suffolk County (Newmark, J.).
Ordered that the order is reversed insofar as appealed from, on the law, with costs, and those branches of the motion by the respondent Robert M. Stark which were to dismiss the proceeding to the extent that it was based on Business Corporation Law § 1104, convert the proceeding to one pursuant to Business Corporation Law § 1104-a, and permit the respondent Robert M. Stark to elect to purchase the petitioner's interest in the corporation pursuant to Business Corporation Law § 1118 are denied, and the matter is remitted to the Supreme Court, Suffolk County, for further proceedings in accordance herewith.
Michael Giordano, who is the petitioner herein, and Robert Stark each own a 50% interest in Southampton Village Market, Inc. In July of 1994, Giordano commenced the subject proceeding for judicial dissolution of the corporation pursuant to Business Corporation Law § 1104. In his answer, Stark denied Giordano's allegations of deadlock and claimed that because the petition contained allegations of fraud, waste, looting, and diversion of funds, Giordano was actually seeking dissolution under Business Corporation Law § 1104-a, rather than section 1104. Stark contended that he should be permitted to purchase Giordano's interest in the corporation pursuant to Business Corporation Law § 1118.
In a motion brought by Stark at virtually the same time he filed his answer, Stark requested, inter alia, that the proceeding be converted to one pursuant to Business Corporation Law § 1104-a, and that the proceeding be dismissed to the extent that it sought dissolution under Business Corporation Law § 1104. In the order which is the subject of this appeal, the Supreme Court, inter alia, denied, without a hearing, the petitioner's application for dissolution pursuant to Business Corporation Law § 1104, but permitted the proceeding to continue pursuant to Business Corporation Law § 1104-a, thereby giving Stark the opportunity to acquire Giordano's interest in the corporation pursuant to Business Corporation Law § 1118.
A plain reading of Business Corporation Law § 1118 indicates that the buyout option under that section is not available in a proceeding brought exclusively pursuant to Business Corporation Law § 1104 (see, Matter of Lake Mahopac Tailor [Iacovone], 146 A.D.2d 774; Greer v. Greer, 124 A.D.2d 707; cf., Matter of Cristo Bros., 64 N.Y.2d 975; Matter of Public Relations Aids, 109 A.D.2d 502). Because it is the petitioner who chooses the statutory basis for dissolution (see, Business Corporation Law § 1105), it was error to convert the proceeding, over the petitioner's objection, to a proceeding pursuant to Business Corporation Law § 1104-a (see, Matter of Sternberg, 181 A.D.2d 897; Matter of Southampton Brick Tile, 159 Misc.2d 519, 521).
Moreover, the Supreme Court erred in denying the petition for dissolution under Business Corporation Law § 1104 without conducting a hearing. The allegations in the petition and its supporting papers were prima facie sufficient to establish a basis for dissolution pursuant to Business Corporation Law § 1104. In light of the conflicting affidavits by the parties regarding the relevant facts, the Supreme Court should have conducted a hearing before determining whether dissolution was warranted (see, Business Corporation Law § 1109; Matter of Kournianos, 175 A.D.2d 129; Matter of MacDougall, 150 A.D.2d 160; Matter of Ricci v. First Time Around, 112 A.D.2d 794; Matter of Rosen, 102 A.D.2d 855). Of course, if the parties can reach an agreement whereby one acquires the other's interest in the corporation, there would be no need for continuation of the proceedings (see, Matter of Sternberg, 181 A.D.2d 899). Miller, J.P., O'Brien, Copertino and Pizzuto, JJ., concur.