73 A.D.2d 504 | N.Y. App. Div. | 1979
Dissenting Opinion
dissents in a memorandum, as follows: This action arises from an agreement, dated February 23, 1976, pursuant to which Chrysler sold certain assets of its Airtemp Division to Fedders. In consideration therefor, Fedders gave Chrysler "the aggregate of (i) $18,000,000 (the 'Cash Portion’); (ii) 1,500,000 shares of Preferred Stock of Fedders Series B, $1.00 par value, (the 'Preferred Stock’); (iii) a note (the 'Note’) in the form initialled by the parties in the aggregate principal amount of $10,539,965; plus (iv) the assumption by Fedders of the Disclosed Liability of the Division” (§ 2.1). William G. McGagh, vice-president and treasurer of Chrysler, submitted a moving affidavit in support of Chrysler’s motion for partial summary judgment of $3,900,000 for dividends due on the preferred stock. For the sake of argument, it will be conceded that, absent any meritorious defenses or counterclaims, that sum is due to Chrysler under controlling provisions of Fedders’ certificate of incorporation and the Business Corporation Law. Ignatius J. MacBrinn, vice-president and controller of Fedders, submitted an affidavit in opposition to the motion. In the opening pages of his affidavit, MacBrinn stated the reasons why Fedders had not paid the subject dividends: "In fact, the purchase price of the net assets acquired by Fedders has never been finally determined as required by the Agreement. The final purchase price of the net assets acquired by Fedders—that is, all the consideration to be given to Chrysler under the Agreement—was to be calculated on the basis of a 'Final Balance Sheet and Income Statement’ as provided in Article 2 of the Agreement. Sections 2.2 and 2.2.1 of the Agreement required Chrysler to deliver within sixty days from February 23, 1976 to Fedders and Arthur Young & Company (Fedders’ independent public accountants) the 'Final Balance Sheet and Income Statement’s prepared as at February 23, 1976 in accordance with generally accepted accounting principles and examined by Touche, Ross & Co. (Chrysler’s accountants) in accordance with generally accepted auditing standards. Chrysler did not even pretend to comply with these requirements until mid-July 1976 when it delivered what purported to be the 'Final Balance Sheet and Income Statement’. But those documents were not prepared in accordance with generally accepted accounting principles, as required by the Agreement. In fact, Chrysler and Touche, Ross & Co. acknowledged this to me at meetings in August 1976. A copy of a memorandum of those meetings, which was prepared by one of Chrysler’s representatives, is annexed as Exhibit 'L’. Attached to that memorandum is a draft of a letter from Touche, Ross to Mr. Roger Helder, Chrysler’s Comptroller, conceding that the purported 'Final Balance Sheet’ was not prepared in accordance with generally accepted accounting principles. Chrysler’s own memorandum admits that I requested unqualified financial statements and 'was advised that unqualified statements would not be forthcoming’. The draft Touche, Ross letter to Mr. Helder expresses what is commonly known as a 'going concern qualification’ to the use of generally accepted accounting principles. The Initial Balance Sheet, upon which the tentative purchase price provided for in the Agreement was based, was presented to Fedders at the closing of the acquisition on February 23, 1976. During the immediately preceding week Touche, Ross presented Fedders’ representatives, including myself, with
. “This is the document which was referred to in Mr. Ehrenbard’s letter to Mr. Casey of October 20, 1977, attached to Mr. McGagh’s affidavit as Exhibit 'O’. Although Mr. Ehrenbard’s letter to Mr. Casey says that he is enclosing a copy, no copy is attached to the McGagh affidavit.”
. "To further demonstrate this, I attach as Exhibit'T’ copies of a few of the many letters from Fedders to Chrysler.”
. “Arthur Young & Company has issued a report to Fedders stating conservatively that the Airtemp balance sheet presented by Chrysler ovestated (sic) net assets by $18,666,000 and was not prepared in accordance with generally accepted accounting principles. A copy of this report was produced to Chrysler before it made its summary judgment motion; but Chrysler nowhere alludes to it.”
Lead Opinion
Order and judgment (one paper), Supreme Court, New York County, entered on December 15, 1978, affirmed for the reasons stated by Greenfield, J., at Special Term. Respondent shall recover of appellant $75 costs and disbursements of this appeal. Concur—Sullivan, Bloom, Lupiano and Ross, JJ.