Harris v. Reagan
| Docket Number | 533292 |
| Decision Date | 02 November 2023 |
| Parties | Calvin L. Harris, Appellant, v. Joseph C. Reagan, Respondent. |
| Court | New York Supreme Court — Appellate Division |
Calendar Date: September 12, 2023
Bellavia Blatt, PC, Mineola (Leonard A. Bellavia of counsel) for appellant.
Harris Beach PLLC, Pittsford (Kelly S. Foss of counsel), for respondent.
Before: Egan Jr., J.P., Lynch, Ceresia and Fisher, JJ.
Appeal from a judgment of the Supreme Court (Brian D. Burns, J.) entered January 13, 2021 in Otsego County, upon a decision of the court in favor of defendant.
Plaintiff, defendant and a nonparty owned and operated two automobile dealerships and their associated real estate in Cortland County. In 2005, plaintiff was charged with the murder of his wife, an event which triggered a series of agreements between the dealership owners. [1] Initially, and as a direct result of plaintiff's arrest on the charges, the nonparty sold his stock and real estate interests in both dealerships to the parties, thereby resulting in plaintiff and defendant being the only shareholders, with plaintiff having 45% and defendant having 55% of the shares in each dealership. Thereafter, precipitated by the fear that the automobile manufacturers would terminate the franchise status of both dealerships due to plaintiff's legal situation, plaintiff and defendant entered into two additional agreements. A shareholders' agreement established a process where, if plaintiff was convicted and upon the expiration of his statutory appeals, he would sell his ownership interests to a trust for the benefit of his children, whereby defendant would purchase such interests by making monthly payments to the trust in the amount of $15,000 for a period of 20 years. In the event that plaintiff was ultimately acquitted, a side agreement provided that plaintiff's ownership interests would increase to 75%, thereby resulting in a corresponding reduction of defendant's ownership interests to 25%. According to plaintiff, the shareholders' agreement also contained a footnote providing that, if he was acquitted, the monthly payments made by defendant would constitute a "salary" and plaintiff's shares would be transferred back to him.
In May 2007, plaintiff was convicted by a jury and, while he was awaiting sentencing, he participated remotely in a joint meeting of the shareholders for the dealerships. During such meeting in June 2007, plaintiff agreed to transfer his ownership interests to defendant in a manner that was "generally consistent with the terms" of the shareholders' agreement, whereby defendant also agreed to assume all of the outstanding debt of the dealerships. As a result, plaintiff's ownership interests were subsequently conveyed to defendant, who then began making monthly payments in the amount of $15,000 directly to plaintiff. Thereafter, plaintiff successfully moved to set aside the verdict pursuant to CPL 330.30, which this Court affirmed (People v Harris, 55 A.D.3d 958 [3d Dept 2008]). Plaintiff was again convicted in 2009 and began serving his sentence, however, this conviction was similarly vacated and a new trial ordered (People v Harris, 19 N.Y.3d 679 [2012]). After a third trial which ended in a hung jury, plaintiff was ultimately acquitted at the conclusion of a bench trial in 2016.
Following his acquittal, plaintiff commenced this action asserting several causes of action for breach of contract and seeking specific performance of the shareholders' agreement. [2] Specifically, plaintiff demanded that defendant retransfer him the ownership interests in the dealerships and associated real estate pursuant to the shareholders' agreement and the side agreement. He further contended that defendant's $15,000 monthly payments constituted a salary pursuant to the footnote of the shareholders' agreement. In lieu of serving an answer, defendant moved pre-answer to dismiss the complaint for failure to state a cause of action, arguing, in part, that the shareholders' agreement had already terminated by virtue of the June 2007 transfer and, alternatively, that the version of the shareholders' agreement that the parties signed did not include a footnote. Supreme Court (O'Shea, J.) granted defendant's motion and plaintiff appealed, whereafter this Court reversed and reinstated the complaint, finding that "[d]iscovery [was]... needed to discern the actual provisions of the agreements, the intent of the parties in entering into them and the extent to which they survived after defendant became the sole shareholder in the dealerships" (161 A.D.3d 1346, 1349 [3d Dept 2018]). [3] In doing so, this Court acknowledged the possibility that the parties may have intended to be bound by the expired agreement or that they had come to a separate agreement (see id.).
