Court Opinion

ID: 4123252
Source: CourtListenerOpinion
Date Created: 2017-02-03 20:11:06.351121+00
Date Added: 2024-06-11T14:45:31.567337
License: Public Domain

SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

878
CA 16-00160
PRESENT: WHALEN, P.J., SMITH, LINDLEY, TROUTMAN, AND SCUDDER, JJ.

MAVEN TECHNOLOGIES, LLC AND TODD R. WHEATON,
PLAINTIFFS-APPELLANTS-RESPONDENTS,

                    V                                MEMORANDUM AND ORDER

GAYLE A. VASILE, AS EXECUTOR OF THE ESTATE OF
ANTHONY R. VASILE, DEFENDANT-RESPONDENT-APPELLANT.

JASON S. DIPONZIO, ROCHESTER, FOR PLAINTIFFS-APPELLANTS-RESPONDENTS.

KAMAN, BERLOVE, MARAFIOTI, JACOBSTEIN & GOLDMAN, LLP, ROCHESTER
(RICHARD GLEN CURTIS OF COUNSEL), FOR DEFENDANT-RESPONDENT-APPELLANT.

     Appeal and cross appeal from an order of the Supreme Court,
Monroe County (Matthew A. Rosenbaum, J.), entered May 1, 2015. The
order denied defendant’s motion for partial summary judgment and
denied plaintiffs’ cross motion for summary judgment.

     It is hereby ORDERED that the order so appealed from is affirmed
without costs.

     Memorandum: Plaintiff Maven Technologies, LLC (Maven), was
organized by Anthony R. Vasile (decedent) and others pursuant to an
operating agreement. After the other owners died, decedent prepared
Maven’s Amended and Restated Operating Agreement (Agreement), which is
at issue here. Pursuant to the Agreement, plaintiff Todd R. Wheaton
became Maven’s president and owner of 30% of Maven’s shares, and
decedent owned the remaining 70%. The Agreement also contained
numerous provisions limiting the parties’ ability to dispose of their
shares, the manner in which the shares were transferred, and the price
that must be paid for them. After decedent’s demise, plaintiffs
commenced this action seeking, inter alia, a declaration that the
Agreement’s terms mandated that defendant, decedent’s executor, sell
the shares formerly owned by decedent to Maven at their net book
value. In her answer, defendant contended that decedent bequeathed
his shares to a trust, of which defendant was the trustee, and thus
that the trust was a member of Maven within the meaning of the
Agreement. The answer included a counterclaim in which defendant
sought, among other relief, a declaration that decedent’s trust was
the owner of 70% of Maven’s shares, and an accounting. Plaintiffs
appeal and defendant cross-appeals from an order that denied both
defendant’s motion for partial summary judgment declaring the rights
of the parties and plaintiffs’ cross motion for summary judgment on
the complaint. We affirm.
                                 -2-                           878
                                                         CA 16-00160

     Initially, we note that the parties fail to address in their
respective briefs on appeal the denial of the motion and cross motion
with respect to the cause of action seeking specific performance, and
thus they have abandoned any contentions concerning that cause of
action (see Ciesinski v Town of Aurora, 202 AD2d 984, 984).

     Resolution of the remainder of this appeal depends on the
principles of contract interpretation. “It is well settled that a
contract must be read as a whole to give effect and meaning to every
term . . . Indeed, ‘[a] contract should be interpreted in a way [that]
reconciles all [of] its provisions, if possible’ ” (New York State
Thruway Auth. v KTA-Tator Eng’g Servs., P.C., 78 AD3d 1566, 1567; see
RLI Ins. Co. v Smiedala, 96 AD3d 1409, 1411). Therefore, “[e]ffect
and meaning must be given to every term of the contract . . . , and
reasonable effort must be made to harmonize all of its terms” (Village
of Hamburg v American Ref-Fuel Co. of Niagara, 284 AD2d 85, 89, lv
denied 97 NY2d 603; see Matter of El-Roh Realty Corp., 74 AD3d 1796,
1799). It is equally well settled that “[t]he interpretation of an
unambiguous contractual provision is a function for the court . . . ,
and [t]he proper inquiry in determining whether a contract is
ambiguous is whether the agreement on its face is reasonably
susceptible of more than one interpretation . . . To be entitled to
summary judgment, the moving party has the burden of establishing that
its construction of the [contract] is the only construction [that] can
fairly be placed thereon” (Nancy Rose Stormer, P.C. v County of
Oneida, 66 AD3d 1449, 1450 [internal quotation marks omitted]).

