Opinion
DOCKET NO. A-0977-12T4 DOCKET NO. A-1248-12T4
07-02-2015
RONALD BARNA, Plaintiff-Respondent, v. ESTATE OF EUGENE C. MEYERS, THE EUGENE C. MEYERS REVOCABLE TRUST, THE EUGENE C. MEYERS CHARITABLE LEAD TRUST, EUGENE C. MEYERS FOUNDATION, DEBORAH SMITH, PARAMUS AUTO MALL CHEVROLET-GEO, INC., HAWTHORNE AUTOMOBILE SALES COMPANY, INC., PAM REALTY, LLC, CYNTHIA NICHOLS, CYNTHIA NICHOLS TRUST, MARK MEYERS, MARK MEYERS TRUST, STEVEN L. BARNA and TIMOTHY K. TARRANT, JR., Defendants-Respondents/Cross-Appellants, and ANTONIO FERNANDEZ, Defendant-Appellant/Cross-Respondent, and THOMAS MANN, Defendant-Respondent.
Jason S. Nunnermacker argued the cause for appellant/cross-respondent Antonio Fernandez (Arturi, D'Argenio, Guaglardi & Meliti, LLP, attorneys; Mr. Nunnermacker, on the brief). Bruce H. Nagel argued the cause for respondents/cross-appellants (Nagel Rice, LLP, attorneys; Mr. Nagel and Jay J. Rice, of counsel and on the brief; Randee M. Matloff, on the brief). Christopher P. Kelly argued the cause for respondent Ronald Barna (Reppert Kelly, LLC, attorneys; Mr. Kelly, of counsel and on the brief). Virginia T. Shea argued the cause for respondent Thomas Mann (Carlet, Garrison, Klein & Zaretsky, LLP, attorneys; Norman I. Klein, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Nugent, Accurso and Manahan. On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-389-10. Jason S. Nunnermacker argued the cause for appellant/cross-respondent Antonio Fernandez (Arturi, D'Argenio, Guaglardi & Meliti, LLP, attorneys; Mr. Nunnermacker, on the brief). Bruce H. Nagel argued the cause for respondents/cross-appellants (Nagel Rice, LLP, attorneys; Mr. Nagel and Jay J. Rice, of counsel and on the brief; Randee M. Matloff, on the brief). Christopher P. Kelly argued the cause for respondent Ronald Barna (Reppert Kelly, LLC, attorneys; Mr. Kelly, of counsel and on the brief). Virginia T. Shea argued the cause for respondent Thomas Mann (Carlet, Garrison, Klein & Zaretsky, LLP, attorneys; Norman I. Klein, on the brief). PER CURIAM
These are consolidated appeals by defendant Antonio Fernandez and defendants Estate of Eugene C. Meyers, the Eugene C. Meyers Revocable Trust, the Eugene C. Meyers Charitable Lead Trust, Eugene C. Meyers Foundation, Deborah Smith, Hawthorne Automobile Sales Company, Inc., Cynthia Nichols, Cynthia Nichols Trust, Mark Meyers, Mark Meyers Trust, Steven L. Barna and Timothy K. Tarrant, Jr. (the Estate defendants) from several orders, now final, granting plaintiff Ronald Barna (Barna) and Thomas Mann, shareholders in Paramus Auto Mall, the right to purchase certain shares formerly held by Eugene C. Meyers (Meyers), the other shareholder, in accordance with their December 29, 2002 Shareholders' Agreement. The Estate defendants also appeal the trial court's order that Barna may demand the Estate sell him its fifty percent interest in a related limited liability company, PAM Realty LLC. We affirm the several orders appealed, substantially for the reasons expressed by Judge Contillo in his clearly reasoned opinions of July 17 and September 19, 2012.
As Judge Contillo explained in denying defendants' motion for reconsideration and stay pending appeal, the record, although voluminous, "presents no novel or difficult legal issues." The case is controlled by the plain language of two clearly written agreements.
