In re the Dissolution of El-Roh Realty Corp.

Jun 11, 2010
Appeal No. 1
Versions:74 A.D.3d 1796
902 N.Y.S.2d 727
p class=“midpage-case-name” shortName=“Schwimmer v. Roth“>In the Matter of the Dissolution of EL-ROH REALTY CORP. PHILIPPE R. SCHWIMMER, Individually and as Holder of Fifty Percent of the Outstanding Voting Shares of EL-ROH REALTY CORP., Appellant; JOAN ROTH et al., Respondents. In the Matter of the Dissolution of EL-ROH REALTY CORP. PHILIPPE R. SCHWIMMER, Individually and as Holder of Fifty Percent of the Outstanding Voting Shares of EL-ROH REALTY CORP., Appellant; JOAN ROTH et al., Respondents. (Appeal No. 1.)

[902 NYS2d 727]

Supreme Court, Appellate Division, Fourth Department, New York

June 11, 2010

Appeal from an order of the Supreme Court, Onondaga County (Donald A. Greenwood, J.), entered April 10, 2009 in a proceeding pursuant to Business Corporation Law article 11. The order, among other things, denied petitioner‘s motion for summary judgment.

It is hereby ordered that the order so appealed from is unanimously affirmed without costs.

Memorandum: These consolidated appeals arise from two proceedings pursuant to Business Corporation Law article 11 in which petitioner sought dissolution of El-Roh Realty Corp. (El-Roh). Petitioner owned one half of the voting shares of El-Roh and respondents owned the other half. Petitioner filed her first dissolution petition in 2006 (hereafter, 2006 petition), and respondents asserted a counterclaim seeking specific performance of that part of the shareholders’ agreement (agreement) requiring petitioner to offer to sell her shares to El-Roh and the remaining shareholders in the event that she attempted to transfer shares in violation of the agreement. In support of the counterclaim, respondents contended that petitioner triggered the part of the agreement in question by commencing the dissolution proceeding. We previously reversed the order that, inter alia, dismissed the 2006 petition, reinstated the petition and granted respondents’ motion for a stay of the proceeding pending determination of the counterclaim (Matter of El-Roh Realty Corp. [appeal No. 1], 48 AD3d 1190, 1192 [2008]), and we affirmed the order that, inter alia, granted respondents’ motion for partial summary judgment on the counterclaim (Matter of El-Roh Realty Corp. [appeal No. 2], 48 AD3d 1193 [2008]). We concluded that Supreme Court prematurely dismissed the petition because, in the event that respondents or El-Roh declined to purchase petitioner‘s shares, petitioner would be left without a remedy (id.).

During the pendency of the appeals from those two orders, petitioner filed a second dissolution petition in 2007 (hereafter, 2007 petition). The first cause of action in the 2007 petition sought dissolution of El-Roh on virtually the same grounds alleged in the 2006 petition, and the second cause of action sought to dissolve the corporation pursuant to Business Corporation Law § 1104 (c) on the additional ground that the shareholders had failed to hold an annual meeting for more than two years and thus failed to elect a board of directors in violation of El-Roh‘s bylaws. On a subsequent appeal, we modified the order dismissing the 2007 petition by reinstating the second cause of action and by granting respondents’ motion to stay the proceeding pending determination of the counterclaim asserted in respondents’ answer to the 2006 petition (Matter of El-Roh Realty Corp., 55 AD3d 1431, 1433-1434 [2008]).

Thereafter, El-Roh‘s independent accountants submitted a valuation of petitioner‘s shares, after which El-Roh and respondents indicated that they would purchase petitioner‘s shares based on that valuation. Petitioner refused to sell her shares and moved for, inter alia, summary judgment on the 2006 and 2007 petitions. In support of the motion, petitioner contended that she is entitled to dissolution because respondents failed to purchase the shares pursuant to her offer within the time limits set forth in the agreement.

In appeal No. 1, petitioner appeals from an order that, inter alia, denied that motion. At the outset, we agree with petitioner that the court erred in denying the motion pursuant to the doctrine of law of the case. “The doctrine of . . . ‘law of the case’ is a rule of practice, an articulation of sound policy that, when an issue is once judicially determined, that should be the end of the matter as far as [j]udges and courts of [coordinate] jurisdiction are concerned” (Martin v City of Cohoes, 37 NY2d 162, 165 [1975], rearg denied 37 NY2d 817 [1975]; see United States v United States Smelting Refining & Mining Co., 339 US 186, 198 [1950]; Insurance Group Committee v Denver & Rio Grande Western R. Co., 329 US 607, 612 [1947]; Messenger v Anderson, 225 US 436, 444 [1912]). The doctrine applies, however, “only to issues that have been judicially determined” (Edgewater Constr. Co., Inc. v 81 & 3 of Watertown, Inc. [appeal No. 2], 24 AD3d 1229, 1231 [2005]) and, here, none of the court‘s prior rulings specifically addressed petitioner‘s present contention.

