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INDEXNo. 3541'(6
SUPREME COURT - STATE OF NEW YORKIAS TERM PART 16 NASSAU COUNTY
PRESENT:HONORALE
LEONARD B. AUSTINJustice
ALFRED Hill, JR., DENNIS Hill,JOHN BANNISTER, ADMIRAL AIRFREIGHT SERVICES, INC. and SEVENCERRO STREET CORP.,
Plaintiffs,
- against -
THE ESTATE of MICHAEL AVNET,ALICIA AVNET, RICHARD FURMANand HEMISPHERE FORWARDING,INC.,
Defendants.
Motion RID: 6-9-06Submission Date: 6-16-06
Motion Sequence No. : 001/MOT D
COUNSEL FOR PLANTIFFRuskin, Moscou & Faltischek, P .1425 Reckson PlazaUniondale, New York 11556-1425
COUNSEL FOR DEFENDANTMichael A. Markowitz, P .1553 BroadwayHewlett, New York 11557
ORDER
The following papers were read on the application to dissolve Seven Cerro StreetCorp. and for other relief:
Order to Show Cause dated April 24, 2006;Affdavit of Alicia Avnet sworn to on April 19, 2006;Affrmation of Michael A. Markowitz, Esq. dated
April 19, 2006;
Affdavit of Alfred Hil sworn to on June 7, 2006;
Affrmation of Michael A. Markowitz, Esq. dated
June 16, 2006;
Affdavit of Richard Furman sworn to on June 13, 2006.
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
Defendants, Estate of Michael Avnet, Alicia Avnet, and Hemisphere Forwarding,
Inc. move for an order: (1) dissolving the Plaintiff Seven Cerro Street Corp. pursuant to
BCL 1104(a) and 1104-a; (2) appointing a receiver for Seven Cerro Street Corp.
pursuant to BCL 1113 and 1202(a)(1) and CPLR 6301; (3) dismissing the first and
second causes of action pursuant to CPLR 3211 (a)(7) or, alternatively granting
summary judgment, pursuant to CLR 3212; and (4) enjoining Seven Cerro Street Corp.
and its shareholders from: (i) transacting any unauthorized business; (ii) exercising any
unauthorized powers except upon permission of the Court; (Hi) collecting or receiving
rents or other debt or other propert of the corporation; and (iv) paying out or otherwise
transferring or delivering any propert of the corporation.
BACKGROUND
In 1987, Plaintiff Seven Cerro Street Corp. ("Cerro ) was formed to purchase and
operate commercial propert located in Inwood, New York located near JFK
International Airport (the "Inwood Propert).
Although, upon formation, Cerroapparently had some seven original
shareholders, the currently remaining shareholders (and their respective interests)
include: the decedent Michael Avnet ("Avnet") (now the Defendant Estate of Micahel
Avnet ("Estate
))
- 75%; the Plaintiffs Alfre Hil ("Alfred"
) -
- 5%; his brother, Dennis
Hil ("Dennis ) 5% (collectively the "Hils ); and John Banister ("Banister")
- -
15%.
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HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
At one time, Avnet, Alfred, Dennis and Bannister each owned separate
corporations which occupied the Inwood propert and paid rent to Cerro pursuant to
written lease agreements.
The Hils owned a corporation known as Admiral Freight Services, Inc
Admiral", a coDefendant herein; Bannister owed Escort FOlWrding, Inc ("Escrr).
Avnet owned co-Defendant, Hemisphere Forwarding, Inc ("Hemisphere
Cerro was operated and managed exclusively by Avnet. Until 2001, it was run
without major incident or controversy.
In early 2001 , however, Escort moved out of the building. Prior to its departure,
Escort was a significant source of income for Admiral.
Plaintiffs claim that Avnet was aware that Escort's departure would reduce
Admiral' s income and, thereby, impair its abilty to pay rent. Instead of seeking out a
new tenant to replace Escort, Avnet used the space for his own corporation-
Hemisphere.
In light of the detrimental impact of Escort's departure, Plaintiffs claim that they
entered into discussions with Avnet which focused on obtaining a new tenant to replace
Escort at the premises. Plaintiffs contend that a binding agreement was ultimately
reached, pursuant to which Avnet would move Hemisphere out of the former Escort
space and place a new tenant in the premises.