Because we write solely for the parties, all of whom are well acquainted with the family saga, we dispense with a lengthy factual and procedural history. Suffice it to say that Meyers founded and built several successful automobile dealerships and brought all three of his stepsons, including Barna, into the business. In December 2000, Meyers created the Eugene C. Meyers Revocable Trust as part of his estate plan and entered into a new shareholders' agreement for the Paramus Auto Mall dealership with Barna and Mann, an employee of the dealership. This agreement, and specifically its provisions restricting transfer of the shareholders' stock and setting the value of the shares, is central to the litigation.
At the time of the execution of the Agreement, the corporation's stock was held by the Eugene C. Meyers Revocable Trust (eighty shares), Barna (ten shares) and Mann (one share). The purpose of the restrictions on alienation are included in the Agreement's preamble.
WHEREAS, the Shareholders have devoted and shall continue to devote their energies and skills to the development of the business of the Corporation, and it is desired that the Corporation may continue to receive their joint attention during their lives, and the attention of the survivor of them after the death or separation of the Shareholders;
WHEREAS, the parties are apprehensive that a Shareholder may sell his or her stock interest in the Corporation during his or her lifetime or may bequeath such stock interest at death to a person or persons who may be unfamiliar and unsympathetic with the Corporation's business objectives, thereby creating a situation which may lead to internal strife and dissension among the Corporation's management;
WHEREAS, the parties therefore having concluded that the Corporation's best interests may be protected by preventing its shares from passing to such other interests and by restricting the ability of current Shareholders from competing with the Corporation upon a future separation from service;
. . . .WHEREAS, for all of the foregoing purposes, the parties hereto deem it advisable that certain safeguards and restrictions be placed upon the transfer and alienation of the shares of capital stock of the Corporation so held by each of the above Shareholders . . . .
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for the other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
The operative conditions follow.. . . .
1. Each of the Shareholders do hereby acknowledge and represent that there is a total of one thousand (1000) shares of voting common capital stock now authorized and each Shareholder presently declares and represents that he or she owns the number of shares of the common capital stock of the Corporation as set forth above. The terms and provisions of this Agreement shall apply to all of the shares of stock of the Corporation presently owned by each of the Shareholders and to any and all additional shares of stock of the Corporation as may hereafter be acquired in any manner by any of the Shareholders. Each of the Shareholders agree, on behalf of themselves, their heirs, legatees, executors, administrators or personal representatives, that any shares of the capital stock of the Corporation registered in their name, or beneficially owned by them, but held in the name of any other person, shall be subject to and disposed of in Accordance with this Agreement.
2. During the joint and several lives of the Shareholders, each of them does covenant and agree to and with each other and with the Corporation that he will at no time during the period of this Agreement bargain, sell, hypothecate, pledge or otherwise dispose of his shares of stock in the Corporation which he may hereafter acquire except as provided in this Agreement.
3. The majority shareholder, The Eugene C. Meyers Revocable Trust, may dispose of its stock by gift or devise to Gene Meyer's spouse, children, stepchildren, or trusts for their benefit, including more remote issue, without incurring a purchase option. In the event that any of the Shareholders other than Eugene C. Meyers desires to sell, transfer, assign, retire or otherwise dispose of any or all of the shares of stock of the Corporation owned by him or her, or shares are acquired by person not a party to this Agreement by reason of death, gift taking by a creditor, or a bankruptcy, such Shareholder or third party for this purpose being referred to as the "selling Shareholder", the following terms, conditions and limitations shall be applicable:
[list of requirements for first offering to sell the stock to remaining Shareholders, the Corporation or Shareholders/Members of Hawthorne Chevrolet and 1301 Realty Enterprises LLC]
. . . .
4. The majority shareholder, Eugene Meyers, may dispose of his stock by gift or devise to his spouse, children, stepchildren, or trusts for their benefit, including more remote issue, without incurring a purchase option. Upon the death of any other Shareholder, the surviving Shareholders shall be obligated to purchase
and the estate of the deceased Shareholder shall be obligated to sell all of the shares of stock of the Corporation owned by such deceased Shareholder at the time of his death, and failing such, the corporation must redeem said shares . . . .
