Court Opinion

ID: 3172919
Source: CourtListenerOpinion
Date Created: 2016-01-28 08:04:40.177122+00
Date Added: 2024-06-11T11:58:56.546808
License: Public Domain

STATE OF MICHIGAN

                           COURT OF APPEALS

VENKATA KRISHNA NALLABALLI,                                        UNPUBLISHED
                                                                   January 26, 2016
              Plaintiff/Counter-Defendant-
              Appellant,

v                                                                  No. 322021
                                                                   Washtenaw Circuit Court
ESWARI ACHANTA,                                                    LC No. 13-001104-CK

              Defendant/Counter-Plaintiff-
              Appellee,

and

GMGT TECHNOLOGIES, INC.,

              Defendant-Appellee.

SUNEETHA NALLABALLI,

              Plaintiff-Appellant,

v                                                                  No. 325704
                                                                   Washtenaw Circuit Court
ESWARI ACHANTA and GMGT                                            LC No. 14-000663-CK
TECHNOLOGIES, INC.,

              Defendants-Appellees,

Before: SHAPIRO, P.J., and O’CONNELL and WILDER, JJ.

O’CONNELL, J. (concurring in part and dissenting in part).

       I concur with the majority opinion that these causes of action are not barred by the
doctrine of res judicata. I also concur with the majority opinion that the amended agreement
contains an illegal provision that purports to transfer shares of stock to Venkata, an individual
who does not possess a green card. As such, the illegal provisions in the amended agreement are

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void as against public policy, and I would vacate the trial court’s decision in these cases and
remand both cases for further proceedings consistent with this opinion.

        I first note that neither Achanta nor Suneetha can transfer shares of stock in GMGT to
Venkata, an individual who does not possess a green card. At the time the amended agreement
was executed, Venkata only possessed an H-1B visa and as such could not hold stock in a U. S.
corporation. As the majority opinion aptly concludes, any such purported transfer is against
federal law and therefore illegal. See 26 USC 1361(b)(a)(C) (it is contrary to federal law for an
S Corporation to have a nonresident alien as a shareholder). The ramification of the illegal
transfer is that the purported stock transfer is void as against public policy. See Epps v 4
Quarters Restoration, LLC, 498 Mich. 518, ___; ___ NW2d ___ (2015) (illegal contracts may be
void or voidable); Rembert v Ryan’s Family Steak Houses, Inc, 235 Mich. App. 118, 170; 596
NW2d 208 (1999) (“A contract that is contrary to public policy is illegal and void.”).

       Since the amended agreement contains a severability clause, the illegal provisions of the
amended agreement must be severed and the balance of the contract is enforceable. Suneetha’s
shares remained her own and she has standing to seek to enforce her rights as a shareholder
under that contract.

       On remand, I would direct the trial court to strike the illegal provisions from the amended
agreement. Attempting to enforce illegal provisions in the amended agreement by redefining
them as a condition precedent is untenable. While it may provide a legal solution as applied to
Venkata’s rights under the amended contract, as applied to Achanta, Suneetha, and GMGT, it is
unworkable and violates federal law. The courts of this state cannot enforce illegal provisions
contained in contracts.

       The trial court’s decision does not address the ramifications of the illegal provisions
contained in the amended agreement. While this Court may address purely legal questions on
appeal, we should not do so when it would require us to construct and evaluate our own
arguments. Candelaria v BC Gen Contractors, Inc, 236 Mich. App. 67, 83; 600 NW2d 348
(1999). I would direct that the trial court make these determinations in the first instance.
Accordingly, I would vacate the trial court’s decisions in these matters and remand for further
proceedings consistent with this opinion.

                                                            /s/ Peter D. O’Connell

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