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. u
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET,et a/.,
Index No. 3541-
Although the Hils claim that they identified several potential tenants who could
have replace Escrt, Avnet nefiher moved Hemisphere out of the
forer Escort space
nor placed a new tenant at the premises. As a result, they claim that Avnet breached
what they have descrbed as the Bannister Space Agreement.
Notbly, there is no
written agreement evidencing the existence of the Bannister Space Agreement or
memorializing its terms.
Ultimately, Admiral's financial distress became acute. Thus, it was no longer
able to pay the rent due. Plaintifs claim that Avnet knew of Admiral'
s rental default and
never once objected or threatened Admiral's tenancy.
In light of Admiral's continuing financial distrss, Plainti claim that, Avnet,
agred to sublet one-half of Admiral's warehouse space. Again. he allegedly never
honored this commitment either.
In additin, the shareholders agrement persnally "obligate (Avnet)
to maintain
a life Insurance policy on his own life for the purposes of funding the purchase of his
stock in the event of his death"
Plaintiffs contend that Avnet - who died of cancer in July 2005
- wrongfully
allowed a $600,000.00 life insurance policy to lapse in violation of the Cerro
shareholders agreement.
Article VI (A)(1) of the shareholders agreement provides that "
(t1he Corporation
hereby covenants to obtain a term life insurance policy upon the lives of each of the
Shareholders
* *
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HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
Article VI (B)(2) further states that, "(t)he Corporation shall pay all premiums due
on the policy purchased on the lives of the shareholders" but continues by stating that
(l1f any Shareholder (sic) fails to pay a premium within thirt (30)
days after the
premium due date, the Shareholder * * * may pay such premium" which "shall be
considered a loan to the Corporation * * *"
Article VI (8)(1) provides that "(u)pon the death of any Shareholder the
CORPORATION must purchase the decedent's stock from his estate and the estate
shall sell such stock to the CORPORATION.
Plaintiffs contend that since Avnet permitted the policy to lapse, there was "
insurance policy in place to fund the purchase of * * * Avent's stock * * * in favor of the
surviving shareholders" as contemplated by the shareholders agreement.
In any event, according to the Estate, since the corporations owned by the
Plaintiffs were no longer paying rent in late July 2005, Cerro "had no funds for basic
operating costs." Against this backdrop, the partes agreed to met in early 2006 to
discuss the possible sale of the Inwood propert - Cerro s only real asset, which had
recently been valued at some $1, 275,000.00.
Apparently, a consensus was reached at the meeting, pursuant to which, it was
agreed that Plaintiffs would attempt to acquire the building. A subsequentiy sceduled,
follow-uP meeting never took place. Shortly thereafter, this action was commenced.
By summons and complaint date February 2006, the Hils, Bannister, Admiral
and Cerro commenced this action against the Estate of Alicia Avnet (Michael'
s wife and
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
co-executrix of his estate) and Hemisphere, alleging: (1) breach of the shareholders
agreement by virte of Avnefs failure to renew his life insurance poticy; (2) breach of
the so-called Bannister Space Agreement; and (3) breach of the sublet agreement with
Admiral.
Defendants have answered and interposed counterclaims for dissolution of Cerro
pursuant to BCL 1104(a) and 1104-a.
Defendants now move by order to show cause for dissolution of Cerro and for
dismissal of the Plaintiffs' first and second causes of action pursuant to CPLR
3211(a)(7) and 3212.
DISCUSSION
Defendants have sustained their
prima facie burden of establishing entitlement
to judgment as a matter of law dismissing the first and second causes
breach of
contrct cause of acton. CPLR 3212(b). See, zYennan v. Cit of New York
Y. 2d 557, 562 (1980).
First Cause of Action
With respect to first cause of action alleging breach of the shareholders
agreement, Plainti' theory is that Avent violated a persnal dut impoed
by the
shareholders agreement, which was the duty to maintain life insurance so as to ensure
the continued existence of a fund "enabling the surviving shareholders to
purcase
shares from the spouse of the deceased shareholder." The Court disagrees.
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
(The be evidence of what partes to a wren agreement intend is what they
say in their wrting." Siamow v. Del CoI, 79 N.Y. 2d 1016, 1018 (1992).