Paragraph 5 of the Shareholders' Agreement explains how shares are to be valued. It provides, in relevant part:
(A) The purchase price of each share of capital stock of the Corporation shall be its value as determined herein. . . . [T]he parties have determined that the full and true value of all the outstanding shares of capital stock of the Corporation, as of the date of this Agreement, is the amount set in the Certificate of Value, attached hereto and made a part hereof, and bearing even date herewith. The parties do further agree that they shall have the right to redetermine the full and true value of the outstanding shares of the Corporation as often as desired, but shall redetermine such value no less frequently than every year, and upon such redetermination of value, shall execute and file a revised Certificate of Value, setting forth the revised full and true value of the outstanding shares of the Corporation as of such valuation date. For all purposes of this Agreement, the value set forth on the Certificate of Value, annexed hereto and made a part hereof and bearing even date herewith or in the most recent Certificate of Value filed pursuant to this Paragraph, as the case may be, shall be conclusively presumed to be the full value of any sale or purchase hereunder. The ratable value of each share of stock of the Corporation shall be determined by dividing the full and true value as above determine[d] by the total number of shares of the Corporation then outstanding.The Certificate of Value attached to the Shareholders' Agreement listed the value of the outstanding stock as $1,500,000, with a per share value of $16,483.52 ($1,500,000 divided by ninety-one). The certificate of value was never updated.
(B) In the event that said value is not redetermined within a two (2) year period after the last such determination, the following formula shall be utilized in determining the value of the stock of the Corporation:
The purchase price shall be adjusted based upon the percentage change in gross revenue, measured from the year the Corporation was last evaluated to the year at issue. This adjustment may be either positive or negative.
In January 2002, Meyers rewarded Barna and Mann for their years of service by increasing their respective ownership interests in the corporation. Barna's equity stake was increased to twenty shares and Mann's to ten shares. Meyers' ownership stake was decreased to seventy shares. The following year, the corporation's stock was recapitalized into Class A voting shares and Class B non-voting shares pursuant to a Recapitalization Agreement, the stated purpose of which was to "retain the services of certain key personnel by issuance of voting and non-voting stocks." Each shareholder received three Class B non-voting shares for each Class A voting share owned, leaving the Trust with seventy Class A shares and 210 Class B shares, Barna with twenty Class A shares and sixty Class B shares and Mann with ten Class A shares and thirty Class B shares.
Over the following year, the corporation issued shares to several employees of the dealerships as well as to Meyers' daughter, Cynthia Nichols. The Meyers Trust transferred forty Class B non-voting shares to a new charitable trust formed by Meyers, the Eugene C. Meyers Charitable Lead Trust. At the end of 2004, the Meyers Trust held seventy Class A and 170 Class B shares, while Barna's and Mann's interests remained as they had immediately following the Recapitalization Agreement. The corporation's total outstanding shares rose from 300 to 415.
Meyers, Barna and Mann owned another business entity together. In 2002, they formed a single-asset, limited liability company, Pam Realty, LLC, to own and manage a four acre parking facility in Fair Lawn to store cars. The company's Operating Agreement contained specific provisions governing the transfer of a member's interest. Section 8.1(e) of the Operating Agreement provides:
In the event that a Member, other than the Eugene C. Meyers Revocable Trust, desires to sell, transfer, assign, retire or otherwise dispose of any or all of his Membership interest owned by him, or interest is acquired by a person not a party to this
Agreement by reason of death, gift, taking by a creditor, or a bankruptcy, such Member or third party for this purpose being referred to as the "selling Member", the following terms, conditions and limitations shall be applicable:
(i) Such selling Member shall first offer to sell the Member's interest which he desires to dispose of by extending to the remaining Members a thirty (30) day option, in writing, giving such remaining Members the option to purchase equally such shares of interest as the selling Member then desires to dispose of, or in the case of a third party, all such interest acquired, at the price and on the terms and conditions hereinafter set forth in subparagraph (f) ("First Offer"). If the remaining Members do not exercise the First Offer option to the full extent thereof, then the selling Member may accept such partial exercise or reject the same.
