Supreme Court Seal
South Carolina
JUDICIAL DEPARTMENT
Site Map | Feedback
2004-UP-506 - 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Unpublished Opinion No. 2004-UP-506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.