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Central Jersey Airport v. Jones

A-6368-08T1 (N.J. Super. App. Div. 2010) (Unpublished)

CORPORATIONS; SHAREHOLDERS; OPPRESSION — Even where a court rules that a minority shareholder has not been oppressed, it can still fashion equitable relief.

Two men purchased an airport at an auction sale. They then formed a limited liability company (LLC) to own, operate, and manage the airport. Pursuant to their operating agreement, one member owned eighty percent of the company, and the other owned the remaining twenty percent. The 20% member also was the sole shareholder of a fixed base operation at the airport that maintained and repaired aircraft, and his family formed a flight school that operated from the airport. Both businesses were tenants of the LLC and paid rent. Around this time, the 20% member also entered into an agreement with another tenant at the airport in which the 20% member would have full use of the tenant’s storage tank at the airport in consideration of a waiver of that tenant’s rent payment.

The two members’ relationship broke down after the LLC filed for bankruptcy, and pursuant to a reorganization plan was converted to a corporation. The former members retained similar percentages of ownership and continued to operate and manage the airport. The majority owner then filed suit against the minority owner, claiming the minority owner had made no attempt to run the affairs of the corporation and had breached his fiduciary duties in dealings with the aforementioned tenants. The minority owner asserted that he was an oppressed minority shareholder, sought an accounting, and requested that his interest in the corporation be bought by the majority owner. He also sought damages from the majority owner for past due repair and maintenance costs related to his sole business.

The lower court held that the minority owner was not an oppressed shareholder and denied an accounting, but ordered that an independent appraisal of the corporation and airport real property be conducted. It concluded that the minority owner had violated his fiduciary duty to the corporation when he caused the flight school and other tenant to stop paying rent. The lower court found the corporation was entitled to $86,000 from the minority owner, and that the majority owner owed the minority’s sole business $10,209.40 for repair and maintenance costs. It stayed execution on the money judgments until the appraisals were completed. No appeal was taken from this judgment.

Two years later, the majority owner filed a motion for post-judgment relief seeking an amended, increased judgment and for ejection of the minority owner’s business from the airport. He asserted the minority owner refused to make rent payments as a tenant and continued to breach his fiduciary duties. He informed the court that the appraisal had not been completed because the corporation was without funds to pay the balance due on the appraisal, its monthly expenditures exceeding its rental income. Of relevance, the court only granted an order of ejectment, as there was no dispute the minority owner had failed to pay the rent as originally awarded by the court. The court permitted the tenant to pay the rent owed, and if it did, it could continue its operations. The minority owner appealed the order of ejectment, asserting the lower court had initially ruled that other remedies had to be sought prior to seeking ejectment.

The Appellate Division affirmed the lower court’s initial order as equitable to the minority owner’s interests, and saw that the lower court had directed the obtaining of independent appraisals so that the parties hopefully could work out their differences. However, the minority owner never appealed the dismissal of his counterclaim or the form of order, and never asked for the court’s intervention when the appraisals were not forthcoming. Instead, the minority owner returned to court only in response to a post-judgment motion filed by the majority owner. The Court also said that the lower court’s initial order denied the request for eviction without prejudice subject to any post-trial motions seeking such remedy because of any inability to resolve the matter otherwise. In his post-trial motion, the majority owner asserted that the corporation could not afford to secure appraisals, and this statement was not challenged by the minority owner. Thus, it concluded that the lower court did not err in finding that the case could now be resolved without the remedy of ejectment, given the rent arrears.

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