Section 8.1(c)(ii) provides:
(ii) Notwithstanding anything to the contrary, upon the death of one Member (unless pursuant to the terms of his or her will, the deceased Member's interest is bequeathed solely to the original Members) the surviving original Member(s) shall be obligated to purchase and the estate of the deceased Member shall be obligated to sell all of the interest of the Company owned by such deceased Member at the time of his or her death, at the price and upon the following terms and conditions:Mann sold his interest to the company in 2007, leaving the ownership split between the Meyers Trust (50%), Barna (25%) and Pam Realty (25%). Meyers was the company's sole manager.
(A) The price at which such Company interest shall be sold shall be the ratable
value thereof, determined in accordance with the provisions of Section 8.1(f) hereof.
In 2008, Barna instituted a minority oppression suit against Meyers. Meyers responded by excluding Barna as a trust beneficiary and disinheriting him. In his last Will, executed months before his death in July 2010, Meyers bequeathed the Meyers Trust's interest in Paramus Auto Mall as follows: ten non-voting shares to the Eugene C. Meyers Foundation; five voting and fifteen non-voting shares to Deborah Smith; ten voting and fifty non-voting shares to his daughter, Cynthia Nichols in Trust; ten voting and fifty non-voting shares to his son, Mark Meyers in Trust; twenty-five voting and forty-five non-voting shares to Steven Barna, and eighteen voting shares to Antonio Fernandez. Meyers left one-half of the Trust's interest in PAM Realty to the company and the other one-half of the Trust's interest to Hawthorne Automobile Sales Company, Inc.
Recognizing that he intended to make distributions by Will of business interests owned by his revocable trust, Meyers amended the Trust to direct his trustee to cooperate with his executrix to ensure that bequests made in his Will would be satisfied by an appropriate distribution of trust assets.
Following discovery, the court granted Barna's motion for partial summary judgment declaring his right to purchase the shares of Paramus Auto Mall that Meyers had bequeathed to non-family members and to purchase the 50% interest in Pam Realty that Meyers had divided between the company and Hawthorne Automobile Sales Company in his Will. After reviewing the terms of the Shareholders' Agreement for Paramus Auto Mall, the court concluded
[i]t is undisputable, given the plain language of the Agreement, and the lack of material countervailing contextual evidence, that the Eugene C. Meyers Revocable Trust (and/or Meyers himself — the "Shareholder" is so designated interchangeably) — exempted that Trust and individual from the purchase option in specific instances: that trust, or Meyers, was authorized to dispose of PAM shares ". . . by gift or devise to Gene Meyer's spouse, children, stepchildren, or trusts for their benefit, including more remote issue . . . ." ¶3. Moreover, in all other instances, the purchase option is mandated. That is the plain meaning of the broad, all encompassing remaining language in that paragraph, juxtaposed against the freedom granted the Revocable Trust and Meyers.The judge continued:
Paragraph 4 of the PAM Shareholders' Agreement likewise implements this right of Meyers specifically to "dispose of his stock by gift or devise to his spouse, children, stepchildren, or trusts for their benefit, including more remote issue, without incurring a purchase option." By contrast, the surviving Shareholders are required to purchase the shares of any shareholder who dies — except Meyers.
The court declines to write a better or different Shareholders' Agreement than the one the parties constructed for themselves: both the Revocable Trust and Meyers were free to give or bequeath shares of PAM to "... Gene Meyer's spouse, children, stepchildren, or trusts for their benefit, including more remote issue, without incurring a purchase option" (Paragraph 3), and the beneficiaries of any such gifts were not bound to offer them for sale to the remaining shareholders.
Likewise, gifts or devises by the Revocable Trust or Meyers to recipients other than those within the defined, protected family class (e.g. employees or other third parties) are bound by the purchase option. In that regard, such dispositions are on the same unsheltered footing as would be any contemplated dispositions by Barna or Mann. The language of the Shareholders' Agreement compels this conclusion, and no context proffered in the parties' submissions allows for a different conclusion.
