Deborah Intern. Beauty, Ltd. v. Quality King Distributors, Inc.

• Court: New York Supreme Court — Appellate Division
• Citation: Deborah Intern. Beauty, Ltd. v. Quality King Distributors, Inc., 573 N.Y.S.2d 189, 175 A.D.2d 791 (N.Y. App. Div. 1991)
• Decision Date: 05 August 1991
• Docket Number: No. 1,No. 2,1,2
• Parties: DEBORAH INTERNATIONAL BEAUTY, LTD., Appellant, Deborah K. Richman, Respondent v. QUALITY KING DISTRIBUTORS, INC., et al., Appellants, et al., Defendant. (Matter) In the Matter of Deborah K. RICHMAN, etc., Respondent; Deborah International Beauty, Ltd., Appellant. (Matter)

Page 189

573 N.Y.S.2d 189

175 A.D.2d 791

DEBORAH INTERNATIONAL BEAUTY, LTD., Appellant Deborah K. Richman, Respondent v. QUALITY KING DISTRIBUTORS, INC., et al., Appellants, et al Defendant. (Matter No. 1) In the Matter of Deborah K. RICHMAN, etc., Respondent Deborah International Beauty, Ltd., Appellant. (Matter No. 2)

Supreme Court, Appellate Division Second Department.

Aug. 5, 1991.

Rivkin, Radler, Bayh, Hart & Kremer, Uniondale (David E. Steckler and Evan H. Krinick, of counsel), for appellants.

Solin & Breindel, P.C., New York City (Donald A. Derfner, of counsel), for respondent.

Before MANGANO, P.J., and BRACKEN, SULLIVAN and RITTER, JJ.

MEMORANDUM BY THE COURT.

In related matters, inter alia, to recover damages for breach of a shareholders' agreement (Matter No. 1) and for a valuation pursuant to Business Corporation Law § 1118 (Matter No. 2), Deborah International Beauty, Ltd., Quality King Distributors, Inc., Bernard Nussdorf, Ruth Nussdorf, Steven Nussdorf, Glenn Nussdorf, Arlene Nussdorf, McKesson Fragrance Company, Inc., Foxmier Fragrance Company, and Jeffrey Oster, individually and as a partner in the firm of Margolin, Winner & Evans, CPAs, appeal (1) from an order of the Supreme Court, Nassau County (McCabe, J.), dated November 21, 1989, which denied the motion by the defendants-appellants for partial summary judgment dismissing the fifth, sixth, seventh and ninth causes asserted in Matter No. 1, (2) from so much of an order of the same court, dated January 12, 1990, as directed Deborah International Beauty, Ltd., a subchapter S Corporation, to issue a check to Deborah K. Richman payable to the Internal Revenue Service for taxes owing on undistributed profits, and (3) from so much of an order of the same court dated January 25, 1990, as awarded Deborah K. Richman attorneys' fees on a motion to hold Deborah International Beauty, Ltd., in contempt for failing to comply with the January 12, 1990, order.

ORDERED that the order dated November 21, 1989, is affirmed; and it is further,

ORDERED that the orders dated January 12, 1990, and January 25, 1990, are affirmed insofar as appealed from; and it is further,

ORDERED that the respondent is awarded one bill of costs.

The Supreme Court properly concluded that the terms of the shareholders' agreement upon which Deborah K. Richman's fifth, sixth, seventh and ninth causes of action in Action No. 1 are based are ambiguous. The relevant portions of the shareholders' agreement are subject to competing interpretations, thereby raising triable issues of fact as to the parties' intent and requiring the consideration of relevant extrinsic evidence (see, Hartford Accident & Indemnity Co. v. Wesolowski, 33 N.Y.2d 169, 172, 350 N.Y.S.2d 895, 305 N.E.2d 907; River Park Assoc. v. Meyerbank Elec. Co., 116 A.D.2d 709, 710, 497 N.Y.S.2d 762; see also, Lachs v. Fidelity & Cas. Co. of N.Y., 306 N.Y. 357, 365, 118 N.E.2d 555). The appellants' claims that Richman's conduct under the shareholders' agreement established a practical construction of the subject terms and estopped her from disputing the meaning of the agreement raise sharply contested issues of fact. Accordingly, summary judgment was properly denied.

The court properly granted Richman partial summary judgment when it ordered Deborah International Beauty, Ltd. to distribute sufficient funds to cover Richman's tax obligation for the "paper" profits. Richman alleged that the parties had agreed that such distributions would be made and that they had been made prior to the commencement of litigation. The appellants presented no contrary evidence. The claim by the corporation on appeal that it did not have adequate notice that the motion would be treated as one for...