Passaloukes v. Bensch

THIS OPINION HAS NO PRECEDENTIAL
VALUE.  IT SHOULD NOT

BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING

EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

Bill P. Passaloukas and Susie H.
Passaloukas, Individually and as Shareholders
derivatively on behalf of Zorba's Inc.,       
Appellants,

v.

Cynthia Bensch, Gary Bensch and Zorba's Inc.,       
Respondent.

Appeal From Beaufort County

Thomas Kemmerlin, Special Circuit Court
Judge

Unpublished Opinion No. 2004-UP-506

Submitted September 14, 2004 – Filed
October 11, 2004

REVERSED AND REMANDED

Frank F. Pape, Jr., of Atlanta, for Appellants.

James Arthur Brown, Jr., of Beaufort, for Respondents.

PER CURIAM:  In early 1999, Bill
and Susie Passaloukas (“Appellants”) approached Gary and Cynthia Bensch (“Respondents”)
and initiated discussion concerning the possible leasing of commercial real
estate owned by Respondents for the purpose of opening a restaurant.  Following
these discussions, the parties incorporated Zorba’s Inc., a statutory close
corporation, to operate the restaurant.  Appellants and Respondents were each
fifty-percent owners of this corporation, which was funded by contributions
in various forms from both parties.  Zorba’s Inc. then entered into a commercial
lease agreement with Respondents to rent retail space for the restaurant.  This
agreement essentially placed Respondents in the dual role of sole landlord and
half owner of the leasing entity. 

Zorba’s lease with Respondents provided
for default in the event rent was not paid, and clearly stated eviction could
occur if default was not cured within ten days of notice.  Just months into
the restaurant’s operation, Zorba’s had yet to turn a profit and various disagreements
arose between Appellants and Respondents.  In November 1999, Appellants withheld
the rent money due to a disagreement over Respondents’ alleged responsibility
to correct some problems with the property.  The rent was put in an attorney’s
escrow account and eventually paid to Respondents.  In December, however, the
rent was again withheld due to disagreements between the parties and financial
woes.

In response to the non-payment of rent,
Respondents evicted Zorba’s, Inc. from the premises by changing the locks on
the restaurant and threatening Appellants with criminal prosecution if they
attempted entry.  After a short and ill-fated attempt by Respondents to operate
their own restaurant on the premises, the restaurant, its good-will, and all
its equipment was sold to another restaurant for $75,000.  The purchasing restaurant
also entered into a five-year lease with Respondents for the retail space.

Appellants brought an action individually and as
a derivative suit on behalf of Zorbas, Inc. against Respondents and Zorba’s. 
Appellants set forth several causes of action relating to actions of Respondents,
including breach of fiduciary duty, unfair trade practices, and misappropriation
of corporate assets.  Additionally, they brought individual and derivative claims
for damages resulting from the alleged conversion of corporate and personal
property which was in the restaurant on the date of eviction.  Respondents counterclaimed
for damages.  After hearing exhaustive and often conflicting testimony from
the parties, the circuit court ordered any remaining assets of Zorbas be used
to pay creditors and then split evenly between Appellants and Respondents. He
denied all other claims of both parties. 

ANALYSIS

Despite the daunting amount of testimony and evidence
presented in the record on appeal, we conclude a strict accounting is necessary
to properly answer the questions before this court.  While the trial court attempted
to allow as much into the record as possible in an effort to preclude remanding
the action, there is scant evidence from either party as to the identity and
value of the property owned by Zorba’s, the specific amounts of debt owed, or
how the proceeds from the sale of Zorba’s, its corporate assets, or Appellants’
personal property were applied to this alleged debt.  Although both parties
introduced several vague and unspecific valuations, the record’s lack of particularity
leaves this court without the means to determine whether the circuit erred in
simply splitting Zorba’s meager remaining corporate assets.

We deem an accounting necessary to properly
determine whether Respondents converted corporate assets to their personal use
and whether there is any indication of oppressive or unfairly prejudicial behavior
on the part of Respondents.  The accounting should detail the contributions
by the parties; the identity and value of equipment, furnishings, and other
items in Zorba’s at the time of eviction; the disposal of any property belonging
to Zorba’s; any revenues from the disposal of Zorba’s property; and Zorba’s
debts, both paid and currently outstanding.  As all remaining issues raised
on appeal are to some degree intertwined with the factual conclusions to be
determined by the strict accounting, we do not address them at this time.  Instead,
we remand for a strict accounting followed by a full de novo review
of all legal and equitable issues.

REVERSED AND REMANDED.

GOOLSBY, ANDERSON, and WILLIAMS, JJ.,
concur.