Turning to the price Barna and Mann would have to pay for the shares bequeathed to non-family members, the court found the question controlled by paragraph 5(B) of the Shareholders' Agreement. Adjusting the purchase price based on the percentage change in the corporation's gross revenues from 2000 when the corporation was last evaluated to 2010, the year Meyers died, and dividing that amount by the number of outstanding shares, the court determined the per share price to be $2592.65. The parties agree that the corporation's gross revenues dropped from $83,183,837 in 2000 to $59,665,069 in 2010, a decline of 28.27%. Reducing the total value of the corporation's outstanding shares at the time of the 2000 Shareholders' Agreement, $1,500,000, by 28.27% yields a value in 2010 of $1,075,950. Dividing that number by the 415 total outstanding shares yields the final per share value of $2592.65.
As for disposition of the Meyers Trust's 50% membership in PAM Realty, the court found it too a legal issue controlled by an agreement between Meyers and Barna. The court explained:
Meyers executed a Last Will and Testament on March 25, 2010, some four months prior to his death. In that Will, Meyers overrode the Trust directions as to Trust assets, and instead exercised his authority under the Trust to exercise his general power of appointment over the Trust assets. With respect to the Trust's 50% membership interest in PAM Realty, LLC, Meyers, in his Will, directs that one-half thereof be devised and equaled to PAM, and one-half to Hawthorne Automobile Sales Company, Inc. t/a Hawthorne Chevrolet ("Hawthorne Chevrolet").
It is clear, then, that Meyers, in the Will he had prepared, and which he signed, sought to exercise the rights he as Grantor had given himself in the Trust to dispose of Trust assets by power of appointment in his Will, and he sought to exercise those rights by bequeathing the Trust's 50% membership interest in PAM Realty to PAM and to Hawthorne Chevrolet.
If Meyers sought to bequeath the Trust's 50% PAM Realty interest via will to anyone other than Barna, this would appear to violate that never-abandoned obligation under the Operating Agreement to offer the
membership to sale, in the first instance, to sole surviving Original Member, Barna. Meyers cannot bequeath the interest by operation of his Will, nor by operation of the power of appointment power given him as Grantor under the Trust, without first offering up to Barna, if Section 8.1(a)(ii) controls and if the Trust has 'died'.
At re-argument on July 11, 2012, Estate counsel re-emphasized that the Trust still held the assets, hence, it was still 'alive', not dead. I have no evidence in the record that the Trust somehow continued to have any right, title or interest in the Trust assets - including the 50% PAM Realty interest - after Meyers passed, since Meyers, by his Will, bequeathed that asset to PAM and to Hawthorne Chevrolet. If I give Z a ring to hold in trust, and in my Will I bequeath that ring to X, Z, upon my death, has no right, title or interest in that ring. My estate has an interest, as does X. Z does not.
So, in the absence of any evidence of Trust vitality post-Mr. Meyers' demise, or any indicia of arguing ownership or management of the 50% interest in PAM Realty, I am compelled to recognize the Trust has ended - is deceased - and to enforce the obligation that the interest in PAM Realty Mr. Meyers sought to bequeath to third parties must, rather, be acquired by Barna, the sole surviving Original Member of PAM Realty, per Section 8.1(c)(ii) of that entity's Operating Agreement.
Because the value ascribed to Pam Realty in the company's certificate of value was left blank by the parties at the time of its formation, and never updated, the court allowed the parties the opportunity to stipulate to its value. When they were unable to do so, the court tried the issue of value over three days in August and September 2012. At the conclusion of the hearing, the court entered an order allowing Barna to acquire the 50% interest formerly held by the Meyers Trust at a price of $239,214.05. This appeal followed.
Fernandez and the Estate defendants raise the following issues for our consideration.
Appellant Fernandez
I. THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY ENTERING THE AUGUST 15, 2012 DECLARATORY JUDGMENT AND ORDER ON A SUMMARY JUDGMENT BASIS ALLOWING RONALD BARNA AND TOM MANN TO PURCHASE THE 18 PAM SHARES BEQUEATHED TO FERNANDEZ.
A. THE PLAIN READING OF THE PAM OPERATING AGREEMENT REVEALS NO TRANSFER RESTRICTIONS ON MEYERS' ABILITY TO BEQUEST PAM SHARES TO FERNANDEZ.
