Imagine this: Your husband dies in 2016. He leaves behind an unpaid judgment owed to a Florida creditor, one that will balloon past $1 million with interest, that the estate cannot afford to pay. He also leaves a 50% stake in the family’s Brooklyn real estate company, which by all indications is thriving, but which you want “nothing to do with,” because you feel that it “killed [your] husband.” What’s a widow to do?
If you are Ms. Divanea Coven, as the personal representative of your late husband’s estate, you try to dissolve the company. Twice.
Alas, New York courts were unmoved both times. In today’s post, Matter of Coven v. Neptune Equities, Inc., 2026 NY Slip Op 06114 (2d Dept Oct. 21, 2026), the Second Department affirmed the denial of the estate’s dissolution petition under BCL 1104. The court held that the record “fail[ed] to demonstrate that the dissension…precluded the successful and profitable conduct of the corporation’s affairs.”
Neptune Equities and Walter’s Death
Neptune Equities, Inc., incorporated in 1972, owns one asset: a fully rented commercial building in Brooklyn, New York. Walter Coven and his sister, Staci Broder, each inherited 50% of the company in 2011.
Walter died intestate in Florida on May 30, 2016. Divanea, Walter’s second wife, became the Estate’s personal representative. Under Florida law, she is entitled to half the Estate, and Walter’s sons from his first marriage, Ross and Alex, to a quarter each.
When Walter died, he owed an $800,000 judgment to a Florida creditor, more than the Estate’s cash assets could cover. As a result of that unpaid judgment plus interest (which had increased the judgment to $1.1 million at the time of the trial at issue here), the Estate remains undistributed.
Neptune, meanwhile, is thriving. The building is unencumbered, and generates a gross rent roll of nearly $500,000 a year. By all accounts, the company is “running well,” and the petitioner’s own appraisal put its value at about $7.4 million.
Governance is another story. The corporate book held blank, pre-printed forms, including by-laws that did not bear the corporation’s name, and no minutes or resolutions electing any officers or directors. While Walter was alive, he and Staci ran the business informally, swapping titles freely on leases, tax returns, and bank documents. Since his death, Staci has run the family business alone.
Dissolution Attempt #1: The 2017 Proceeding
In 2017, Divanea petitioned for dissolution under BCL 1104-a (oppression, looting, waste), alleging that Walter and Staci had agreed to sell the building, that Staci stalled the sale after Walter died, and that Staci engaged in self-dealing and froze the estate out.
In September 2019 after a bench trial, Justice Timothy S. Driscoll of the Nassau County Commercial Division determined that dissolution was not warranted. Having disclaimed the business, Divanea had cut off contact with the family, meaning there was no proof of oppression. The court also found no agreement to sell and no looting, only a company “functioning as it always has”: “Neptune has made appropriate distributions since Walter’s death — including a distribution for his own funeral expenses — and Staci and Divanea have received equal distributions.”
That said, although the petition invoked only BCL 1104-a, the court also considered deadlock under BCL 1104 (a) which permits dissolution where:
- The directors are so divided respecting the management of the
corporation’s affairs that the votes required for action by the board cannot
be obtained; - The shareholders are so divided that the votes required for the election of
directors cannot be obtained; - There is internal dissension and two or more factions of shareholders are
so divided that dissolution would be beneficial to the shareholders.
As would later prompt the next round between the parties, Justice Driscoll found:
[T]he only “division” and “dissension” between the shareholders is due to Divanea’s lack of desire to communicate with Staci, Alex and Ross. Divanea never attempted to call a meeting of the directors of Neptune or to call a meeting to elect directors of Neptune. This is fatal to her claims. See Matter of Parveen, 259 A.D.2d 389 (1st Dept. 1999) (deadlock not established when parties have not attempted to elect directors)”
Dissolution Attempt #1: Denied and Dismissed.
The 2022 Zoom Shareholders Meeting
You can imagine what Divanea did next.
By notice dated January 19, 2022, citing BCL 602(a) and 603(a), Divanea called a special shareholders’ meeting, to be held by Zoom on March 30, 2022, to fix the size of the board and elect directors.
The meeting did not go smoothly.
Both Divanea and Staci appeared, together with their respective counsel. Staci’s attorney objected to the meeting as violating the “by-laws” (i.e. the incomplete blank template forms that were never adopted by the company). Divanea’s lawyer refused to admit Ross and Alex (her stepsons) to the meeting. Both Divanea and Staci proposed a one-person board, nominated herself, and voted the other down. Staci later proposed herself and Ross as a two-person board, and Divanea voted no.
Dissolution Attempt #2: The 2022 Proceeding
In October 2022, Divanea filed a new petition, now seeking dissolution under BCL 1104(a)(2) on the ground that “the shareholders are so divided that the votes required for the election of directors cannot be obtained,” along with other relief. By the time the two-day bench trial came around in January 2025, only the BCL 1104(a)(2) claim remained.