After joinder of issue and the completion of discovery, the matter proceeded to a nonjury trial. Supreme Court (Burns, J.) ultimately found that plaintiff failed to prove by a preponderance of the evidence the existence of an enforceable contract, agreeing with defendant that the contract terminated in June 2007 and rejecting the existence of the footnote. In this respect, the court weighed the credibility of the parties, finding plaintiff to be less credible as to the version of the shareholders' agreement that the parties signed and their intentions during the June 2007 transfer. Nevertheless, the court further determined that plaintiff's version of the shareholders' agreement would have rendered the contract illusory and invalid due to the lack of consideration. As a result, the court found in favor of defendant and dismissed the complaint. Plaintiff appeals.
We affirm. "When conducting a review of a nonjury trial verdict, this Court independently reviews the probative weight of the evidence, together with the reasonable inferences that may be drawn therefrom, and grants the judgment warranted by the record while according due deference to the trial court's factual findings and credibility determinations" (Ampower-US, LLC v WEG Transformers USA, LLC, 214 A.D.3d 1129, 1130 [3d Dept 2023] [internal quotation marks and citations omitted]). Relevantly, "it is fundamental that specific performance may be awarded only where there is a valid existing contract for which to compel performance" (Galarneau v D'Andrea, 184 A.D.3d 1064, 1065 [3d Dept 2020] [internal quotation marks, brackets and citations omitted ]). In order to establish a valid existing contract, "the plaintiff must demonstrate that there was an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound" (Carroll v Rondout Yacht Basin, Inc., 215 A.D.3d 1190, 1191 [3d Dept 2023] [internal quotation marks and citations omitted]; see TAJ Intl. Corp. v Bashian & Sons, 251 A.D.2d 98, 100 [1st Dept 1998]). Although a party's rights and obligations under an agreement typically cease after its termination (see New York Tel. Co. v Jamestown Tel. Corp., 282 NY 365, 371 [1940]; Harris v Reagan, 161 A.D.3d at 1348), "the conduct of the parties to a contract following the expiration of that contract can operate to demonstrate that the parties impliedly agree that their rights and obligations should continue to be measured as provided in the old contract" (Monahan v Lewis, 51 A.D.3d 1308, 1309-1310 [3d Dept 2008] []; see Richmor Aviation, Inc. v Sportsflight Air, Inc., 82 A.D.3d 1423, 1424 [3d Dept 2011]). To make this determination, such evaluation by a court "involves an assessment of the parties' conduct and the extent to which such conduct demonstrates a meeting of the minds" (Monahan v Lewis, 51 A.D.3d at 1310), as "[t]he fact that the parties continue to deal under some sort of informal arrangement does not, without more, mean that all the terms of the expired formal contract continue to apply" (Twitchell v Town of Pittsford, 106 A.D.2d 903, 904 [4th Dept 1984], affd 66 N.Y.2d 824 [1985]; see Coogi Partners LLC v Soho Fashion, Ltd., 107 A.D.3d 426, 427 [1st Dept 2013]; Bessette v Niles, 23 A.D.3d 996, 997 [4th Dept 2005]).
Here, section 6 (d) of the shareholders' agreement required, in the event that plaintiff was convicted, that defendant purchase all of plaintiff's ownership interests in the dealerships and their associated real estate by making payments of $15,000 per month for 20 years. Section 7 (a) provided that plaintiff "hereby agrees and covenants with [defendant] that, in the event of his conviction, he shall immediately transfer his shares" in the dealerships to a trust for the benefit of plaintiff's children, which "shall be an irrevocable transfer of his shares to [defendant], through the [t]rust." This section further provided that "[t]his transfer shall be made by [plaintiff] upon the conviction and expiration of all statutory appeals." Further, the shareholders' agreement contained a severance clause, requiring any invalid, illegal or unenforceable part of the agreement to be severed to maintain the validity of the remaining terms. Importantly, pursuant to its own terms, the shareholders' agreement would terminate when there is only one remaining shareholder.
At trial, it was undisputed that plaintiff and defendant were the only shareholders of the dealerships when they signed the shareholders' agreement and side agreement. According to plaintiff, his initial conviction triggered his obligations under the shareholders' agreement to transfer his ownership interests to defendant. When he did this at the joint meeting of shareholders in June 2007, plaintiff testified that it was his understanding that the transfer was not yet permanent, but subject to the parties' agreements and the expiration of his appeals. [4] After this meeting plaintiff testified that he...
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