B. RON BARNA'S AND MANN'S AFFIRMATIVE AND PASSIVE CONDUCT AFTER THE PAM AGREEMENT EXECUTION PREVENTS THEM FROM ENFORCING ANY RESTRICTIVE COVENANTS.
1. THE RECAPITALIZATION AGREEMENT EXPRESSLY PROVIDED MEYERS THE RIGHT TO TRANSFER PAM SHARES TO NON-FAMILY MEMBERS WITHOUT RESTRICTION.
2. BARNA IS ESTOPPED FROM SEEKING TO PREVENT THE BEQUESTS OF PAM SHARES TO NON-FAMILY MEMBERS BASED UPON HIS PRIOR AFFIRMATIVE CONDUCT.
3. BARNA'S AND MANN'S RESPECTIVE ACQUIESCENCE OF PAM SHARES BEING CONVEYED TO NON-FAMILY MEMBERS
PRECLUDES THEM FROM OBJECTING TO THE BEQUEST MADE TO FERNANDEZ.
II. ASSUMING THIS COURT WILL ALLOW BARNA AND MANN TO PURCHASE FERNANDEZ'S PAM SHARES, THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY ESTABLISHING A $2592.65 VALUE PER SHARE.
A. THE TRIAL COURT CLEARLY ERRED BY CALCULATING THE VALUE PER SHARE UNDER PARAGRAPH 5(A) OF THE PAM AGREEMENT WHEN THE TRIAL COURT FOUND THAT PARAGRAPH 5(B) WAS THE OPERATIVE PROVISION FOR THE BUY-OUT.
B. THE TRIAL COURT WAS PREMATURE IN ESTABLISHING PER SHARE VALUE AND SHOULD HAVE AT LEAST WAITED UNTIL THE TRIAL COURT DETERMINED THE VALUE OF PAM REALTY, LLC, AN ENTITY IN WHICH PAM POSSESSES A 25% INTEREST.
III. THE COURT ERRED BY DETERMINING THE VALUE OF THE PAM SHARES WITHOUT 1) WAITING FOR THE VALUE OF 194 REALTY, LLC TO BE ESTABLISHED DURING THE SIMULTANEOUS ARBITRATION MATTER AND 2) CONSIDERING THE VALUE OF 194 REALTY, LLC WHEN SETTING THE PAM SHARES' VALUE.
Appellants Estate of Eugene C. Meyers, The Eugene C. Meyers Revocable Trust, the Eugene C. Meyers Charitable Lead Trust, Eugene C. Meyers Foundation, Deborah Smith, Hawthorne Automobile Sales Company, Inc., Cynthia Nichols, Cynthia Nichols Trust, Mark Meyers, Mark Meyers Trust, Steven L. Barna and Timothy K. Tarrant, Jr.A. THE PAM REALTY AGREEMENT CLEARLY ESTABLISHES MEYERS' RIGHT TO FREELY BEQUEATH HIS INTEREST IN PAM REALTY.
B. BARNA IS ESTOPPED FROM ASSERTING ANY RIGHTS TO PURCHASE MEYERS' PAM REALTY INTEREST BECAUSE HE ACQUIESCED TO MANN SELLING HIS INTEREST TO PAM.
I. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF RON AND TOM AND ORDERING THAT THEY COULD PURCHASE SHARES BEQUEATHED TO NON-FAMILY MEMBERS.
II. REVERSAL IS REQUIRED BECAUSE THE TRIAL COURT DECIDED AT LEAST THREE DISPUTED ISSUES OF MATERIAL FACT IN GRANTING SUMMARY [JUDGMENT] IN FAVOR OF PLAINTIFF.
III. THE COURT IGNORED THE IMPORTANT EFFECT THE RECAPITALIZATION AGREEMENT HAD ON THE RELATIONSHIP BETWEEN THE ORIGINAL SHAREHOLDERS.
IV. THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY DECIDING AN ISSUE THAT WAS NOT YET RIPE.
V. ASSUMING ARGUENDO THAT THE COURT UPHOLDS THE DECISION THAT RON AND TOM WERE PERMITTED TO BUY SHARES BEQUEATHED TO NON-FAMILY MEMBERS, THE TRIAL COURT COMMITTED REVERSIBLE ERROR FIXING A VALUE WITHOUT A CURRENT APPRAISAL.