Contrary to the further contention of petitioner, however, respondents’ acceptance of her offer to sell her shares was not untimely pursuant to the terms of the agreement. Pursuant to well-settled rules of contract interpretation, “when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms” (W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). The contract must be “read as a whole to determine its purpose and intent” (id.), and it “should be interpreted in a way [that] reconciles all its provisions, if possible” (Green Harbour Homeowners’ Assn., Inc. v G.H. Dev. & Constr., Inc., 14 AD3d 963, 965 [2005]; see Beal Sav. Bank v Sommer, 8 NY3d 318, 324 [2007]). “Effect and meaning must be given to every term of the contract . . . , and reasonable effort must be made to harmonize all of its terms . . . Moreover, the contract must be interpreted so as to give effect to, not nullify, its general or primary purpose” (Village of Hamburg v American Ref-Fuel Co. of Niagara, 284 AD2d 85, 89 [2001], lv denied 97 NY2d 603 [2001]; see Niagara Frontier Transp. Auth. v Euro-United Corp., 303 AD2d 920, 921 [2003], amended on rearg 306 AD2d 952 [2003]; Reda v Eastman Kodak Co. [appeal No. 2], 233 AD2d 914, 914-915 [1996]; see generally Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 171-172 [1973]).

Here, the primary purpose of the agreement and the intent of the shareholders who prepared it was to preserve the closely-held nature of El-Roh, which the agreement accomplished by granting the corporation and each shareholder the right to purchase shares of capital stock if a shareholder attempted to transfer his or her shares outside the corporation. The agreement set up a process whereby any proposed transfer of shares of capital stock was deemed an offer by the owner to sell to the corporation all of his or her shares of capital stock. The price for the sale was to be determined by mutual yearly agreement of the shareholders at the annual shareholders’ meeting, after they reviewed a report prepared by El-Roh‘s independent accountants. Where, as here, no such agreement had been made within the 12 months preceding the date of the attempted transfer, “the [p]urchase [p]rice and all component parts thereof shall be calculated by the independent certified public accountants then engaged by the [c]orporation.” The corporation and the remaining shareholders were required to purchase the stock at the price determined by that process within 120 days after the corporation received notice of the offer.

We agree with respondents that the only reasonable interpretation of those provisions in the agreement that gives effect to all provisions and the intent of the shareholders is that the corporation and shareholders are entitled to know the purchase price of the shares before determining whether to purchase them. There is no support in the agreement for petitioner‘s contention to the contrary. It would be commercially unreasonable and absurd to require respondents to agree to purchase petitioner‘s shares without knowing the price (see Matter of Lipper Holdings v Trident Holdings, 1 AD3d 170 [2003]). Consequently, the court properly determined that petitioner‘s offer could be accepted within 120 days from the date upon which the accountants’ report was issued, and that respondents’ acceptance therefore was timely. Petitioner‘s remaining contention with respect to appeal No. 1 is moot in light of our determination.

In appeal No. 2, petitioner appeals from an order that denied her motion for, inter alia, an order declaring that the 2003 amendment to the agreement rendered the acceptances by respondents of her offer to sell her shares defective based on their failure to comply with the requisite method of payment, as well as for an order directing that the proceeds from a life insurance policy on the life of her predecessor in interest in El-Roh be paid to the shareholders in proportion to their ownership interest. Petitioner contended in support of the motion that the 2003 amendment voided the original provisions in the agreement with respect to the method of payment for her shares. We conclude that the court properly rejected that contention pursuant to the doctrine of law of the case. The court determined that issue in a prior order that, inter alia, granted respondents’ motion for partial summary judgment on the counterclaim, which we affirmed on appeal (El-Roh Realty Corp., 48 AD3d 1190 [2008]). Consequently, the contention of petitioner was “previously raised and decided against [her] . . . [, and thus] ‘reconsideration of [the] issue[ ] is barred by the doctrine of law of the case‘” (Matter of Suzuki-Peters v Peters, 37 AD3d 726 [2007], lv denied 9 NY3d 814 [2007]; see Matter of Shondell J. v Mark D., 18 AD3d 551 [2005], affd 7 NY3d 320 [2006]).