     Here, neither party established that its interpretation of the
Agreement is the only reasonable interpretation thereof (see Arrow
Communication Labs. v Pico Prods., 206 AD2d 922, 923). Consequently,
summary judgment is inappropriate at this juncture because a
“determination of the intent of the parties depends on the credibility
of extrinsic evidence or on a choice among reasonable inferences to be
drawn from extrinsic evidence” (P&B Capital Group, LLC v RAB
Performance Recoveries, LLC, 128 AD3d 1534, 1535 [internal quotation
marks omitted]; see Matter of Wilson, 138 AD3d 1441, 1442-1443; Kibler
v Gillard Constr., Inc., 53 AD3d 1040, 1041-1042; Arrow Communication
Labs., 206 AD2d at 923).

     All concur except WHALEN, P.J., and TROUTMAN, J., who dissent and
vote to modify in accordance with the following memorandum: We
respectfully dissent. Although we agree with the majority that the
Amended and Restated Operating Agreement (Agreement) is ambiguous, we
do not agree that the interpretation of the Agreement depends on the
credibility of extrinsic evidence or on a choice among reasonable
inferences to be drawn from extrinsic evidence. Here, the
interpretation of the Agreement is the exclusive function of a court,
and we conclude that plaintiffs have established that their
construction is “ ‘the only construction [that] can fairly be placed
thereon’ ” (DiPizio Constr. Co., Inc. v Erie Canal Harbor Dev. Corp.,
120 AD3d 905, 906). We therefore vote to modify the order by granting
plaintiffs’ cross motion for summary judgment in part and granting
judgment in plaintiffs’ favor, declaring that defendant Gayle A.
Vasile, as executor of the Estate of Anthony R. Vasile (decedent),
                                 -3-                           878
                                                         CA 16-00160

must transfer decedent’s 70% interest in plaintiff Maven Technologies,
LLC (Maven) to that company at net book value.

     The dispute underlying this action arose following the February
2014 death of decedent, the owner of a 70% membership interest in
Maven. Maven’s president, Todd R. Wheaton (plaintiff), owns the
remaining 30%. At issue is the disposition of decedent’s 70% interest
under the terms of the Agreement.

     Article 6 of the Agreement governs the transfer of membership
interests and the withdrawal of existing members. Section 6.1.1
provides that a member who owns “more than 50% in Membership Interest
may transfer all, or any portion of, or any interest in, the
Membership Interest owned by the Member.” Conversely, section 6.1.2
prohibits a member with a minority membership interest from
transferring any portion of his or her interest and renders any such
transfer “invalid, null and void, and of no force or effect.” Section
1.21 defines a “transfer” as “any sale, hypothecation, pledge,
assignment, gift, bequest, attachment, or other transfer.” A member’s
“involuntary withdrawal,” which section 1.11 (iv) defines as including
“the occurrence” of the “death” of “any Member,” triggers section 6.3,
which provides: “Immediately upon the occurrence of an Involuntary
Withdrawal, other than for Cause, the successor of the Withdrawn
Member shall thereupon become an Interest Holder but shall not become
a Member.” Section 6.3 further provides that, within 180 days of the
involuntary withdrawal, Maven “shall pay the successor Interest Holder
the Net Book Value per unit of his Interest.” The Agreement, which
was executed by both decedent and plaintiff, went into effect December
31, 2007.

     In his pour-over will, decedent purportedly bequeathed his
membership interest in Maven to a living trust. After his death,
plaintiffs commenced this action seeking, inter alia, a declaration
that defendant as executor of the estate is obligated under section
6.3 to sell decedent’s 70% interest back to Maven at net book value.
Defendant interposed an answer and thereafter moved for “partial
summary judgment” seeking, inter alia, a declaration that section 6.1
allowed decedent as the owner of a majority interest to bequeath his
membership interest to his living trust. In support of her motion,
defendant submitted the affirmation of her attorney, who described a
conversation he had with the attorney whom decedent purportedly
contacted to amend Maven’s original operating agreement. During that
process, decedent reportedly directed his attorney to insert section
6.1.1, a new provision allowing transfer only by the owner of a
majority interest. Attached to the affirmation was a copy of the
original operating agreement and an excerpt from decedent’s living
trust instrument executed in October 2011, which provided the trustee
with specific instructions concerning the disposition of decedent’s
interest in Maven. In addition, defendant submitted a second attorney
affirmation and her own affidavit, which primarily contained
speculation with respect to decedent’s intent in amending the original
operating agreement. Plaintiffs then cross-moved for summary judgment
on their complaint and submitted the affirmation of their attorney,
who contended that the language of the Agreement was unambiguous, and
                                 -4-                           878
                                                         CA 16-00160

objected to the use of extrinsic evidence to interpret unambiguous
contract language.