VI. THE TRIAL COURT ERRED IN PREMATURELY SETTING THE VALUE OF PAM WITHOUT WAITING FOR THE TRIAL OF THE PAM REALTY VALUATION AND INCORPORATING THIS VALUE IN RULING ON THE PRICE PER SHARE OF PAM.
VII. THE TRIAL COURT ERRED IN SETTING THE VALUE OF PAM WITHOUT WAITING FOR JUDGE KEEFE'S ARBITRATION AWARD AND NOT CONSIDERING THE VALUE OF 194 REALTY LLC
WHEN DETERMINING THE PRICE PER SHARE OF PAM.
VIII. THE TRIAL COURT ERRED IN RULING THAT BARNA WAS ENTITLED TO PURCHASE THE REVOCABLE TRUST'S 50% INTEREST IN PAM REALTY.
IX. THE TRIAL COURT ERRED IN DENYING THE ESTATE DEFENDANTS MOTION FOR RECONSIDERATION.
Having reviewed this voluminous record and applying the same standard as the trial court, Globe Motor Co. v. Igdalev, 436 N.J. Super. 594, 600 (App. Div. 2014), we find no merit in any of these arguments and affirm, substantially for the reasons expressed by Judge Contillo in his written opinions of July 17 and September 19, 2012. We add only the following.
We agree with Judge Contillo that the plain language of the Paramus Auto Mall Shareholders' Agreement permits no other interpretation than the one adopted by the trial court, that Meyers and the Meyers Trust could not give or bequeath their shares to non-family members without first offering them to Barna and Mann. If the parties had intended to permit Meyers to sell his shares freely to any third person, they would not have listed the persons and entities to whom he could transfer his shares without the burden of the purchase option. See Gabel v. Manetto, 177 N.J. Super. 460, 464 (App. Div. 1981) (explaining that "[a]n affirmative expression ordinarily implies a negation of any other alternative"), certif. denied, 91 N.J. 270 (1982).
The trial court's interpretation also gives effect to the Agreement's stated purpose of alleviating the parties' "apprehensi[on] that a Shareholder may sell his or her stock interest in the Corporation during his or her lifetime or may bequeath such stock interest at death to a person or persons who may be unfamiliar and unsympathetic with the Corporation's business objectives." No other alternative can claim that distinction. Even were we to conclude the language was ambiguous, which we do not, the extrinsic evidence proffered by defendants is not probative of the parties' intent as it post-dates the Agreement.
We likewise reject the argument that the Recapitalization Agreement allowed Meyers the right to transfer Paramus Auto Mall shares to non-family members without restriction. Nothing in that agreement suggests, much less states, that Meyers could transfer his stock unburdened by the restrictions of the Shareholders' Agreement. The purpose of the recapitalization was to allow the corporation to issue stock to employees, not to redefine what the existing shareholders could do with their shares. Further, Barna could not have "acquiesced" in Meyers' transfer of shares to non-family members because defendants failed to prove that Barna had knowledge of the one share Meyers attempted to transfer from his own holdings to an employee. All other "transfers" were either a transfer to a qualified family trust or the issuance of new capital stock by the corporation, not covered by the Shareholders' Agreement.
Meyers purported to transfer from his own holdings one Class B non-voting share of Paramus Auto Mall to an employee, Tim Tarrant, in 2009. Barna submitted a certification in support of his summary judgment motion that he was not aware of this purported transfer until after the filing of this suit over two years later. Defendants did not counter that assertion with competent evidence and thus failed to contest the fact on the motion. --------
We also agree that the court correctly determined the per price share of the shares available to Barna and Mann for purchase in accord with the method established in the Shareholders' Agreement. Defendants contest that formula, claiming that the trial court improperly reduced the total value of outstanding shares by 28.27% and then divided that price pro rata when it should have instead reduced the value of each share at the time of the Shareholder's Agreement, $16,483.52 by 28.27% to establish a price per share of $11,823.63.