Contrary to the further contention of petitioner, the 2003 amendment to the agreement does not require that the corporation pay, as a dividend to the shareholders in proportion to their ownership interest, the proceeds from the life insurance policy on the life of her predecessor in interest. Although the 2003 amendment altered certain provisions of the agreement with respect to the transfer of capital stock, it did not change the method of disbursing the proceeds of the life insurance policy of a shareholder. Rather, the shareholders agreed to negotiate in good faith with respect to those proceeds. “Because the parties [to the agreement] left for future negotiation an essential term, i.e., [the disposition of the proceeds from the life insurance policy of a shareholder, that part of] their letter agreement is ‘a mere agreement to agree’ and is thus unenforceable” (Uniland Partnership of Del. L.P. v Blue Cross of W. N.Y. Inc., 27 AD3d 1131, 1132 [2006], lv denied 7 NY3d 713 [2006], quoting Joseph Martin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109 [1981]). Thus, there was no enforceable agreement to pay the proceeds from such policies to the shareholders, and the original provisions of the agreement continued to govern the disbursement of the proceeds from the life insurance policy in question.

We have considered petitioner‘s remaining contention with respect to appeal No. 2, and conclude that it is without merit. Present—Martoche, J.P., Smith, Centra, Sconiers and Pine, JJ.

MARTOCHE, J.P., SMITH, CENTRA, SCONIERS AND PINE, JJ.