     Supreme Court denied the motion and cross motion, reasoning that
the conflict between sections 6.1 and 6.3 “creates an issue of fact as
to [d]ecedent’s intent which [cannot] be resolved in favor of either
party on a motion for summary judgment.” In our view, that was error.

     It is well established that, where “a contract is ambiguous, its
interpretation remains the exclusive function of the court unless
‘determination of the intent of the parties depends on the credibility
of extrinsic evidence or on a choice among reasonable inferences to be
drawn from extrinsic evidence’ ” (Town of Eden v American Ref-Fuel Co.
of Niagara, 284 AD2d 85, 88, lv denied 97 NY2d 603, quoting Hartford
Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 172). Neither party
submitted admissible evidence concerning decedent’s intent at the time
the Agreement was executed, nor have they identified where such
evidence might be found (see id.). Moreover, both parties have
steadfastly maintained that the issue should be resolved as a matter
of law, and “it is well settled that ‘parties to a civil dispute are
free to chart their own litigation course’ (Mitchell v New York Hosp.,
61 NY2d 208, 214), and ‘may fashion the bases upon which a particular
controversy will be resolved’ (Cullen v Naples, 31 NY2d 818, 820)”
(Austin Harvard LLC v City of Canandaigua, 141 AD3d 1158, 1158).
Therefore, because the ambiguity “ ‘must be resolved wholly without
reference to extrinsic evidence[,] the issue is to be determined as a
question of law for the court’ ” (P&B Capital Group, LLC v RAB
Performance Recoveries, LLC, 128 AD3d 1534, 1535, quoting Hartford
Acc. & Indem. Co., 33 NY2d at 172). Furthermore, the principles of
contract interpretation require that we give effect and meaning to
every provision and make a reasonable effort to harmonize all of the
contract’s terms (see DiPizio Constr. Co., Inc., 120 AD3d at 906). To
that end, “[w]here two seemingly conflicting contract provisions
reasonably can be reconciled, a court is required to do so and to give
both effect” (id. at 907 [internal quotation marks omitted]).

     We conclude that plaintiffs established as a matter of law that
their construction of the contract is “ ‘the only construction [that]
can fairly be placed thereon’ ” (id. at 906). Only plaintiffs’
construction, in our view, harmonizes and gives full effect to all of
the Agreement’s provisions. Section 6.3 contains mandatory language
that provides for membership “immediately” to cease upon the death of
a member, and compels Maven’s repurchase of the deceased member’s
interest. By contrast, section 6.1.1 contains permissive language
that allows a transfer of interest to be made by a member “holding
more than 50% in Membership Interest.” When read together, those
provisions allow the owner of a majority interest to transfer all or
some of that interest during his or her lifetime; however, upon that
member’s death, his or her interest ceases to be a membership interest
at the time it passes to his or her successor, who is then obligated
to sell the interest back to Maven at net book value.

     We reject defendant’s contention that the Agreement limits the
application of section 6.3 to owners of a minority interest. To the
                                 -5-                          878
                                                        CA 16-00160

contrary, that provision is triggered “upon the occurrence of an
Involuntary Withdrawal” and, as previously noted herein, section 1.11
(iv) defines an involuntary withdrawal as including “the occurrence”
of the “death” of “any Member.” Contrary to defendant’s further
contention, our construction of the Agreement does not render
meaningless the terms contained in section 6.1.1, which permit
transfers to be made by a person who owns a membership interest of
more than 50%. Nor does our construction render meaningless the terms
contained in section 1.21, which provide a broad definition of
“transfer” to include virtually any lawful means of passing ownership
of personal property from one person to another. Indeed, it is
undisputed that the Agreement allowed decedent to transfer his
interest in Maven to his living trust during his lifetime and that he
did not do so. Inasmuch as the language of the Agreement supports
plaintiffs’ rather than defendant’s construction thereof, we conclude
that the court erred in denying that part of plaintiffs’ cross motion
for summary judgment seeking a declaration to that effect.

Entered:   February 3, 2017                    Frances E. Cafarell
                                               Clerk of the Court