Court Opinion

ID: 5852772
Source: CourtListenerOpinion
Date Created: 2022-01-13 00:12:35.175281+00
Date Added: 2024-06-11T08:44:09.017972
License: Public Domain

Lindley, J.
(dissenting). I respectfully dissent. In my view, Supreme Court properly determined that respondent is bound by the appraisal submitted by the Member Appraisal Institute (MAI) appraiser selected by petitioners to calculate the value of decedent’s membership interest. I cannot agree with respondent’s contention, raised for the first time on appeal, that the appraisal clause of the operating agreements clearly and unambiguously provides that the only appraisal that shall be binding is that offered by Richard Bellows, who declined to prepare an appraisal. The appraisal clause reads: “For purposes of this Agreement, within ten (10) days after the expiration of the thirty (30) day period set forth in Section 8.2 (a) (ii) above, the selling Member (either the selling Member or the legal representative of the Deceased Member, as the case may be) and the purchasing Members shall notify Richard Bellows, (the ‘Appraiser’), to calculate the Fair Value of the Company. In the event the Appraiser or its successor in interest is no longer in business then the purchasing member shall notify Bob Pogel or if he is no longer in business, any MAI appraiser (the ‘Successor Appraiser’). The Fair Value of the Membership Interest being purchased shall be determined by the Appraiser, in accordance with such valuation techniques and appropriate methodologies as the Appraiser deems appropriate, all in accordance with Gen*1284erally Accepted Accounting Principles, and the policies and rules of MAI (Member Appraisal Institute). In all cases, the Appraiser’s final determination shall be binding on the selling Member and the purchasing Member(s). The Appraiser shall deliver a written report of its determination of Fair Value to all interested parties, and the cost of such appraisal shall be borne equally Fifty percent (50%) by said selling Member and Fifty Percent (50%) by the Purchasing Member(s).”
As illustrated above, the instructions as to how the Fair Value of the Membership Interest is to be determined refers only to the Appraiser, as does the provision directing that a written report of the appraisal be delivered to all interested parties. Thus, if the appraisal clause is interpreted as respondent suggests (so as to distinguish between the Appraiser and the Successor Appraiser), the Successor Appraiser would play no role in the appraisal process upon being “notiflied]” by the purchasing member. In other words, to construe the appraisal clause as giving binding effect to an appraisal submitted by only Bellows would render meaningless the provisions for selecting another appraiser in the event that Bellows declines to perform an appraisal. That construction of the appraisal clause is contrary to the well-established rule that courts should “avoid an interpretation that would leave contractual clauses meaningless” (Two Guys from Harrison-N.Y. v S.F.R. Realty Assoc., 63 NY2d 396, 403 [1984]). As the Court of Appeals has advised, “[i]t is a cardinal rule of construction that a court should not adopt an interpretation which will operate to leave a provision of a contract . . . without force and effect” (Corhill Corp. v S.D. Plants, Inc., 9 NY2d 595, 599 [1961] [internal quotation marks omitted]; see Muzak Corp. v Hotel Taft Corp., 1 NY2d 42, 46-47 [1956]).
Although not dispositive, it is worth noting that both petitioners and respondent apparently proceeded with the understanding that an appraisal submitted by an MAI appraiser, i.e., a Successor Appraiser, would be binding, and that may explain why respondent did not contend otherwise in Supreme Court. After Bellows and Bob Pogel declined to perform an appraisal, the parties, in an attempt to reach a settlement, selected Midtown Valuation Group, LLC (Midtown) to perform a nonbinding appraisal. Midtown prepared an appraisal, but the parties still could not agree on the value of decedent’s membership interest. Petitioners therefore selected a Successor Appraiser, in accordance with the appraisal clause. If, as respondent contends, the appraisal from the Successor Appraiser is not binding, there was no need for the parties to select Midtown to prepare a nonbinding appraisal for settlement purposes.
*1285It is true, as respondent points out, that the operating agreements also contain a general arbitration clause. It provides that any “controversy or claim arising out of or relating to” the agreements shall be submitted to arbitration and that, “if the matter submitted to arbitration shall involve a dispute as to the value of a Membership Interest, one of the arbitrators shall be a certified public accountant and shall have no prior affiliation with any Member or the Company.” Contrary to respondent’s contention, however, the arbitration clause does not compel a finding that the parties’ dispute over the value of decedent’s membership interest must be arbitrated. As a preliminary matter, I note that respondent’s contention with respect to the arbitration clause applies with equal force to an appraisal submitted by the Appraiser, which respondent concedes would be binding. In any event, the presence of both the appraisal clause and the arbitration clause gives rise to an issue of arbitrability, which was properly resolved by the court (see Steelworkers v American Mfg. Co., 363 US 564, 570-571 [1960] [“(S)ince arbitration is a creature of contract, a court must always inquire . . . whether the parties have agreed to arbitrate the particular dispute”]; Matter of Dimson [Elghanayan], 19 NY2d 316, 324 [1967]). In my view, the provision of the appraisal clause directing the Appraiser or Successor Appraiser definitively to determine the value of a membership interest removed that subject from the purview of the arbitrator (see Dimson, 19 NY2d at 325).
In addition, it is a well-settled proposition that, “[w]here a contract . . . employs contradictory language, specific provisions control over general provisions” (Green Harbour Homeowners’ Assn., Inc. v G.H. Dev. & Constr., Inc., 14 AD3d 963, 965 [2005]; see Muzak Corp., 1 NY2d at 46). Here, the appraisal clause is far more specific than the arbitration clause, which is contained in a section of the agreements merely entitled “General Provisions.” There is thus no merit to respondent’s contention that the dispute over the value of decedent’s membership must be arbitrated. Having reviewed respondent’s remaining challenges to the court’s confirmation of the appraisal submitted by the Successor Appraiser and the court’s staying of arbitration on the issue of the purchase price, I conclude that those challenges similarly are without merit.
Finally, I conclude that the court erred in awarding interest to respondent on the entire amount of the purchase price. In my view, interest should be awarded only on the 10% down payment and any monthly payments that accrued as of the closing date, March 7, 2011 (see CPLR 5001 [a]). I would therefore *1286modify the judgment only with respect to the amount of the award of interest. Present — Scudder, EJ., Centra, Peradotto and Lindley, JJ.