Vanderminden v. Vanderminden

• Decision Date: 25 April 1996
• Parties: Henry J.W. VANDERMINDEN III et al., Respondents-Appellants, v. Robert D. VANDERMINDEN Sr., Individually and as Coexecutor of the Estate of Henry J.W. Vanderminden Jr., Deceased, et al., Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 732

641 N.Y.S.2d 732

226 A.D.2d 1037

Henry J.W. VANDERMINDEN III et al., Respondents-Appellants, v. Robert D. VANDERMINDEN Sr., Individually and as Coexecutor of the Estate of Henry J.W. Vanderminden Jr. Deceased, et al., Appellants-Respondents.

Supreme Court, Appellate Division Third Department.

April 25, 1996.

Bond, Schoenbeck & King, L.L.P. (John M. Freyer, of counsel), Albany, for appellants-respondents.

Bartlett, Pontiff, Stewart & Rhodes (Malcolm B. O'Hara, of counsel), Glens Falls, for respondents-appellants.

Before CARDONA, P.J., and MERCURE, CASEY, YESAWICH and SPAIN, JJ.

SPAIN, Justice.

(1) Cross appeals from an order of the Supreme Court (Viscardi, J.), entered March 8, 1995 in Washington County, which granted plaintiffs' motion for a preliminary injunction and partially granted defendants' cross motion to dismiss the complaint, and (2) appeal from an order of said court, entered August 8, 1995 in Washington County, which, upon renewal, adhered to its prior decision.

On September 26, 1988, plaintiff Henry J.W. Vanderminden III (hereinafter plaintiff) and his brother, defendant Robert D. Vanderminden Sr. (hereinafter defendant), executed an agreement consisting, inter alia, of an understanding that they, together with their respective families, owned an equal amount of voting stock in the family business, Telescope Casual Furniture Inc. (hereinafter the company). The brothers, who had been at odds over the control and management of the company, essentially agreed to preserve the status quo of equal ownership and control. The agreement was also executed by Henry J.W. Vanderminden Jr., their father, who agreed not to transfer "by gift, [w]ill, sale or in any respect any voting stock of [the company] to either of my sons or any member of their family * * * which will give one family more stock than the other" and, further, not to take any action which would favor one side of the family over the other.

At that point in time, Cecile Vanderminden, the father's wife and mother of plaintiff and defendant, owned 52 shares of voting stock. Shortly thereafter, another agreement was drawn allegedly to supplement the original agreement, which recognized that the mother was not a party to the original agreement and which provided that, if the mother transferred, by will or otherwise during her lifetime, more voting stock to one side of the family than to the other, appropriate action would be taken so that neither side of the family would own more voting stock than the other. Although defendant signed this proposed supplemental agreement, plaintiff did not sign it. Notably, in April 1987, a durable power of attorney was executed by the mother, appointing the father as her attorney-in-fact, which permitted the father, inter alia, to conduct share and commodity transactions.

Thereafter, in July 1989, all of the shareholders of the company executed an irrevocable voting trust and pooling agreement, providing that all the shares of stock be pooled together for a period of five years and that plaintiff and defendant be covoting trustees who must agree in order to cast a vote. In September 1989, the father, as the mother's attorney-in-fact via the power of attorney, transferred the mother's 52 shares of voting stock to defendant Katherine V. Rathbun, defendant's daughter; the transfer was made subject to the July 1989 voting trust agreement.

In July 1994, at the time the voting trust agreement was about to expire, plaintiffs commenced this action by order to show cause and, having been granted a temporary restraining order, sought a preliminary injunction enjoining defendants from acting inconsistent with the voting trust agreement during the pendency of the action. The underlying action, in pertinent part, alleged that defendants breached the September 1988 agreement by inducing the father, as attorney-in-fact, to turn over the mother's stock to Rathbun, thereby giving defendant's family controlling interest in the company, and further, that if defendants were not enjoined during the pendency of the litigation from voting their shares to plaintiffs' detriment, plaintiffs will be irreparably injured.

Defendants, by cross motion, sought an order pursuant to CPLR 3211(a)(1) dismissing plaintiffs' second cause of action, an order pursuant to CPLR 3211(a)(5) dismissing the seventh cause of action, and an order pursuant to CPLR 3211(a)(7) dismissing the first, second, third, fourth, fifth, sixth and eighth causes of action. They also sought denial of plaintiffs' motion for a preliminary injunction. Supreme Court granted plaintiffs a preliminary injunction enjoining defendants from acting inconsistent with the voting trust agreement and, further, enjoining defendants from transferring any shares during the pendency of the action. In addition, Supreme Court dismissed plaintiffs' fourth, sixth, seventh and eighth causes of action. Defendants appeal from said order. Plaintiffs cross-appeal from the order insofar as Supreme Court dismissed the fourth and seventh causes of action. Defendants then moved to renew their motion to dismiss the entire matter. Supreme Court granted renewal but adhered to its original decision and order, and defendants appeal from that order as well.

