Muller v. Silverstein

Appellate Division of the Supreme Court of New York, First Department · 1983 · Corporations

92 A.D.2d 455 (1983)

Updated August 22, 2026

CorporationsJudicial dissolutionClosely held corporationsDividendsBCL 1104-aBCL 1105BCL 1106closely held corporation

Facts

Patricia Holding Corp. was a closely held New York corporation whose sole business was owning and operating two parcels of real estate. The Hillman and Silverstein families had each owned 50% of the shares until one Silverstein acquired an additional 12 1/2%, obtaining control. In an action seeking, among other relief, declaration of a reasonable dividend and removal of officers and directors, certain family members cross-claimed against the Silversteins, but they did not request dissolution. After a hearing, the trial court dissolved the corporation based on the failure to declare dividends or convene a meeting for that purpose.

Issue

Whether the trial court could dissolve the corporation under Business Corporation Law § 1104-a based on the failure to declare dividends when dissolution had not been requested and the statutory procedures and findings required for judicial dissolution had not been satisfied.

Rule

A court may order dissolution under Business Corporation Law § 1104-a only upon compliance with the statute's procedural and notice requirements and only after a sufficient factual showing on the statutory grounds. In deciding whether to dissolve, the court must consider whether liquidation is the only feasible means by which petitioners may reasonably expect a fair return on their investment and whether liquidation is reasonably necessary to protect shareholder rights and interests. Separately, dividend decisions are generally within the board's discretion, and absent allegations of fraud, bad faith, or dishonesty, the directors' judgment in withholding dividends is conclusive.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

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

In Manhattan, minority shareholders of Harbor Loft Realty, Inc. sued the corporation's directors seeking removal of officers and an order requiring the company to distribute earnings. After the bench trial ended, the plaintiffs argued for the first time in a posttrial memorandum that the court should dissolve the corporation, and the court immediately entered a dissolution order without further notice to other shareholders.

Was the dissolution order proper?

Explanation. The majority treated dissolution as a drastic remedy requiring adherence to the statutory framework. A court may not order dissolution when it was first raised only after trial and the statutory petition and notice provisions were not followed. Interested parties must receive proper notice and an opportunity to oppose dissolution.