Harris v. Reagan

• Decision Date: 10 May 2018
• Docket Number: 525396
• Citation: 161 A.D.3d 1346,77 N.Y.S.3d 187
• Parties: Calvin L. HARRIS, Appellant, v. Joseph C. REAGAN, Respondent.
• Court: New York Supreme Court — Appellate Division

161 A.D.3d 1346
77 N.Y.S.3d 187

Calvin L. HARRIS, Appellant,
v.
Joseph C. REAGAN, Respondent.

525396

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: March 26, 2018
Decided and Entered: May 10, 2018

77 N.Y.S.3d 188

Bellavia Blatt & Crossett, PC, Mineola (Steven H. Blatt of counsel), for appellant.

Harris Beach PLLC, Pittsford (Svetlana K. Ivy of counsel), for respondent.

Before: McCarthy, J.P., Devine, Mulvey, Aarons and Pritzker, JJ.

MEMORANDUM AND ORDER

Devine, J.

Appeal from an order of the Supreme Court (O'Shea, J.), entered May 5, 2017 in Cortland County, which granted defendant's motion to dismiss the complaint.

Plaintiff, defendant and a third person owned and operated Royal Chevrolet/Cortland, Inc. and Royal Nissan, Inc., two automobile dealerships. Plaintiff was charged with murdering his wife in 2005. It was feared that automobile manufacturers would terminate the franchise status of both dealerships due to plaintiff's legal situation, and the dealership owners took steps to head off that result. These machinations included plaintiff and defendant becoming the only shareholders, with defendant having 55% and plaintiff having 45% of the shares in each dealership. A side agreement provided that, upon plaintiff's acquittal, he would be transferred additional stock and would ultimately hold 75% of the shares in each dealership. If he were convicted, a shareholders' agreement required plaintiff to transfer his shares to a trust. Defendant would then buy the shares from the trust by making monthly payments of $15,000 for 20 years.

A jury found plaintiff guilty of murder in the second degree in 2007 and, while he was awaiting sentencing, he executed stock transfer documents. Plaintiff's shares were conveyed to defendant soon after, with defendant making the monthly payments contemplated by the shareholders' agreement. Plaintiff's legal travails then took a labyrinthine course through a successful motion to set aside the 2007 verdict ( People v. Harris, 55 A.D.3d 958, 865 N.Y.S.2d 386 [2008] ), a 2009 conviction that was reversed on appeal ( People v. Harris, 19 N.Y.3d 679, 954 N.Y.S.2d 777, 978 N.E.2d 1246 [2012] ) and a third trial in 2014 that ended with a hung jury. Plaintiff commenced an action in 2014 asserting that the 2007 stock transfer must be set aside as fraudulent and seeking various forms of relief. Supreme Court

77 N.Y.S.3d 189

dismissed that action in 2015 and determined, among other things, that plaintiff's challenge to the stock transfer was properly one for breach of contract and was time-barred.

Plaintiff was acquitted following a fourth trial in 2016 and, contending that the shareholders' agreement required defendant to return his shares at that point, unsuccessfully demanded that defendant take the necessary steps to do so. Plaintiff then commenced the present action, asserting several causes of action revolving around defendant's alleged breach of the shareholders' agreement in refusing to return the shares. In lieu of serving an answer, defendant moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7). Supreme Court determined that the complaint failed to state a cause of action and granted the motion, prompting this appeal by plaintiff.

We reverse. "On a motion to dismiss pursuant to CPLR 3211, we construe the pleadings liberally, accept the allegations in the complaint to be true, give [the] plaintiff[ ] the benefit of any favorable inferences and ‘determine only whether the facts as alleged fit within any cognizable legal theory’ " ( Maldonado v. DiBre, 140 A.D.3d 1501, 1505, 35 N.Y.S.3d 731 [2016], lv denied 28 N.Y.3d 908, 2016 WL 6827088 [2016], quoting Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 [1994] ; see Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30, 38, 73 N.Y.S.3d 95, 96 N.E.3d 191 [2018] ). Supreme Court held that defendant could not have breached the shareholders' agreement in 2016, as the agreement explicitly terminated when he became the "only ... remaining [s]hareholder" of the dealerships in 2007. It is true that "[w]hen a contract is terminated,...