Initially, with respect to the first, second and third causes of action, we reject defendants' contention that they should have been dismissed based on the documentary evidence submitted (see, CPLR 3211[a][1] ). ¹ To dismiss a cause of action based on CPLR 3211(a)(1), defendants must show that "the documentary evidence that forms the basis of [this] defense must be such that it resolves all the factual issues as a matter of law and conclusively and definitively disposes of the plaintiff's claim" (Fernandez v. Cigna Prop. & Cas. Ins. Co., 188 A.D.2d 700, 702, 590 N.Y.S.2d 925; see, Lake Placid Vil. v. Lake Placid Main St. Corp., 90 A.D.2d 873, 874, 456 N.Y.S.2d 477). Here, defendants contend that the wording of the September 1988 agreement and the proposed supplemental agreement, which plaintiff did not execute, show that the transfer of the voting stock was not in violation of the original agreement since the transfer, in effect, was made by the mother. However, a legitimate question exists as to whether the transfer, which was made by the father as the mother's attorney-in-fact, was made by the father or by the mother.

If the transfer is considered to have been made by the father, it is likely that the agreement was violated, but if the transfer is considered to have been made by the mother, it is likely that the agreement was not violated. This factual issue is key to determining whether defendants violated the September 1988 agreement as alleged in the first cause of action, or whether the father breached the contract, as alleged in the second cause of action. Moreover, if the power of attorney gave the father the authority to substitute his judgment for that of the mother, it may be that he limited that authority when he entered into the September 1988 agreement when it came to acting in the mother's behalf with respect to matters involving the balance of ownership of the company. Accordingly, the first and second causes of action were properly sustained. The third cause of action, seeking specific performance, is premised on a favorable outcome of the first two causes of action and, as such, the same factual resolutions which were necessary for those determinations exist here and, therefore, cannot be dismissed based on the documentary evidence.

It is alleged in plaintiffs' fifth cause of action that defendants did not comply with a July 1989 letter agreement by, inter alia, failing to provide raises and causing certain plaintiffs to leave the employment of the company. We reject defendants' argument that this cause of action should be dismissed because it should be addressed to the company and not to the individual defendants, since it was ultimately the company which was responsible for the actions about which plaintiffs are complaining. As plaintiffs point out, the company was not a party to the agreement; rather, it was plaintiffs and defendants, as shareholders, who made the agreement. Accordingly, since the shareholders of the closely held corporation signed the agreement, the terms of the agreement will be enforced despite the fact that the corporation is not a named party (see, Matter of Lane v. Abel-Bey, 70 A.D.2d 838, 839, 418 N.Y.S.2d 25, affd. 50 N.Y.2d 864, 430 N.Y.S.2d 41, 407 N.E.2d 1337; Siegel v. Ribak, 43 Misc.2d 7, 13, 249 N.Y.S.2d 903).

Moving next to defendants' contention that Supreme Court improperly granted a preliminary injunction to plaintiffs, it is well settled that in order to be granted preliminary injunctive relief, plaintiffs must show "a probability of success, danger of irreparable injury in the absence of an injunction, and a balance of the equities in their favor" (Aetna Ins. Co. v. Capasso, 75 N.Y.2d 860, 862, 552 N.Y.S.2d 918, 552 N.E.2d 166; see, Doe v. Axelrod, 73 N.Y.2d 748, 750, 536 N.Y.S.2d 44, 532 N.E.2d 1272; Kensington Ct. Assocs. v. Gullo, 180 A.D.2d 888, 889, 579 N.Y.S.2d 485). Furthermore, the granting of a preliminary injunction will not be disturbed on review absent an abuse of discretion (see, Rick J. Jarvis Assocs. v. Stotler, 216 A.D.2d 649, 651, 627 N.Y.S.2d 810, 812; GTE Spacenet Corp. v. New York State Dept. of Taxation & Fin., 201 A.D.2d 429, 430, 607 N.Y.S.2d 677). In applying the three-pronged test, we conclude that Supreme Court properly granted a preliminary injunction.

As part of their submitted proof, plaintiffs included the September 1988 agreement which established that the father would not favor plaintiff's family over defendant's family, or vice versa, by transferring the controlling stock to either family. Also presented in the documentary...