Short name: Schwimmer v. Roth Docket: appeal No. 1 Court: NY App Div Date: 2010-06-11 Citation: 902 NYS2d 727 Judge: Martoche, J.P., Smith, Centra, Sconiers and Pine, JJ. 1796 ... 1801 ... (Appeal No. 1.) [902 NYS2d 727] ... (Appeal No. 2.) [902 NYS2d 473] ... (Same memorandum as in Matter of El-Roh Realty Corp. (74 AD3d 1796 [2010]).) ... [903 NYS2d 628] ... The user asked for the main opinion. Page 1 contains the end of a previous case and then a new case caption for “In the Matter of the Dissolution of EL-ROH REALTY CORP.” (Appeal No. 1) starting with citation [902 NYS2d 727]. Appeal No. 2 starts at the bottom of Page 6 with its own caption and citation [902 NYS2d 473] but refers back to the memorandum of Appeal No. 1. I will process Appeal No. 1 as the primary document requested. Case Info: Name: In the Matter of the Dissolution of EL-ROH REALTY CORP. PHILIPPE R. SCHWIMMER, Individually and as Holder of Fifty Percent of the Outstanding Voting Shares of EL-ROH REALTY CORP., Appellant; JOAN ROTH et al., Respondents. In the Matter of the Dissolution of EL-ROH REALTY CORP. PHILIPPE R. SCHWIMMER, Individually and as Holder of Fifty Percent of the Outstanding Voting Shares of EL-ROH REALTY CORP., Appellant; JOAN ROTH et al., Respondents. (Appeal No. 1.) Short Name: Schwimmer v. Roth Docket: Appeal No. 1 Court: N.Y. App. Div. (Supreme Court, Appellate Division, Fourth Department) Date: 2010-06-11 (Extracted from citation [902 NYS2d 727] context, standard for AD3d vol 74) Citation: 902 NYS2d 727 Start of document on page 1796. The actual text of Appeal No. 1 memorandum starts on page 1797. Page 1 contains the end of a criminal case. I skip that. Page 1 also contains the header for the El-Roh case. Page 2 continues with the Appeal from order... and the Memorandum. Let‘s refine the metadata. Court: Supreme Court, Appellate Division, Fourth Department, New York. Date: June 11, 2010 (This is the date for 74 AD3d 1796). I will start the conversion from the El-Roh caption on page 1796. HTML structure: Details block. midpage-ps n=“1796” Appeal statement. midpage-ps n=“1797” Order. Memorandum. midpage-ps n=“1798” midpage-ps n=“1799” midpage-ps n=“1800” midpage-ps n=“1801” Conclusion. Signature. Wait, looking at Page 1 image: It‘s a block of text. Top is the end of a criminal case (burglary). Then: “In the Matter of the Dissolution of EL-ROH REALTY CORP. PHILIPPE R. SCHWIMMER... (Appeal No. 1.) [902 NYS2d 727]” Then a black box (redaction or line). Then Page 1797 starts with the appeal description. I will include the caption from 1796. Citations: Business Corporation Law article 11 -> N.Y. Bus. Corp. Law art. 11 (Jurisdiction NY) Penal Law § 140.30 -> Skipping (it‘s in the previous case) Matter of El-Roh Realty Corp. [appeal No. 1], 48 AD3d 1190, 1192 [2008] -> case cite Matter of El-Roh Realty Corp. [appeal No. 2], 48 AD3d 1193 [2008] -> case cite Business Corporation Law § 1104 (c) -> N.Y. Bus. Corp. Law § 1104(c) Matter of El-Roh Realty Corp., 55 AD3d 1431, 1433-1434 [2008] -> case cite Martin v City of Cohoes, 37 NY2d 162, 165 [1975] -> case cite United States v United States Smelting Refining & Mining Co., 339 US 186, 198 [1950] -> case cite Insurance Group Committee v Denver & Rio Grande Western R. Co., 329 US 607, 612 [1947] -> case cite Messenger v Anderson, 225 US 436, 444 [1912] -> case cite Edgewater Constr. Co., Inc. v 81 & 3 of Watertown, Inc. [appeal No. 2], 24 AD3d 1229, 1231 [2005] -> case cite W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990] -> case cite Green Harbour Homeowners’ Assn., Inc. v G.H. Dev. & Constr., Inc., 14 AD3d 963, 965 [2005] -> case cite Beal Sav. Bank v Sommer, 8 NY3d 318, 324 [2007] -> case cite Village of Hamburg v American Ref-Fuel Co. of Niagara, 284 AD2d 85, 89 [2001] -> case cite Niagara Frontier Transp. Auth. v Euro-United Corp., 303 AD2d 920, 921 [2003] -> case cite Reda v Eastman Kodak Co. [appeal No. 2], 233 AD2d 914, 914-915 [1996] -> case cite Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 171-172 [1973] -> case cite Matter of Lipper Holdings v Trident Holdings, 1 AD3d 170 [2003] -> case cite Matter of Suzuki-Peters v Peters, 37 AD3d 726 [2007] -> case cite Matter of Shondell J. v Mark D., 18 AD3d 551 [2005] -> case cite Uniland Partnership of Del. L.P. v Blue Cross of W. N.Y. Inc., 27 AD3d 1131, 1132 [2006] -> case cite Joseph Martin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109 [1981] -> case cite Footnotes: none found. Structure check: Page 1796: Caption. Page 1797: Appeal statement, Order, Memo start. Page 1798: Memo continues. Page 1799: Memo continues. Page 1800: Memo continues. Page 1801: Memo ends, Signature. Wait, Appeal No. 2 starts at bottom of 1801. I should stick to Appeal No. 1 as the main complete opinion provided in the start. Actually, Appeal No. 1 and 2 are consolidated in the first memorandum. The memorandum on pages 1797-1801 covers “These consolidated appeals“. The header on 1796 lists Appeal No. 1. The header on 1801 lists Appeal No. 2. But the text in between is a single memorandum. I will treat the memorandum as part of Appeal No. 1 and include the reference to Appeal No. 2 if it‘s part of the same text flow. The memorandum on page 1797 says: “These consolidated appeals arise from...” So the memo covers both. I‘ll format it as a single coherent document. Correction on case name: The caption on 1796 is: In the Matter of the Dissolution of EL-ROH REALTY CORP. PHILIPPE R. SCHWIMMER... (Appeal No. 1.) [902 NYS2d 727] I‘ll use “Schwimmer v. Roth” as the short name. Let‘s begin. Metadata: shortName=“Schwimmer v. Roth” docket=“Appeal No. 1” court=“N.Y. App. Div.” date=“2010-06-11” citation=“902 NYS2d 727” Wait, 74 AD3d 1796 is the reporter cite. Formatting the citations correctly: In the Matter of the Dissolution of El-Roh Realty Corp. [appeal No. 1], 48 AD3d 1190, 1192 [2008] Matter of El-Roh Realty Corp. [appeal No. 1], 48 AD3d 1190, 1192 [2008] and so on. One detail: hyphenated line breaks. “Business Corporation Law article 11” - OK. “dis- solution” -> dissolution “per- formance” -> performance “pend- ing” -> pending “in- surance” -> insurance “sharehold- ers‘” -> shareholders’ OCR check: Page 1796: “...contention that the ruling consti- tutes an improvident exercise...” -> part of previous case. “...In the Matter of the Dissolution of EL-ROH REALTY CORP. ...” -> new case. Page 1797: “...counterclaim seeking specific perform- ance...” -> rejoining. “...stay of the proceeding pend- ing...” -> rejoining. “...we af- firmed...” -> rejoining. Page 1798: “...Business Corporation Law article 11...” - note the El-Roh name has a double hyphen in OCR? “El-- Roh“. It‘s a line break. El-Roh. “...doc- trine...” -> doctrine. Page 1799: “...crit- ing...” -> writing. (OCR says “writ ing“). “...Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 171-- 172 [1973]” -> 171-172. “...interpre- tation...” -> interpretation. Page 1800: “...accountants’ report was issued, and that respondents’ accep- tance...” -> acceptance. “...life in- surance...” -> life insurance. “...con- tention...” -> contention. Page 1801: “...‘a mere agreement to agree’ and is thus unen- forceable‘...” -> unenforceable. Okay. I will produce the HTML.