In Re the Dissolution of Ongweoweh Corp. ( 2015 )

State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: July 16, 2015 520435
________________________________
In the Matter of the
Dissolution of ONGWEOWEH
CORPORATION.
DANIEL F. BONAMIE, MEMORANDUM AND ORDER
Appellant;
ONGWEOWEH CORPORATION,
Respondent.
________________________________
Calendar Date: May 26, 2015
Before: Lahtinen, J.P., McCarthy, Rose and Clark, JJ.
__________
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, in a proceeding pursuant to Business
Corporation Law article 11, granted respondent's motion for,
among other things, summary judgment dismissing the proceeding.
Respondent is a closely held corporation in which, as of
late 2012, petitioner owned 38 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
detailed shareholders' agreement provided, in relevant part, that
-2- 520435
respondent would purchase all shares of a shareholder whose
employment was terminated, and the agreement set forth different
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 valuation method. Both petitioner and
respondent initially looked to section 3.2, but did not agree as
to the value under that section. In May 2014, respondent's
counsel notified petitioner's counsel via letter that respondent
had just discovered activities in which petitioner had engaged
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, in June 2014, by
commencing this proceeding seeking judicial dissolution of
respondent pursuant to Business Corporation Law § 1104-a,
alleging that he was an oppressed shareholder. In July 2014,
respondent acknowledged that it had erred in asserting section
3.1 valuation and agreed that the valuation should be calculated
pursuant to section 3.2. It then answered the petition for
dissolution, obtained an order extending the time to exercise its
purchase rights under Business Corporation Law § 1118 in the
event that the dissolution proceeding continued, and moved by
order to show cause for summary judgment dismissing 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 that respondent's May 2014 letter constituted a
material breach of the shareholders' agreement and that,
accordingly, the provisions thereof no longer controlled
valuation. "The written terms 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 ommitted]), and a breach thereof is material if it is
"so substantial that it defeats the 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. v Erie 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 after petitioner was terminated by respondent, the
-3- 520435
parties disputed the amount that petitioner was to receive under
the agreement and, as reflected by the (later retracted) letter
of May 2014, disagreed about which provision of the agreement
applied. However, respondent did not indicate that it would not
adhere to a method of valuation set forth in the agreement or
that it did not intend to pay petitioner under the agreement. We
agree with Supreme Court that, essentially, negotiations
transpired as to which provisions applied and this did not
constitute a material breach of the agreement. We further note
that, under the relevant language of the agreement, petitioner's
commencement of this proceeding would also trigger the forced-
buyout provisions of the agreement (see Matter of El-Roh Realty
Corp., 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 the appropriate ones for
determining value and, thus, we do not address such issue. The
remaining arguments are unavailing.
McCarthy, Rose and Clark, JJ., concur.
ORDERED that the order and judgment are affirmed, with
costs.
ENTER:
Robert D. Mayberger
Clerk of the Court