Court Opinion

ID: 5956676
Source: CourtListenerOpinion
Date Created: 2022-01-13 06:41:03.385733+00
Date Added: 2024-06-11T08:47:58.671867
License: Public Domain

Casey, J. (dissenting).
The majority holds that no contract existed until the required shareholder approval was obtained. Judicial review of an administrative determination, however, is limited to the grounds invoked by the agency (Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 758), and the determination of respondent Tax Appeals Tribunal expressly recognized that "[t]he merger agreement may have been a contract”. In any event, there is no support in the record for the majority’s conclusion that shareholder approval of the merger was the sine qua non of the existence of a contract between petitioner and United National Corporation (hereinafter UNC). According to this analysis, both parties would have been free unilaterally to abandon the proposed merger at any time prior to shareholder *45approval, but the agreement expressly and unambiguously provided that it could be terminated prior to the effective date of the merger only upon the occurrence of certain events, including the parties’ "mutual concurrence”. The agreement also obligated the parties to perform or refrain from a variety of activities prior to, and independent of, shareholder approval. Many of these obligations related to obtaining such approval, but the obligations existed regardless of whether such approval was actually obtained.
Instead of being a prerequisite to the existence or formation of a contract, shareholder approval was included as one of five conditions which had to be satisfied as "conditions precedent to the obligation of each of the parties to consummate the Merger”. The majority apparently confuses a condition precedent to performance under a contract with a condition precedent to the existence of a contract. The Court of Appeals has had no trouble recognizing the distinction (see, Allis-Chalmers Mfg. Co. v Malan Constr. Corp., 30 NY2d 225, 231, n 4) and the differences between the two conditions are not difficult to understand. The former condition is " 'an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due’ ” (Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106, 112, quoting Restatement [Second] of Contracts § 224). Inasmuch as the latter type of condition affects the existence of a contract (see, Matco Elec. Co. v American Dist. Tel. Co., 156 AD2d 840, 842) while the other affects performance under an existing contract (see, Merritt Hill Vineyards v Windy Hgts. Vineyard, supra, at 112), a condition cannot be both types; it must be one or the other. The clear and unambiguous language of the parties’ agreement read as a whole, which imposes a number of obligations on the parties independent of shareholder approval and expressly makes shareholder approval a condition precedent to the parties’ obligation to consummate the merger, establishes as a matter of law that the parties intended shareholder approval of the merger to be a condition precedent to performance under an existing contract, not a condition precedent to the existence of the contract itself. Perplexed by the distinction between the two types of conditions, which it describes as "esoteric”, the majority simply ignores the distinction and rewrites the parties’ agreement to make shareholder approval a prerequisite to the existence of a contract.
It is important to note that although Delaware law required *46shareholder approval of the merger agreement, there is no evidence in the record that either party lacked the authority to enter into a merger agreement which made the requisite shareholder approval a condition precedent to the performance of the parties’ obligations to merge, which is what the parties did in this case. Absent shareholder approval no merger would occur, but that does not mean that no contract existed. The inclusion of a condition precedent to the parties’ obligation to perform under a contract does not render a contract ineffective or unenforceable (see, Flaherty v Elber Constr. Corp., 149 AD2d 655, 657). No rational basis exists for concluding that the parties did not enter into a binding contract before shareholder approval was obtained.
The cases of Matter of Lever v New York State Tax Commn. (144 AD2d 751) and Matter of Bredero Vast Goed N. V. v Tax Commn. (146 AD2d 155, appeal dismissed 74 NY2d 791) lend no support to the majority’s holding. In the Lever case, the parties’ "letter agreement” was nothing more than an agreement to agree because of the parties’ intent to continue negotiations with a possible meeting of the minds in the future. Here, however, even a cursory reading of the parties’ agreement reveals that the parties had reached the necessary meeting of the minds as to all of the material terms and conditions, including the condition requiring shareholder approval, and their intent was to be bound by those terms and conditions. In the Bredero Vast Goed N. V. case, the exemption was held to be inapplicable because the parties’ contract was not executed before the effective date of Tax Law article 31-B. It is undisputed that the parties’ agreement herein was timely executed.
The determination that the parties’ agreement was not a binding contract lacks a rational basis and, therefore, should be annulled.
Mercure and Harvey, JJ., concur with Weiss, P. J.; Casey and Crew III, JJ., dissent in a separate opinion by Casey, J.
Adjudged that the determination is confirmed, without costs, and petition dismissed.