Opinion
15308-02.
Decided October 22, 2004.
Roosevelt, Benowich Lewis, LLP, White Plains, New Yorkm, Counsel for Plaintiffs.
(for all Defendants except Gerry Marcoux and Rockville Links Corp.), Cullen Dykman, LLP, Garden City, New York, Counsel for Defendants.
(for Rockville Links Corp.) Matthews Matthews, Esqs., Huntington, New York.
FACTUAL BACKGROUND
Defendant Rockville Country Club ("Country Club") is corporation that was formed in 1923. Country Club owns 106 acres of real property located in the Town of Hempstead and the Village of Rockville Center that is improved with an 18 hole golf course, a clubhouse, a pool and other facilities related to the operation of a private golf and country club.
Defendant Rockville Links Corporation ("Links") is a not-for-profit corporation that was incorporated in 1958.
Since 1959, Country Club has leased the real property and facilities to Links. Links pays all of the expenses involved in the operation of the property including the real estate taxes, insurance, mortgage and maintenance. Links also pays Country Club $7,200.00 a year in rent. When the lease is terminated, all of the improvements on the property will revert to Country Club.
Country Club is authorized to issue 500 shares of common stock. Owners of shares of Country Club stock do no automatically become members of Links. Currently, 120 shares of Country Club stock are owned by individuals who are not members of Links.
Members of Links who are owners of shares of Country Club stock pay reduced Membership dues and fees to Links.
Plaintiffs collectively own 7 or 8 shares of Country Club stock. None of the Plaintiffs are currently members of Links.
Plaintiffs' second amended complaint alleged four causes of action, a shareholder derivative claim seeking to recover damages from Country Club's directors for breach of fiduciary duty and waste of corporate assets, a claim against the directors of Links alleging that they aided and abetted the directors of Country Club in breach their fiduciary duty, a cause of action seeking the common law dissolution of Country Club, and an action seeking counsel fees and a claim seeking an injunction enjoining Country Club from violating the New York State Security Takeover Disclosure Act as set forth in Business Corporation Law Article 16.
By order dated February 23, 2004, this Court granted Defendants' motion for summary judgment dismissing the action. See, Shapiro v. Rockville Country Club, Inc., 2 Misc 3d 1002(A), (Sup.Ct., Nassau Co., 2004). A judgment dismissing the action was entered by the County Clerk on May 19, 2004. Plaintiffs have filed a Notice of Appeal but have not yet perfected their appeal.
PROCEDURAL BACKGROUND
In December 2002, Country Club moved for an order pursuant to Business Corporation Law § 627 requiring Plaintiffs to post security for costs.
Business Corporation Law § 627 provides that if a shareholder derivative action is commenced by the holders of less than 5% of the shares of the corporation or by shareholders whose beneficial interest in the corporation is valued at less than $50,000, the court can direct the Plaintiffs to post a bond as security for reasonable expenses including legal fees which may be incurred by the corporation in the defense of the action.
By order dated April 29, 2003, this Court denied Country Club's motion for the posing of security for costs. At that time, the Court reasoned that the property owned by Country Club was worth $40,000,000.00. Therefore, upon dissolution, the value of a share was arguably $80,000. Thus, at that stage of the litigation, the Plaintiffs had demonstrated that the value of their interest in Country Club was in excess of $50,000.
After the Court granted Defendants, for summary judgment and the Plaintiffs had filed their Notice of Appeal, Country Club moved to renew its application for an order directing Plaintiffs to post security pursuant to Business Corporation Law § 627. Upon renewal, the Court by order dated June 21, 2004 granted Country Club's motion and directed that Plaintiff post a bond of $50,000 for reasonable expense including attorney's fees. The Court reasoned that the factual underpinning of its prior decision denying security was no longer valid. Since the action to dissolve Country Club had been dismissed and since the Court had found that the value of shares had not been artificially depressed, the value of Plaintiffs' shares would be the fair market value of those shares.
Shares of Country Club have historically sold for between $3,000.00 and $3,500.00. The maximum amount ever paid for a share of Country Club was $6,000.00. Since Plaintiffs owned 7 or 8 of the 500 shares of common stock that Country Club is authorized to issue and their shares are worth less than $50,000.00 in the aggregate, the Court required Plaintiffs to post security. However, the Court held that the posting of security would be contingent upon Plaintiffs perfecting their appeal since if they did not perfect their appeal, Defendants would not incur any additional expenses.
PLAINTIFF'S MOTION TO REARGUE
Plaintiffs assert three reasons why reargument should be granted and why upon reconsideration Country Club's motion for security should be denied.
First, they argue that pursuant to Business Corporation Law § 627, the court can direct the posting of security for reasonable expenses at any time up to the filing of a final judgment. Since a judgment had been entered in this action before the motion for security for costs was made, the Court lacked jurisdiction to hear the motion.
Second, Plaintiffs contend that Country Club's motion was not a motion to renew since a motion to renew must be based upon new or additional facts which, although in existence were not known to the party seeking renewal at the time the motion was made and therefore were not provided to the Court. See, Granato v. Waldbaums, Inc., 289 AD2d 289 (2nd Dept., 2001).
Third, they claim that the Court's decision on the summary judgment motion was immaterial to the fair value of Plaintiffs' shares in Country Club.
