Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 17

Close Corporations. Mark Burnett and Kamran Pourgol were the only shareholders in a corporation that built and sold a house in North Hempstead, New York. The town revoked the certificate of occupancy on the ground that the house exceeded the amount of square footage allowed by the building permit. The corporation agreed with the buyers to pay a certain amount to renovate the house to conform with the permit and to obtain a new certificate of occupancy. Burnett, however, bought the house and then filed a suit in a New York state court against Pourgol. Burnett charged that Pourgol had submitted incorrect plans to the town without Burnett's knowledge, had assumed responsibility for the error in square footage in discussions with the buyers, had knowingly misrepresented the extent of the renovations, and had failed to undertake any work to fix the house. Do the charges indicate misconduct? How might this situation have been avoided? Discuss. [ Burnett v. Pourgol, 83 A.D.3d 756, 921 N.Y.S.2d 280 (2011)]