| Matter of El-Roh Realty Corp. |
| 2010 NY Slip Op 05102 [74 AD3d 1796] |
| June 11, 2010 |
| Appellate Division, Fourth Department |
| 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 ofEl-Roh Realty Corp., Appellant; Joan Roth et al., Respondents. In the Matter of the Dissolutionof El-Roh Realty Corp. Philippe R. Schwimmer, Individually and as Holder of Fifty Percent ofthe Outstanding Voting Shares of El-Roh Realty Corp., Appellant; Joan Roth et al., Respondents.(Appeal No. 1.) |
—[*1] Woods Oviatt Gilman LLP, Rochester (William G. Bauer of counsel), forrespondents-respondents.
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. Theorder, 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 BusinessCorporation Law article 11 in which petitioner sought dissolution of El-Roh Realty Corp.(El-Roh). [*2]Petitioner owned one half of the voting shares ofEl-Roh and respondents owned the other half. Petitioner filed her first dissolution petition in2006 (hereafter, 2006 petition), and respondents asserted a counterclaim seeking specificperformance of that part of the shareholders' agreement (agreement) requiring petitioner to offerto sell her shares to El-Roh and the remaining shareholders in the event that she attempted totransfer shares in violation of the agreement. In support of the counterclaim, respondentscontended that petitioner triggered the part of the agreement in question by commencing thedissolution proceeding. We previously reversed the order that, inter alia, dismissed the 2006petition, reinstated the petition and granted respondents' motion for a stay of the proceedingpending 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 prematurelydismissed the petition because, in the event that respondents or El-Roh declined to purchasepetitioner's shares, petitioner would be left without a remedy (id.).
During the pendency of the appeals from those two orders, petitioner filed a seconddissolution petition in 2007 (hereafter, 2007 petition). The first cause of action in the 2007petition 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 BusinessCorporation Law § 1104 (c) on the additional ground that the shareholders had failed tohold an annual meeting for more than two years and thus failed to elect a board of directors inviolation of El-Roh's bylaws. On a subsequent appeal, we modified the order dismissing the2007 petition by reinstating the second cause of action and by granting respondents' motion tostay the proceeding pending determination of the counterclaim asserted in respondents' answer tothe 2006 petition (Matter of El-RohRealty 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 basedon that valuation. Petitioner refused to sell her shares and moved for, inter alia, summaryjudgment on the 2006 and 2007 petitions. In support of the motion, petitioner contended that sheis entitled to dissolution because respondents failed to purchase the shares pursuant to her offerwithin the time limits set forth in the agreement.
In appeal No. 1, petitioner appeals from an order that, inter alia, denied that motion. At theoutset, we agree with petitioner that the court erred in denying the motion pursuant to thedoctrine of law of the case. "The doctrine of . . . 'law of the case' is a rule ofpractice, an articulation of sound policy that, when an issue is once judicially determined, thatshould be the end of the matter as far as [j]udges and courts of [coordinate] jurisdiction areconcerned" (Martin v City of Cohoes, 37 NY2d 162, 165 [1975], rearg denied 37NY2d 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]). Thedoctrine applies, however, "only to issues that have been judicially determined" (EdgewaterConstr. 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 heroffer to sell her shares was not untimely pursuant to the terms of the agreement. Pursuant towell-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 [*3]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. vG.H. Dev. & Constr., Inc., 14 AD3d 963, 965 [2005]; see Beal Sav. Bank v Sommer, 8NY3d 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, itsgeneral 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 FrontierTransp. Auth. v Euro-United Corp., 303 AD2d 920, 921 [2003], amended on rearg306 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 preparedit was to preserve the closely-held nature of El-Roh, which the agreement accomplished bygranting the corporation and each shareholder the right to purchase shares of capital stock if ashareholder attempted to transfer his or her shares outside the corporation. The agreement set upa process whereby any proposed transfer of shares of capital stock was deemed an offer by theowner to sell to the corporation all of his or her shares of capital stock. The price for the sale wasto 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, ashere, no such agreement had been made within the 12 months preceding the date of theattempted transfer, "the [p]urchase [p]rice and all component parts thereof shall be calculated bythe independent certified public accountants then engaged by the [c]orporation." The corporationand the remaining shareholders were required to purchase the stock at the price determined bythat 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 theagreement that gives effect to all provisions and the intent of the shareholders is that thecorporation and shareholders are entitled to know the purchase price of the shares beforedetermining whether to purchase them. There is no support in the agreement for petitioner'scontention to the contrary. It would be commercially unreasonable and absurd to requirerespondents to agree to purchase petitioner's shares without knowing the price (see Matter of Lipper Holdings v TridentHoldings, 1 AD3d 170 [2003]). Consequently, the court properly determined thatpetitioner'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 remainingcontention 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, anorder declaring that the 2003 amendment to the agreement rendered the acceptances byrespondents of her offer to sell her shares defective based on their failure to comply with therequisite method of payment, as well as for an order directing that the proceeds from a lifeinsurance policy on the life of her predecessor in interest in El-Roh be paid to the shareholders inproportion to their ownership interest. Petitioner contended in support of the motion that the2003 amendment voided the original provisions in the agreement with respect to the method ofpayment for her shares. We conclude that the court properly rejected that contention pursuant tothe 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 weaffirmed on appeal (El-Roh Realty Corp., 48 AD3d 1190 [2008]). Consequently, thecontention of petitioner was "previously raised and decided against [her] . . . [, andthus] 'reconsideration of [the] issue[ ] is barred by the doctrine of law of the case' " (Matter of Suzuki-Peters v Peters, 37AD3d 726 [2007], lv denied 9 NY3d 814 [2007]; see Matter of Shondell J. vMark D., 18 [*4]AD3d 551 [2005], affd 7 NY3d 320[2006]).
Contrary to the further contention of petitioner, the 2003 amendment to the agreement doesnot require that the corporation pay, as a dividend to the shareholders in proportion to theirownership interest, the proceeds from the life insurance policy on the life of her predecessor ininterest. Although the 2003 amendment altered certain provisions of the agreement with respectto the transfer of capital stock, it did not change the method of disbursing the proceeds of the lifeinsurance policy of a shareholder. Rather, the shareholders agreed to negotiate in good faith withrespect to those proceeds. "Because the parties [to the agreement] left for future negotiation anessential term, i.e., [the disposition of the proceeds from the life insurance policy of ashareholder, that part of] their letter agreement is 'a mere agreement to agree' and is thusunenforceable" (Uniland Partnership ofDel. L.P. v Blue Cross of W. N.Y. Inc., 27 AD3d 1131, 1132 [2006], lv denied7 NY3d 713 [2006], quoting Joseph Martin, Jr., Delicatessen v Schumacher, 52NY2d 105, 109 [1981]). Thus, there was no enforceable agreement to pay the proceeds fromsuch policies to the shareholders, and the original provisions of the agreement continued togovern 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, andconclude that it is without merit. Present—Martoche, J.P., Smith, Centra, Sconiers andPine, JJ.