DISCUSSION
A motion to reargue is addressed to the discretion of the court and may be granted upon a showing that the court overlooked or misapprehended the facts or misapplied the relevant law or for some other reason improperly decided the prior motion. Hoey-Kennedy v. Kennedy, 294 AD2d 573 (2nd Dept., 2002); and Long v. Long, 251 AD2d 631 (2nd Dept., 1998); and Foley v. Roche, 68 AD2d 558 (1st Dept., 1979); and CPLR 2221(d). A motion to reargue is not a means by which the unsuccessful party can obtain a second opportunity to argue issues previously decided or to present new or different arguments relating to previously decided issues. McGill v. Goldman, 261 AD2d 593 (2nd Dept., 1999); and Pahl Equipment Corp. v. Kassis, 182 AD2d 22 (1st Dept., 1992).
Plaintiffs' assertion that this Court lacks jurisdiction to entertain the motion is without merit. This Court's granting of Country Club's summary judgement motion deprived the Court of jurisdiction except for a motion to renew. Cerro v. Washington County Board of Supervisors, 270 AD2d 679 (3rd Dept., 2000); and Stone v. Bridgehampton Race Circuit, 244 AD2d 403 (2nd Dept., 1997).
The issue is whether Country Club's motion was properly designated as a motion to renew. In that motion, Country Club was requesting that the Court reconsider its prior order which denied it's request that Plaintiffs be required to post security for costs based upon new and different facts which resulted from the Court having granted Country Club summary judgment against Plaintiff and in its favor. Thus, the motion to renew was proper.
An order entered on a motion made pursuant to Business Corporation Law § 627 is subject to renewal if there are changes in the in the relevant facts. See, Matter of Baker v. Macfadden Publications, Inc., 300 NY 325 (1950); and Sorin v. Shahmoon Industries, Inc., 30 Misc 2d 429 (Sup.Ct., NY Co., 1961).
In this case, the relevant facts relating to the value of Plaintiffs' beneficial interest in the action has changed. The Court denied Country Club's prior motion requesting that Plaintiffs' post security for costs on the grounds that Plaintiffs' interest in Country Club, upon dissolution, was in excess of $50,000. However, this factual predicate no longer exists. The Court has dismissed Plaintiffs' action for a common law dissolution of Country Club. The Court has also held that the Defendants' actions have not artificially devalued Plaintiffs' shares or made their shares unmarketable. Therefore, the dissolution value of the Plaintiffs' shares is no longer an appropriate method for determining the value of Plaintiffs beneficial interest in Country Club. Based upon this Court's summary judgment decision, the only basis for determining the fair value of Plaintiffs shares would be the price at which those shares could be sold.
Business Corporation Law § 627 requires that the Plaintiffs in a shareholder derivative action post security for costs including legal fees if Plaintiffs own less than 5% of the shares of the corporation or the fair value of their beneficial interest is less than $50,000.00. The statute uses the term "fair value," but that term is not defined in the statute. Words not defined in the statute are to be given their ordinary and usual meaning. McKinney's Statutes § 232. When the same or similar words are used in different parts of the same statute, courts are to presume ". . . that the Legislature intended to convey the same conception each time." McKinney's Statutes § 236. The term "fair value" is also used but not defined in Business Corporation Law § 1118.
The Court of Appeals has interpreted the term "fair value" as used in Business Corporation Law § 1118 to mean ". . . what a willing purchaser in an arm's length transaction would offer for petitioners' interest in the company as an operating business." Matter of Pace Photographers (Rosen), 71 NY2d 737, 748 (1988); Matter of Penepent Corp., 96 NY2d 186 (2001); and Matter of Seagroatt Floral Co., Inc.(Riccardi), 78 NY2d 439(1991).
Under the current facts, the fair value of the Plaintiffs shares must be viewed as the price at which shares in Country Club have most recently sold which is between $3,000.00 and $3,500.00. This is the price a willing purchaser is willing to pay to purchase a share of County Club in an arm's length transaction.
Business Corporation Law § 627 is a recodification of General Corporation Law § 61-b with a minor revision which is irrelevant to this motion. The legislative purpose of that statute was ". . . to frustrate a 'strike action' by an owner of a small amount of stock, by requiring a fixed amount of stock, which the Legislature felt would be indicative of a legitimate financial stake in the corporation to justify the institution or maintenance of an action." Richman v. Felmus, 16 Misc 2d 377, 379 (Sup.Ct., Kings Co., 1958), mod. other grnds., 8 AD2d 985 (2nd Dept., 1959).
Requiring Plaintiffs in this action to post security for costs including legal fees would comport with this legislative purpose. Plaintiffs own, at most, 8 of the 500 shares or 1.6% of the shares that Country Club is authorized to issue. The de minimis nature of Plaintiffs' holdings in Country Club is further reflected by the fact that Plaintiffs own only 6.67% of the shares of Country Club stock owned by persons who are shareholders of Country Club but not members of Links. The value of Plaintiffs' shares, at current market value, is between $24,000.00 and $28,000.00. Even if the Court were to value Plaintiffs' shares at the maximal market price for a share of Country Club stock, $6,000.00, Plaintiffs fall short of the statutory $50,000.00 threshold.
Eight shares at $3,000.00 to $3,500.00 per share.
Eight shares at $6,000.00 per share would give Plaintiffs a beneficial interest worth $48,000.00.
Thus, this Court neither misapprehended the facts nor misapplied the law when it decided Country Club's motion to renew its application to require Plaintiffs to post security for costs.
Additionally, making the posting of security contingent upon Plaintiff perfecting their appeal was appropriate and in accordance with the legislative intent of this statute. If Plaintiffs choose not to perfect their appeal, Defendants will incur no further costs for which security would be necessary.
Accordingly, it is,
ORDERED, that Plaintiffs motion for reargument is denied.
This constitutes the decision and Order of the Court.