68th St. Apts., Inc. v. Lauricella

Superior Court of New Jersey, Law Division · 1976 · Corporations

362 A.2d 78 (1976)

Updated August 22, 2026

Corporationsclose corporationsshareholder fiduciary dutiespartnership analogiesdeadlock and dissolutionclose corporationstatutory partnershippiercing corporate form internally

Facts

Lauricella and Introcaso orally agreed to acquire and develop 6818 Park Avenue through a corporation they formed, each owning half the stock, with ICC as general contractor and Lauricella responsible for arranging financing. Construction began, but after a disputed concrete slab pour Lauricella refused to proceed under the original arrangement and failed to arrange construction mortgage drawdowns, while Introcaso remained ready, willing, and able to continue. The corporation was later dissolved for deadlock, and prior Chancery findings—binding here—established that 6818 breached its contract with ICC and that ICC had substantially performed in a substantial, good, and workmanlike manner. The receiver liquidated the property, paid creditors at a discount, and no return of capital was made to either shareholder.

Issue

When a two-person close corporation formed to complete a single development project collapses because one principal refuses to continue with the original undertaking, may the court treat the principals' relationship as analogous to a partnership and hold the withdrawing principal personally liable to the other for losses caused by that wrongful termination? Also, may the contractor corporation recover additionally from the principal by disregarding the corporate form?

Rule

In an internal dispute involving a classic close corporation, where management and ownership are substantially identical and corporate formalities are largely disregarded, a court may look past corporate technisms and treat the principals as partners or coventurers. Under those principles, if the undertaking was intended to continue until completion of a specified project, a principal may not withdraw at will before completion; a wrongful refusal to abide by the original undertaking makes that principal liable for resulting losses. But where the parties deliberately dealt through separate corporate entities in a contract between those entities, the corporate form will not be ignored absent a sufficient basis to do so.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Newark, Nina Patel and Owen Mercer formed Riverfront Lofts, Inc. to renovate a warehouse into artist studios. Each owned 50% of the shares, no directors were ever elected, and the two of them personally made all management decisions. After disputes arose, Nina sued Owen for losses she says he caused by abandoning the venture.

Which is the strongest basis for a court to treat their relationship under partnership-like principles rather than ordinary corporate doctrine?

Explanation. The majority allowed departure from ordinary corporate doctrine where the corporation functioned as a classic close corporation: ownership and management were effectively the same, directors' independent judgment was fictional, and the dispute concerned adjustment of equities among the members only. The court did not hold that every two-shareholder corporation is automatically a partnership, nor that losses alone justify disregarding the form.