Court Opinion

ID: 4086322
Source: CourtListenerOpinion
Date Created: 2016-10-08 00:06:47.294948+00
Date Added: 2024-06-11T09:19:13.729645
License: Public Domain

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

212
CA 11-01364
PRESENT: SCUDDER, P.J., CENTRA, PERADOTTO, AND LINDLEY, JJ.

IN THE MATTER OF THE ARBITRATION BETWEEN
GRANDE’ VIE, LLC, GRANDE’ VIE REALTY, LLC,
ANTHONY J. MARASCO AND ANTHONY M. DIMARZO,
PETITIONERS-APPELLANTS-RESPONDENTS,

                    AND                           MEMORANDUM AND ORDER

ESTATE OF MICHAEL PANAGGIO, DECEASED,
RESPONDENT-RESPONDENT-APPELLANT.
(APPEAL NO. 1.)

GATES & ADAMS, P.C., ROCHESTER (ANTHONY J. ADAMS, JR., OF COUNSEL),
FOR PETITIONERS-APPELLANTS-RESPONDENTS.

PHILLIPS LYTLE LLP, BUFFALO (ALAN J. BOZER OF COUNSEL), FOR
RESPONDENT-RESPONDENT-APPELLANT.

     Appeal and cross appeal from a judgment of the Supreme Court,
Monroe County (Ann Marie Taddeo, J.), entered April 13, 2011. The
judgment, among other things, granted the motion of petitioners to
stay arbitration, and denied the motion of respondent to compel
arbitration.

     It is hereby ORDERED that the judgment so appealed from is
reversed on the law without costs, petitioners’ motion is denied, and
respondent’s motion seeking to compel arbitration is granted.

     Memorandum: Petitioners Anthony J. Marasco and Anthony M.
DiMarzo and Michael Panaggio (decedent), whose estate is the
respondent herein, were equal members of petitioners Grande’ Vie, LLC
and Grande’ Vie Realty, LLC. The operating agreements of the
companies provided that the purchase price of a deceased member’s
interests would be paid to his estate. When decedent died in 2008,
respondent sought arbitration on the value of decedent’s interest in
the companies. Petitioners filed a petition to stay arbitration,
which was granted. After an appraiser selected by petitioners
rendered his written appraisal of the value of decedent’s interest in
the companies, petitioners moved by order to show cause to confirm the
appraisal and to stay arbitration of any issues resolved by that
appraisal. Respondent moved for an order compelling arbitration or
for alternative relief.

     Supreme Court erred in granting petitioners’ motion to confirm
the appraisal and to stay arbitration, and in denying respondent’s
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motion to compel arbitration. The operating agreements had both an
appraisal and an arbitration clause, which gives rise to an issue of
arbitration (see Matter of Dimson [Elghanayan], 19 NY2d 316, 324).
The arbitration clause provided that all controversies or claims
arising out of the operating agreements shall be submitted to
arbitration. Indeed, the arbitration clause also noted that, if the
matter submitted to arbitration involved a dispute as to the value of
a member’s interest, one of the arbitrators shall be a certified
public accountant. The appraisal clause provided that the parties
were to notify a certain individual “(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 [another named individual] or if he is no longer
in business, any MAI appraiser (the ‘Successor Appraiser’).” When the
two named individuals in the appraisal clause declined to appraise
decedent’s interest, petitioners asked an MAI appraiser to value the
companies and decedent’s interest therein. The appraisal clause
further provided that “[t]he Fair Value of the Membership Interest
being purchased shall be determined by the Appraiser, . . . and] the
Appraiser’s final determination shall be binding on the selling Member
and the purchasing Member(s).”

     It is well settled that, “when parties set down their agreement
in a clear, complete document, their writing should as a rule be
enforced according to its terms” (W.W.W. Assoc. v Giancontieri, 77
NY2d 157, 162). “Where an agreement is clear and unambiguous, a court
is not free to alter it and impose its personal notions of fairness”
(Welsbach Elec. Corp. v MasTec N. Am., Inc., 7 NY3d 624, 629). By the
plain wording of the appraisal clause, the MAI appraiser was the
“Successor Appraiser,” but only the “Appraiser’s” determination would
be final and binding on the parties. We therefore conclude that the
parties intended that, where the “Appraiser” was not available to
value the companies and the member’s interest, the matter should be
submitted to arbitration (cf. Dimson, 19 NY2d at 323). In light of
our determination, we do not address the remaining contentions of the
parties.

     All concur except LINDLEY, J., who dissents and votes to modify in
accordance with the following Memorandum: 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
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                                                         CA 11-01364

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 Generally 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 “notif[ied]” 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). 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
[internal quotation marks omitted]; see Muzak Corp. v Hotel Taft
Corp., 1 NY2d 42, 46-47).

     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.

     It 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
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                                                         CA 11-01364

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 United Steelworkers of
Am. v American Mfg. Co., 363 US 564, 570-571 [“(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). 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; 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 modify the judgment only with
respect to the amount of the award of interest.

Entered:   March 23, 2012                       Frances E. Cafarell
                                                Clerk of the Court