| Matter of Ongweoweh Corp. |
| 2015 NY Slip Op 06191 [130 AD3d 1291] |
| July 16, 2015 |
| Appellate Division, Third Department |
[*1]
| In the Matter of the Dissolution of OngweowehCorporation, Respondent. Daniel F. Bonamie, Appellant. |
Hinman, Howard & Kattell, LLP, Binghamton (James S. Gleason of counsel),for appellant.
Harris Beach, PLLC, Pittsford (Douglas A. Foss of counsel), for respondent.
Lahtinen, J.P. Appeal from an order and judgment of the Supreme Court (Mulvey,J.), entered November 13, 2014 and November 24, 2014 in Tompkins County, which, ina proceeding pursuant to Business Corporation Law article 11, granted respondent'smotion for, among other things, summary judgment dismissing the proceeding.
Respondent is a closely held corporation in which, as of late 2012, petitioner owned38 shares, his father owned 37 shares and his step-sister owned the remaining 25 shares.Petitioner's employment with respondent was terminated in February 2014. A detailedshareholders' agreement provided, in relevant part, that respondent would purchase allshares of a shareholder whose employment was terminated, and the agreement set forthdifferent valuation methods depending on whether the termination was "[f]or [c]ause"(section 3.1) or "[i]nvoluntary" (section 3.2), with the latter involving a higher valuationmethod. Both petitioner and respondent initially looked to section 3.2, but did not agreeas to the value under that section. In May 2014, respondent's counsel notified petitioner'scounsel via letter that respondent had just discovered activities in which petitioner hadengaged while president of the corporation that justified for-cause termination and, thus,valuing his stock under the lower method set forth in section 3.1. Petitioner responded, inJune 2014, by commencing this proceeding seeking judicial dissolution of respondentpursuant to Business Corporation Law § 1104-a, alleging that he was anoppressed shareholder. In July 2014, [*2]respondentacknowledged that it had erred in asserting section 3.1 valuation and agreed that thevaluation should be calculated pursuant to section 3.2. It then answered the petition fordissolution, obtained an order extending the time to exercise its purchase rights underBusiness Corporation Law § 1118 in the event that the dissolutionproceeding continued, and moved by order to show cause for summary judgmentdismissing the proceeding and directing the buyout pursuant to the shareholders'agreement. Supreme Court granted respondent's motion and petitioner now appeals.
The issues as framed by petitioner on appeal are narrow. Petitioner argues thatrespondent's May 2014 letter constituted a material breach of the shareholders' agreementand that, accordingly, the provisions thereof no longer controlled valuation. "The writtenterms and conditions of a contract define the rights and obligations of the parties"(Dierkes Transp. v Germantown Cent. School Dist., 295 AD2d 683, 684 [2002][citations omitted]), and a breach thereof is material if it is "so substantial that it defeatsthe object of the parties in making the contract" (Robert Cohn Assoc., Inc. v Kosich, 63 AD3d 1388, 1389[2009] [internal quotation marks and citation omitted]; accord Accadia Site Contr., Inc. vErie County Water Auth., 115 AD3d 1351, 1353 [2014]; Fitzpatrick v Animal Care Hosp.,PLLC, 104 AD3d 1078, 1081 n 4 [2013]). In the months immediately afterpetitioner was terminated by respondent, the parties disputed the amount that petitionerwas to receive under the agreement and, as reflected by the (later retracted) letter of May2014, disagreed about which provision of the agreement applied. However, respondentdid not indicate that it would not adhere to a method of valuation set forth in theagreement or that it did not intend to pay petitioner under the agreement. We agree withSupreme Court that, essentially, negotiations transpired as to which provisions appliedand this did not constitute a material breach of the agreement. We further note that, underthe relevant language of the agreement, petitioner's commencement of this proceedingwould also trigger the forced-buyout provisions of the agreement (see Matter of El-Roh RealtyCorp., 48 AD3d 1190, 1191 [2008]). The parties do not dispute on appeal that,if the agreement applies, then the sections thereof set forth by Supreme Court are theappropriate ones for determining value and, thus, we do not address such issue. Theremaining arguments are unavailing.
McCarthy, Rose and Clark, JJ., concur. Ordered that the order and judgment areaffirmed, with costs.