Court Opinion

ID: 9582524
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:28:22.82054+00
Date Added: 2024-06-11T13:37:54.867718
License: Public Domain

Justice MEYER
dissenting.
I disagree with the majority’s conclusion that the agreement at issue in this case presents a genuine issue of material fact concerning plaintiff’s rights upon transfer of the corporation. Moreover, I do not agree that there is sufficient evidence to support the jury’s finding that plaintiff is entitled to any additional accrued percentage compensation beyond the amount the parties stipulated as due. Therefore, I dissent from the majority opinion and vote to affirm the decision of the Court of Appeals.
I.
A review of the agreement, in its entirety, reveals that the agreement was carefully drafted to define several agreements be*326tween the parties. Following an explanation of plaintiff’s duties and term, of employment set forth in Article I, the agreement contains provisions detailing plaintiff’s right to compensation (Article II), granting plaintiff an option to purchase the corporation (Article III), restricting the sale of the corporation’s stock (Article IV), granting plaintiff a right of first refusal (Article V), and outlining miscellaneous agreements concerning such items as modification and enforcement of the agreement (Article VI).
Article V, the portion disputed in this case, is similarly organized to define the parties’ agreement clearly. This article, entitled “Right of First Refusal,” begins with section 5.01, which provides:
5.01 Receipt of Bona Fide Offer. If after March 1, 1987 and provided Davis remains in the continuous employment of Brower the Shareholders shall receive a bona fide offer to purchase all of the shares of stock of the Corporation or the Corporation shall receive a bona fide offer to purchase all of the assets and assume all of the liabilities of the Corporation, and the Shareholders or the Corporation are willing to accept such bona fide offer, then such Shareholders or the Corporation shall make the offer to transfer described herein.
Under this section, two prerequisites must be met before the corporation is obligated to offer to sell the corporation to plaintiff. First, the shareholders of the corporation must receive a bona fide purchase offer, acceptable to the corporation or its shareholders. Second, plaintiff must have been employed at the time the offer was received by the corporation’s shareholders. Only if these requirements are met is the corporation required to offer to transfer the corporation’s stock or assets and liabilities to plaintiff.
The remaining provisions of Article V similarly deal with plaintiff’s right of first refusal. Section 5.02 explains the manner and method in which the corporation is to make the offer to plaintiff, and sections 5.03 through 5.05 describe what will occur if plaintiff accepts the corporation’s offer. The procedure to be taken upon plaintiff’s rejection of the offer is outlined in sections 5.06 and 5.07. These sections provide:
5.06 Transfer After Offer. If the stock or assets of the Corporation are not purchased by Davis as provided in this Article, then the shareholders or the Corporation shall, for a period of six (6) months thereafter, be free to transfer the *327shares or assets to the prospective purchaser, upon the terms disclosed in the offer given to Davis pursuant to section 5.02 of this Agreement.
5.07 Payment to Davis. In the event that the shares of stock of the Corporation or the assets and liabilities of the Corporation are transferred to the bona fide purchaser, then Davis, in consideration of his services to the Corporation, shall be paid a portion of the proceeds from such sale equal to twenty-five percent (25%) of the total proceeds of such sale in excess of $2,000,000. Provided, however, anything to the contrary notwithstanding, Davis shall receive the payment stated in this section only if either (a) he is still in the employment of Brower, or (b) the stock or assets of the Corporation are sold within one year after termination of his employment with Brower. Payment of the portion of the proceeds to Davis as provided in this section shall be made in cash at the closing of the purchase.
Nothing in Article V in any way suggests that plaintiff is entitled to any rights independent of the right of first refusal.
By focusing on the second sentence contained within section 5.07, the majority concludes that the agreement may be interpreted to entitle plaintiff to share in the proceeds of a sale of the corporation as long as the sale is consummated during plaintiff’s employment with the corporation or within a year following the termination of plaintiff’s employment with the corporation. This conclusion disregards the cardinal principle that a contract must be construed as a whole and not by placing undue emphasis on isolated provisions. See Lattimore v. Fisher’s Food Shoppe, Inc., 313 N.C. 467, 329 S.E.2d 346 (1985); Dixie Container Corp. v. Dale, 273 N.C. 624, 160 S.E.2d 708 (1968).
The language of the agreement plainly and unambiguously provides that plaintiff is entitled to share in the proceeds of a sale of the corporation only if (1) the corporation receives a bona fide purchase offer acceptable to the corporation or its shareholders while plaintiff is employed by the corporation; (2) the corporation makes a written offer to transfer to plaintiff the corporation’s stock or assets and liabilities on the same terms as set forth in the bona fide offer; (3) plaintiff rejects the corporation’s offer; and (4) the corporation consummates a sale pursuant to the bona fide pur*328chase offer while plaintiff is still employed with the corporation or within a year after termination of plaintiffs employment.
Moreover, the plain and unambiguous language of section 5.07 provides that plaintiff is entitled to share in the proceeds of a sale of the corporation “[i]n the event that tlje shares of stock of the Corporation or the assets and liabilities of the Corporation are transferred to the bona fide purchaser.” This section necessarily contemplates that the corporation made an offer to plaintiff, pursuant to the right of first refusal, and that plaintiff rejected the offer, thereby permitting the corporation to make a transfer to the bona fide purchaser. It is only by focusing on the second sentence, in isolation from the remainder of the agreement, that the majority is able to reach a different conclusion.