Se also,
Greenfield v. philes Records. Inc. , 98 N.Y. 2d 562, 569 (2002). Further, since "
(t1
meaning of a wrting may be distorted where undue forc is given to single words or
phrases," the court must interpret the document as a whole
- giving effect to, not
nullfyng - the agreemenfs general or primary purpe. Mattr of Wesorland Coal
Co. v. Entech. Inc. , 100 N.Y. 2d 352, 358 (2003), quoting,
roDerties Corp. v
Manufacturers Trust Co. , 288 N.Y. 242, 248 (1942) (Internal quotes omitted). See,
South Road Assocs. LLC v. International Business Machines Cor .,
4 N.Y, 3d 272, 277
(2005).
A review of the shareholders agreement reveals that there is nothing in that
docment which obligates the individual shareholders to pay lif insurance premiums.
To the contrry, the language of the agreement provides that the
Corp18ti hereby
covenants to obtain a term life insurance policy upon the lives of each of the
Shareholders," and furter states in that "rtJhe COrpo18tion shall pay all premiums due
on the policy purchased on the lives of the shareholders" (Emphasis added).
Although paragraph VI (A)(2) does provide, "(i1f any shareholder fails to pay
premium within 30 days after the premium due date,
the shareholder . . may pay such
premium," the Defendants and their attomey-draftman have demonstrted that the
phrase "any shareholder fails 10 pay,
. is simply a tyraphical elTr and should, when
. viewed in context, be constred to mean: "W the Corp18ti fails to pay
' . '
' This
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
view is buttressed by the fact that the sentence as written, would constitute a virtual
non
seuitur, to wit: "If the shareholderfails to pay" then the
shareholder may pay . . ."
(emphases added). Such an absurd result should be avoided.
More significantly, Defendants' construction is in accord with the unambiguous
language of the two prior provisions quoted above, which provide that: (1) the
cooration was to aCQuire the policies; and (2) the corporation was then to pay the
premiums due. Even as written, the shareholder's agreement doe not stte that
shareholder must or is duty-bound to pay premiums but provides at best, that he or she
may" make those payments. Addfiionally, since there is no relevant ambiguity with
respec to the import of the corporations obligation to pay the premiums,
extnsic
evidence of the partes' intent may not be considered.
See, e.
g.,
South Road Asso.,
LLC v. Intemational Business Machines Cor. supra at 278; Madisn Ave. Leasehold,
n Bentiev Assocs. t.LC. 30 A. D. 3d 1, 12 (1" Dept. 2006); 767 Third Ave.
JJC v. Orix Capital Markets. LLC.26 A.D. 3d 216 (1st Dept. 2006).
Accordingly, the first cause of action, which is predicated upon the breach of a
personal duty to maintain insurance coverage, must be dismissed.
Second Cause of Action
Plaintiffs' second cause of action is based upon Avnet's alleged breach of the
unwren, Bannistr Space Agrement by which he purporly agre - but failed to -
place new tenants in the space formerly occupied by Escort.
. .
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HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.
Index No. 3541-06 More particularly, the second cause of action states, in sum, that
(1)some six
years prior to Michael Avnefs death, he allegedly (and orally) agreed that
certin
porto of the building would be leased to tenants "posfiiQned to refer business
" to
Admiral; and (2) Avnet later reneged on the agreement.
Defendants contend that the transaction as pleaded by the Plaintiffs is inclusively
pleaded, makes no reference to the existnce of a viable consideration and. amounts to
no more than a inconclusively depicted agreement to agree.
In general, the formation of a contrct reuire at least tw parties wi legal
capaci to contrct, mutual assent to the termS of the contrct and consideration. See
gen lIy, Exec owers AtY!C. v. Metr Constrction Servce Inc. , 9 Mise.
1109(A) (Sup. Ct., Nassau Co. 2005);
I!Exres
es anct ermnal Corp.
New Yor State-1ept. of TransDortation, 93 N.Y. 2d 584, 589-590 (1999);
Elias v.
Serota, 103 A.D. 2d 410, 414-5 (2"" Dept. 1984); and 22 NY Jur 2nd,
Contrct. 11,
13).
