Appeal from an amended order of the Supreme Court, Monroe County (Kenneth R. Fisher, J.), entered November 17, 2011.
Sullivan v Troser Mgt., Inc.
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Released on March 15, 2013
PRESENT: SCUDDER, P.J., CENTRA, CARNI, LINDLEY, AND SCONIERS, JJ.
The amended order, among other things, denied defendant's motion for summary judgment.
It is hereby ORDERED that the amended order so appealed from is unanimously modified on the law by vacating the determination that defendant has exercised its option to purchase plaintiff's stock and as modified the amended order is affirmed without costs.
Memorandum: Defendant appeals from an amended order denying its motion for summary judgment seeking a determination that plaintiff must sell his shares of stock to defendant for $183,910, the value determined by defendant's expert in accordance with the formula set forth in Lewis v Vladeck, Elias, Vladeck, Zimny & Engelhard (57 NY2d 975). Supreme Court also noted that the parties sought "clarification as to whether defendant actually exercised its option to purchase plaintiff's stock" under the terms of the parties' "buy-sell" agreement (hereafter, buy-sell agreement), and the court determined that defendant had in fact exercised that option. For the reasons that follow, we modify the amended order by vacating the determination that defendant has exercised its option to purchase plaintiff's stock, and we otherwise affirm.
Plaintiff commenced this action in 2003 seeking specific performance of that part of an agreement entered into by the parties in 1986 (hereafter, Agreement), contemporaneously with the buy-sell agreement, providing that he would receive an 18% equity interest in defendant, a closely held corporation, upon termination of the Agreement on December 31, 1991. The amended complaint also sought an accounting, an inspection of defendant's books and records, a determination that defendant is "required to repurchase" plaintiff's shares of stock once the shares are issued to plaintiff, and a determination of the parties' rights under the buy-sell agreement. This Court has decided three prior appeals arising from this litigation (Sullivan v Troser Mgt., Inc., 75 AD3d 1059 [Sullivan III]; Sullivan v Troser Mgt., Inc., 34 AD3d 1233 [Sullivan II]; Sullivan v Troser Mgt., Inc., 15 AD3d 1011).
As a result of the prior appeals and the various orders of Supreme Court, it has been determined, inter alia, that plaintiff is entitled to 18% of defendant's stock pursuant to the Agreement; the "Purchase Price" of the stock cannot be determined pursuant to the buy-sell agreement because the stockholders, i.e., plaintiff and Daniel Fuller, never agreed upon a value for the shares, as required by paragraph 9 of the buy-sell agreement; and plaintiff is not entitled to a jury trial because the amended complaint sought equitable relief. In addition, in Sullivan III (75 AD3d at 1061), we concluded that the court erred in denying plaintiff's cross motion for partial summary judgment seeking an order determining that his shares in defendant " be valued on the basis of his percentage interest in Defendant's assets' in the event that defendant exercises its option to purchase his shares," and we therefore modified the order accordingly.
On this appeal, we conclude that the court properly denied defendant's motion for summary judgment directing plaintiff to sell his shares of stock to defendant at a price of $183,910. The court properly determined that our decision in Sullivan III did not mandate that plaintiff's stock be valued pursuant to the Lewis formula, which was the method advocated by plaintiff on the prior appeal in Sullivan III (id. at 1060), or by any other particular valuation method. As noted, this Court wrote in Sullivan III that plaintiff's cross motion was for "partial summary judgment seeking an order determining that his shares be valued on the basis of his percentage interest in Defendant's assets' in the event that defendant exercises its option to purchase his shares," as was the case in Lewis; no particular valuation method was specified (id. at 1061). Thus, contrary to defendant's contention, we did not determine that the value of plaintiff's shares should be determined pursuant to a net asset valuation, the valuation method approved but not mandated by the Court of Appeals in Lewis for shares of a law firm. It therefore follows that the court was not bound by the doctrine of law of the case or to apply Lewis in determining the value of plaintiff's stock (see generally Town of Angelica v Smith, 89 AD3d 1547, 1550), nor does the doctrine of judicial estoppel apply to prevent plaintiff from abandoning his prior endorsement of Lewis (see Baje Realty Corp. v Cutler, 32 AD3d 307, 310).
We further conclude that the court properly determined that defendant otherwise failed to meet its burden of establishing as a matter of law that its method for determining the value of plaintiff's stock is the only appropriate valuation method. Rather, while it was established in Sullivan III that plaintiff's shares must be valued " on the basis of his percentage interest' " in defendant's assets (id. at 1061), issues of fact remain with respect to the appropriate method of valuing those assets. Although plaintiff is not entitled to the "fair value" of the stock under Business Corporation Law § 1118 (b) because he does not own 20% of the outstanding shares and there is no evidence that defendant has engaged in "illegal, fraudulent or oppressive actions" toward plaintiff (§ 1104-a [a] ), it does not follow, as defendant suggests, that plaintiff is entitled only to book value. As the Court of Appeals has stated, "[t]here is no uniform rule for valuing stock in closely held corporations. One tailored to the particular case must be found, and that can be done only after a discriminating consideration of all information bearing upon an enlightened prediction of the future' " (Amodio v Amodio, 70 NY2d 5, 7, quoting Snyder's Estate v United States, 285 F2d 857, 861).
We reject defendant's related contention that the buy-sell agreement dictates that book value be used to determine the purchase price of plaintiff's shares. As plaintiff notes, the buy-sell agreement provides that, if the stockholders, i.e., plaintiff and Daniel Fuller, did not agree upon the value of the shares for a period of two years, the agreed upon value shall be adjusted by the increase or decrease in defendant's book value since the date of the last agreed upon value. Here, as we held in Sullivan III, the parties never agreed upon the value of the shares, and we thus conclude that there was nothing to adjust and book value does not come into play. Because ...