The case was tried by Nassau County Commercial Division Justice Jerome C. Murphy.
Justice Murphy’s Decision After Trial
In an April 7, 2025 Decision After Trial, Justice Murphy denied the petition.
First, Justice Murphy held that the March 2022 Zoom meeting was void. The court held that dissolution under BCL 1104(a) requires “a proper meeting.” Because “§602 of the BCL only allows directors to hold meetings by electronic communication, the petitioner, who is not a director, had no right to set up this meeting to be held by Zoom.” It, thus, followed that “any actions that are claimed to have taken place at that meeting are void.”
Hm? Query as to whether that same meeting, held in person, would have been “proper”? And do we think the vote would have come out any differently in a conference room rather than on a computer screen?
But, as the court went on, even if the meeting had been a “proper” one, there was “a strong probability” that dissolution would have been denied anyway. Dissolution is “a last resort,” and Ross Coven, like Staci, testified that he does not want Neptune dissolved.
The court thus embraced a “practical solution.” Once the Florida judgment is paid, “either by selling some stock or by borrowing against the estate’s stock,” the Estate can be distributed and Ross will receive his share. At that point, “Staci Broder’s side of any dispute will control more than a 50% stock interest,” and “any alleged directorship issues will be easily resolved.” On that basis, the court also exercised its discretion to deny dissolution.
Second Department Affirms, But on Different Grounds
Divanea appealed.
She argued (here and here) that Neptune had no lawfully elected director and no adopted by-laws, so no board existed to call a meeting. A shareholders’ meeting notice under BCL 602 and 603(a) was “the only procedure that was available to her.” She further argued that by attending and voting, Staci waived any objection under BCL 606. Analogizing to the LLC context in Amici v. Mazza, 234 AD3d 1170 (3d Dept 2025), Divanea further argued that a court has no discretion to preserve an entity that no one has legal authority to run.
Staci, for her part, argued that she is Neptune’s sole remaining officer and director, and that BCL 602(a) reserves virtual meetings to be called by the board “in its sole discretion.” She characterized the March 2022 Zoom meeting “a setup contrived to create a deadlock.” In her view, the impasse would end the moment Divanea distributed any of the Estate’s shares to her stepsons, who would vote to elect a board (and side with Staci).
The Second Department affirmed, but on different grounds and with zero mention of Zoom, BCL 602 or 603, or waiver.
The Appellate Court held that the trial court “did not improvidently exercise its discretion in denying dissolution,” because “the dissension between the petitioner and Broder was not sufficient to warrant dissolution” based on the following reasoning:
- “[T]he issue is not who is at fault for a deadlock, but whether a deadlock exists” (Matter of ANO, Inc. v. Goldberg, 167 AD3d 731; Matter of Kaufman, 225 AD 2d 115).
- The “critical consideration” is whether dissension “has resulted in a deadlock precluding the successful and profitable conduct of the corporation’s affairs” (Matter of Goodman v. Lovett, 200 AD2d 670).
- Here, “the record fails to demonstrate that the dissension between Broder and the petitioner precluded the successful and profitable conduct of the corporation’s affairs.”
Dissolution Attempt #2: Denied and Dismissed.
Final Thoughts
Perhaps you are thinking: Wait a minute. Wasn’t this a BCL 1104(a)(2) case about the shareholders’ inability to elect directors? Why is the Second Department asking whether the deadlock impaired profitability?
As I read it, the decision appears to blur the lines between BCL 1104(a)(2) (inability to elect directors) and BCL 1104(a)(3) (internal dissension between two or more factions). The Second Department did not say which subdivision its decision was decided under, though the cases cited in the decision are often bundled together under a BCL 1104 (a)(3) analysis (see, e.g., Matter of Pathology Assoc. of Ithaca, P.C., 214 AD3d 1171). Hold that up next to BCL 1111(b)(3), which provides that dissolution under BCL 1104 “is not to be denied merely because it is found that the corporate business has been or could be conducted at a profit,” and it leaves one wishing that the Second Department provided more detailed reasoning for its decision.
A final word on the plight of Divanea. Justice Driscoll faulted Divanea for never trying to elect directors; Justice Murphy faulted the attempt she made. The Second Department reached a sound result but left this catch-22 for directorless corporations unresolved. So, how exactly does one call a “proper” shareholders’ meeting for a corporation with no adopted by-laws, no directors, and no board? And if BCL 602(a) only lets “the board” authorize a Zoom meeting, can a corporation without a board ever hold a “proper” virtual shareholders’ meeting? These questions will have to be answered another time.
Recent Comments