The majority apparently accepts plaintiffs argument that the clause “[provided, however, anything to the contrary notwithstanding” indicates that the language following the clause is a departure from or contrary to that expressed previously and thus may be interpreted as vesting in plaintiff a right, independent of the right of first refusal, to share in the proceeds of a sale of the corporation. This interpretation completely ignores the plain meaning of the beginning of the clause, “[provided, however.” As noted by several authorities, “provided” is a word used to indicate that the language following is a limitation on that previously stated. See Black’s Law Dictionary at 1224 (6th ed. 1990) (stating that “provided” is a “word used in introducing a proviso” —a condition, stipulation, or limitation); Webster’s Third New International Dictionary at 1827 (1966) (defining “provided” as “on condition that,” “with the understanding,” or “if only”). It is clear that the entire phrase, read alone and within the context of the remainder of section 5.07, indicates that the language following this clause is departing from the remainder of section 5.07 by further limiting plaintiffs right to share in the proceeds of a sale of the corporation.
The majority, however, rejects the plain and unambiguous language of section 5.07 that entitles plaintiff to share in the proceeds of a sale of the corporation only if (1) plaintiff is employed at the time the corporation receives the bona fide offer, and (2) the sale of the corporation’s stock or assets and liabilities is consummated during plaintiff’s employment or within a year following the termination of plaintiff’s employment. The majority states, “[plaintiff] cannot be both employed for the purpose of first refusal and *329unemployed as contemplated in section 5.07, unless the offer is made just prior to his termination.” I submit that the plain and unambiguous language of section 5.07 expressly requires that plaintiff be employed by the corporation at the time the bona fide offer is received. By discarding the plain and unambiguous language of this section merely because the majority finds it unrealistic that the parties would include such a condition, the majority dismisses our cardinal principles of contract construction and thus grievously errs. Moreover, this provision is not beyond contemplation as suggested by the majority. It is quite logical that section 5.07 was drafted for the purpose of protecting plaintiff’s employment. Had the agreement instead provided that plaintiff would be entitled to share in the proceeds of a sale of the corporation only if plaintiff were employed both at the time the bona fide offer was received and at the time the sale was consummated, then the corporation would have been able to prevent plaintiff from sharing in the proceeds by merely terminating plaintiff’s employment. As written, however, the agreement removes this incentive to terminate plaintiff’s employment upon receipt of a bona fide offer acceptable to the corporation or its shareholders.
I conclude that plaintiff is not entitled to any share of the proceeds of the sale of the corporation. In its unpublished decision below, Davis v. Dennis Lilly Co., 101 N.C. App. 574, 400 S.E.2d 779 (1991), the Court of Appeals correctly noted that plaintiff “would be entitled to 25% of the sale proceeds in excess of $2 million if, (1) after 1 March 1987 while he was in the continued employment of the Brower Company a bona fide offer to purchase was received”; and (2) a sale occurred either while plaintiff was still employed with the Brower Company or within one year of the termination of plaintiff’s employment with the Brower Company. “[B]ecause the bona fide offer of the Dennis Lilly Company to purchase the Brower Company was not received while [plaintiff] was employed with the Brower Company, but was received some ,‘two or three months after [plaintiff] left [their employment],’ ” plaintiff is not entitled to recover a portion of the sale proceeds.
II.
The majority also errs by concluding that sufficient evidence was presented to support the jury’s award to plaintiff of $62,860.36 in accrued percentage compensation. The evidence presented at trial, viewed in the light most favorable to plaintiff, establishes *330that plaintiff is not entitled to additional accrued percentage compensation for fiscal year 1987.
As noted by the majority, the agreement at issue in this case plainly and unambiguously provides that accrued percentage compensation (“APC”) is to be calculated according to “generally accepted accounting principles” and becomes “due and payable to [plaintiff] . . . upon . . . termination of [plaintiff’s] employment ... or a sale ... of the Corporation.” Since APC became “due and payable” upon the date plaintiff’s employment was terminated, the APC could properly be calculated only by using the income figures available at the time plaintiff’s employment was terminated.
At trial, plaintiff’s expert opined that the method used to calculate plaintiff’s 1987 APC was different from the method used to calculate plaintiff’s 1985 APC and that this “departure from consistency . . . would in a sense be a contradiction of generally accepted accounting principles.” Relying on this testimony, the majority concludes that there was sufficient evidence to support a finding that plaintiff’s APC was not properly calculated in accordance with generally accepted accounting principles.
Although I agree with the majority that the agreement required plaintiff’s APC to be calculated in accordance with generally accepted accounting principles, I do not agree that sufficient evidence was presented to show that the 1987 APC calculations were in violation of generally accepted accounting principles. Upon cross-examination, plaintiff’s accounting expert conceded that the express provisions of the agreement required that the corporation pay plaintiff the APC upon termination. When asked whether generally accepted accounting principles permit an accountant to disregard the express terms of a written contract, plaintiff’s expert replied:
A. Oh, no.
Q. What you are saying is that as an accountant you are not entitled to deviate from the written terms of the contract?
A. That is correct.
Upon further questioning concerning the APC due plaintiff for fiscal year 1987, plaintiff’s expert indicated that there was no way, absent a mutual agreement not present in this case, that the corporation could have waited until the fiscal year-end to pay plaintiff *331the APC due for 1987. According to the express, unambiguous provisions of the agreement, the corporation was obligated to pay plaintiff his accrued percentage compensation on the date that plaintiff’s employment was terminated. Had the corporation’s accountant waited until year-end to calculate and pay plaintiff the accrued percentage compensation, he would have put the corporation in breach of its agreement and, according to plaintiff’s expert, would have violated generally accepted accounting principles.
Based upon the plain and unambiguous language of the agreement, I conclude that plaintiff is not entitled to share in the proceeds of the sale of the corporation. I also conclude that there was insufficient evidence to support the jury’s finding, that plaintiff is entitled to additional APC for fiscal year 1987. For these reasons, I dissent from the majority opinion and vote to affirm the Court of Appeals.
Justice MITCHELL joins in this dissenting opinion.