Further, "(i)n order to plead a breach of contract cause of action, a complaint
must allege the provisions of the contrct upon which the claim
is base (and) (t)he
pleadings must be suffcientiy partcular to give the court and (the) partes notice of the
transactions, occurrences, or series of transactions or occurrences, intended to be
proved as well as the material elements of each cause of acton or defense. Atknson
205 A.D. 2d 719, 720 (2"" Dept. 1994) (Internal quottio mark
-'U
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-06 omittd). See also, Peters v. Accrate ekg. lnspers Div. of Ubell Ent.. Inc. , 29 A.
Co. , 8 A.D. 3d 348, 350 (2"" Dept. 2004). Vague and conclusory allegations wtll not
suffce. Gordon v. Dino De Laurentiis Cor .141 A.D. 2d 435, 436 (1st Dept. 1988).
See, fgr v. AmerIcan Lawver Media, Inc. , 306 A. D. 2d 113 (1" Dept. 2003);
Long
Island Women s Health Care Asociates v. Haselkom-Lomansk . 10 Mise.3d 1068(A)
(Sup. Ct. Nassau Co. 2005).
The Court agrees that the alleged transaction, as pleaded, is unclear, vague and
fails to adequately to identify terms and conditions establishing the existence of a
binding agreement with respect to Avnet in his personal capacity.
Id.
Rather, and to the extent articulated in the complaint, the transaction depicted
suggests, at bes, that certin discussions ensued many years prior to Avnefs death in
2005 and that Avnet allegedly made some sort of statement that he would take steps
to lease certain space in premisowned by the corporation.
The fact that - as the Plaintiffs claim in their opposing submissions - Avnet
(actally Hemisphere) would be able to "stop paying rent" once the disputed space was
rented, or that the "corpration as a whole" would suppoedly sere some incidental
beneft upon exection of a new lease, does not establish the extstnce of a contctal
Although it was not raised in the moving papers, it appears that this purportedagreement occrrd more than siX years prir to the
commencement of this acUn. Thus. this
cause of acton may also be barred by the applicable statute of limitations.
CPLR 213(2).
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HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
duty personally binding upon Avnet, or his estate. Accordingly, the second cause of
action should be also dismissed.
Dissolution/Receiver
In support of their application, the Defendants assert, among other things, that
(1) the shareholders are deadlocked; (2) intractable, internal dissension exists within
the meaning of BCL ~ 1104(a) (1 )-(3); and (3) by virtue ofthe foregoing, Cerro
is no
longer capable of meeting its financial obligations - including mortgage, tax and utilty
expenses. Defendants further advise that Cerro s primary asset - - the Inwood
Propert - - wil be in jeopardy "if immediate steps are not taken to sell" it.
Plaintiffs do not oppose the dissolution of Cerro. Nor do they materially dispute
the relevant factual assertions advanced by Defendants in support of the applicatio
except to the extent that they request that proceedof any sale be placed in escrow
pending the outcome of this litigation.
The Court agrees that upon these facts, Defendants' unopposed counterclaim
for dissolution of Cerro should be granted. Moreover, while Plaintiffs rely on the
purported debt owed by virtue of the insurance policy lapse to support their escrow
claim, the Court has already dismissed the first and second causes of action, thereby
negating the viabilty of these factual theories.
The Court has considered the remaining contentions advanced by the Plaintiffs
including the claim that further discovery is required (Casey v. Clemente , 31 A.D. 3d
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HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.,
Index No. 3541-
361, (2 Dept. 2006)), and concludes that none is suffcient to defeat the Defendants
motion.
Accrdingly, it is,
ORDERED, that Defendants' motion to dismiss the first and second.
causes of
action is granted; and it is further,
ORDERED, that Defendants' motion to dissolve Seven Cerro Street Corp. is
granted; and it is further,
ORDERED, that Defendants' motion to appoint a receiver is granted.
Defendants shall settle an order on ten (10) days notice providing for the appointment
of a receiver to sell the Inwood propert and including provisio for the posting of an
undertaking, consistent herewith; and it is further,
ORDERED, that the third cause of action is hereby severed and continued; and it
is further,
ORDERED, that counsel for the parties are directed to appear for a status
conference on October 12, 2006 at 9:30 a.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY
September 14, 2006
ENTEREDSEP 2 1 2006
NASSAU COUNTYCOUNTY CLERK' S OFFICE
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