According to defendants, Paragraph 5(B) of the Shareholders' Agreement differs from paragraph (A) because it does not provide that the total value of outstanding shares should be divided ratably. Rather, the value of the shares themselves at the time the Corporation was last evaluated should be adjusted based on the percentage change in gross revenue. Thus, defendants conclude, the trial court "blend[ed] the methods outlined in Paragraph 5 of the PAM Agreement achieving an entirely inequitable, unconscionable and unintended result."
We disagree. Defendants ignore that the corporation recapitalized, greatly increasing the number of its shares in 2002. Adopting defendants' calculation would effectively nearly quadruple the corporation's total capitalized value from 2000 to 2010 despite the fact that revenues decreased over that period by 28.27%. Further, as plaintiff argues, there is no reason to adjust the purchase price based on share valuations in the share sales to employees following the recapitalization because Barna, Mann and the Meyers Trust were not parties to those agreements and they did not alter the Shareholders' Agreement in any event.
We also reject the arguments that the trial court erred in establishing the purchase price for the Paramus Auto Mall shares without waiting for the PAM Realty valuation or the outcome of the arbitration of the claims raised in Barna's minority oppression suit. The trial court valued the Paramus Auto Mall shares in accordance with the Shareholders' Agreement, which calculated value on the basis of the corporation's revenues. To the extent that PAM Realty was an income producing asset, its value would have been included in Paramus Auto Mall's 2010 revenues.
The other asset that defendants assert affects value was awarded to the corporation as a remedy in the arbitration. It did not become an asset of Paramus Auto Mall until the date of the arbitration award, January 10, 2013; it thus was not an asset of the corporation at Meyers' death, the trigger for the purchase option. Defendants offer no cogent argument for using a method to calculate value other than the one chosen by the shareholders in the Shareholders' Agreement.
Finally, we agree that the trial court was correct in its determination that Meyers' death triggered Barna's option to purchase the Meyers Trust's 50% interest in PAM Realty. Section 8.1(c)(ii) of the Operating Agreement provides that unless the deceased member's interest is bequeathed solely to the original members, the surviving original members are obligated to purchase, and the estate of the deceased member is obligated to sell, all of the interest of the company owned by the deceased member at his death. As Paramus Auto Mall was not an original member of the company, but only acquired its interest from Mann in 2007, the plain language of the Agreement precludes defendants' interpretation that Meyers' bequest to Paramus was not covered by the "First Offer" provision of the Operating Agreement.
Our review of the record convinces us that none of defendants' remaining arguments is of sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
We grant plaintiff's reserved motion to dismiss defendants' appeal of the trial court's October 5, 2011 order denying defendants' motion to consolidate this action with the arbitration of the minority oppression claims or to stay the action pending the outcome of the arbitration. The holding of GMAC v. Pittella, 205 N.J. 572, 587 (2011) is unequivocal:
as of today [March 23, 2011], litigants and lawyers in New Jersey are on notice that all orders compelling and denying arbitration shall be deemed final for purposes of appeal, regardless of whether such orders dispose of all issues and all parties, and the time for appeal therefrom starts from the date of the entry of that order.As defendants did not appeal from the October 5, 2011 order denying arbitration until October 11, 2012, their appeal is obviously untimely without excuse, and we grant plaintiff's motion to dismiss that aspect of defendants' appeal.
Even were we to consider the appeal of the arbitration order on the merits, we would reject it as we agree with the trial court that Barna's claims in this action were never the subject of any agreement to arbitrate and did not arise until the death of Meyers. See In re Arbitration Between Grover & Universal Underwriters Ins. Co., 80 N.J. 221, 228 (1979) (noting that absent consent by both parties to arbitrate, "neither party is entitled to force the other party to arbitrate their dispute").
We deny defendants' motion to reconsider our earlier decision denying their motion to supplement the record with the arbitration award.
The orders on appeal are affirmed substantially for the reasons expressed by Judge Contillo in his opinions of July 17 and September 19, 2012, with the exception of the appeal from the order of October 5, 2011, which is dismissed as untimely.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION