On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County.
Approved for Publication February 27, 1996.
Before Judges Stern, Wallace and Newman. The opinion of the court was delivered by Wallace, Jr., J.A.D.
The opinion of the court was delivered by: Wallace
The opinion of the court was delivered by WALLACE, JR., J.A.D.
We granted leave to appeal to address defendant Scott L. Nicholas' challenge to an order of the Chancery Division entered on June 9, 1995. The order directed each of the shareholders of Atex Associates, Inc. to pay $20,000 to the receiver within two weeks. Any shareholder who made the payment would receive priority over a non-paying shareholder. Further, the order provided that if the entire $140,000 was not paid within two weeks, the custodial receiver could apply to the court for appropriate relief.
On appeal defendant Nicholas essentially contends that (1) the scope of the June 9, 1995 order is excessive in that it exceeds the bounds of the underlying action; (2) there is no justification for imposing personal liability on a shareholder; and (3) the court's assessment against him is disproportionately higher than the shares he owns in Atex. We hold that it was error to order defendant Nicholas to pay $20,000 to the receiver.
Plaintiff Aristotle Catsouphes filed a complaint against Atex Associates Inc., and its individual shareholders Peter Callas, Constantine Callas, Demitri Tefariki, Katerina Nicholas, Scott L. Nicholas, Louis E. Amoratis, Elena Nicholas Cella and George K. Stratis, seeking to compel defendants to purchase his shares in accordance with the stockholders' agreement. Separate answers and counterclaims were filed by defendants. In the answer and cross-claim of defendants Callas and Tefariki, individually and on behalf of Atex, they sought the appointment of a custodian with full powers of the Board of Directors to manage the affairs of Atex pending dissolution. Defendant Nicholas, who had acquired his shares in Atex as a result of the death of Nicholas S. Nicholas, *fn1 also filed an answer.
On November 24, 1993, the Chancery Judge entered an order appointing a custodial receiver for Atex. Paragraph 5 of the proposed consent order provided that:
The services of the Receiver shall be paid by Atex, but if Atex shall not have sufficient funds to make such payments, then the services of the Receiver shall be paid as follows: one seventh by each of the stockholders of Atex who are parties to this action.
The order had been agreed to and signed by Nicholas, only after he deleted the above underlined portion. The Chancery Judge reinstated the underlined portion and noted that, "this provision is reinstated by the Court despite [the] objection of some of the parties."
Thereafter, the receiver entered into various agreements with third parties to preserve and maintain Atex's property. The receiver entered into the agreements only after application to the Court and after notice and an opportunity to object was given to all parties. On May 24, 1995, the receiver filed a motion for an order compelling the shareholders of Atex to pay for any and all obligations incurred by Atex to date in the event that sufficient funds were not available from Atex. In support of the motion, an attorney in the receiver's law firm certified that as of April 1995 the balance in Atex's checking account was $5,242.28, and that on April 18, 1995, Encore Studios, a major tenant of Atex, had advised the receiver that it was going to terminate its lease as of June 1995. Further, it was noted that there was a mortgage on the Edgewater premises with principal due and owing of approximately $450,000, with monthly payments of $5,583.77, and that real estate taxes on the property amounted to $4,814.88 per month. The attorney further certified:
Accordingly, due to the loss of Encore Studios, there will be no surplus funds for any and all items required to be performed on the property, since the rental received from Coffee Associates ... will necessarily be used to satisfy the monthly mortgage and real estate tax payments. The corporate obligations necessarily incurred to date include, but are not limited to, the separation of sanitary sewer and storm sewer project [$84,000], ... ...