Sea ""

INDEXNo. 3541'(6

SUPREME COURT - STATE OF NEW YORKIAS TERM PART 16 NASSAU COUNTY

PRESENT:HONORALE

LEONARD B. AUSTINJustice

ALFRED Hill, JR., DENNIS Hill,JOHN BANNISTER, ADMIRAL AIRFREIGHT SERVICES, INC. and SEVENCERRO STREET CORP.,

Plaintiffs,

- against -

THE ESTATE of MICHAEL AVNET,ALICIA AVNET, RICHARD FURMANand HEMISPHERE FORWARDING,INC.,

Defendants.

Motion RID: 6-9-06Submission Date: 6-16-06

Motion Sequence No. : 001/MOT D

COUNSEL FOR PLANTIFFRuskin, Moscou & Faltischek, P .1425 Reckson PlazaUniondale, New York 11556-1425

COUNSEL FOR DEFENDANTMichael A. Markowitz, P .1553 BroadwayHewlett, New York 11557

ORDER

The following papers were read on the application to dissolve Seven Cerro StreetCorp. and for other relief:

Order to Show Cause dated April 24, 2006;Affdavit of Alicia Avnet sworn to on April 19, 2006;Affrmation of Michael A. Markowitz, Esq. dated

April 19, 2006;

Affdavit of Alfred Hil sworn to on June 7, 2006;

Affrmation of Michael A. Markowitz, Esq. dated

June 16, 2006;

Affdavit of Richard Furman sworn to on June 13, 2006.

-,--- ._, . ---'--

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

Defendants, Estate of Michael Avnet, Alicia Avnet, and Hemisphere Forwarding,

Inc. move for an order: (1) dissolving the Plaintiff Seven Cerro Street Corp. pursuant to

BCL 1104(a) and 1104-a; (2) appointing a receiver for Seven Cerro Street Corp.

pursuant to BCL 1113 and 1202(a)(1) and CPLR 6301; (3) dismissing the first and

second causes of action pursuant to CPLR 3211 (a)(7) or, alternatively granting

summary judgment, pursuant to CLR 3212; and (4) enjoining Seven Cerro Street Corp.

and its shareholders from: (i) transacting any unauthorized business; (ii) exercising any

unauthorized powers except upon permission of the Court; (Hi) collecting or receiving

rents or other debt or other propert of the corporation; and (iv) paying out or otherwise

transferring or delivering any propert of the corporation.

BACKGROUND

In 1987, Plaintiff Seven Cerro Street Corp. ("Cerro ) was formed to purchase and

operate commercial propert located in Inwood, New York located near JFK

International Airport (the "Inwood Propert).

Although, upon formation, Cerroapparently had some seven original

shareholders, the currently remaining shareholders (and their respective interests)

include: the decedent Michael Avnet ("Avnet") (now the Defendant Estate of Micahel

Avnet ("Estate

))

- 75%; the Plaintiffs Alfre Hil ("Alfred"

) -

- 5%; his brother, Dennis

Hil ("Dennis ) 5% (collectively the "Hils ); and John Banister ("Banister")

- -

15%.

..- -- _..

HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

At one time, Avnet, Alfred, Dennis and Bannister each owned separate

corporations which occupied the Inwood propert and paid rent to Cerro pursuant to

written lease agreements.

The Hils owned a corporation known as Admiral Freight Services, Inc

Admiral", a coDefendant herein; Bannister owed Escort FOlWrding, Inc ("Escrr).

Avnet owned co-Defendant, Hemisphere Forwarding, Inc ("Hemisphere

Cerro was operated and managed exclusively by Avnet. Until 2001, it was run

without major incident or controversy.

In early 2001 , however, Escort moved out of the building. Prior to its departure,

Escort was a significant source of income for Admiral.

Plaintiffs claim that Avnet was aware that Escort's departure would reduce

Admiral' s income and, thereby, impair its abilty to pay rent. Instead of seeking out a

new tenant to replace Escort, Avnet used the space for his own corporation-

Hemisphere.

In light of the detrimental impact of Escort's departure, Plaintiffs claim that they

entered into discussions with Avnet which focused on obtaining a new tenant to replace

Escort at the premises. Plaintiffs contend that a binding agreement was ultimately

reached, pursuant to which Avnet would move Hemisphere out of the former Escort

space and place a new tenant in the premises.

-..--. .

. u

- .. _.. . - -. . - --. - --

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET,et a/.,

Index No. 3541-

Although the Hils claim that they identified several potential tenants who could

have replace Escrt, Avnet nefiher moved Hemisphere out of the

forer Escort space

nor placed a new tenant at the premises. As a result, they claim that Avnet breached

what they have descrbed as the Bannister Space Agreement.

Notbly, there is no

written agreement evidencing the existence of the Bannister Space Agreement or

memorializing its terms.

Ultimately, Admiral's financial distress became acute. Thus, it was no longer

able to pay the rent due. Plaintifs claim that Avnet knew of Admiral'

s rental default and

never once objected or threatened Admiral's tenancy.

In light of Admiral's continuing financial distrss, Plainti claim that, Avnet,

agred to sublet one-half of Admiral's warehouse space. Again. he allegedly never

honored this commitment either.

In additin, the shareholders agrement persnally "obligate (Avnet)

to maintain

a life Insurance policy on his own life for the purposes of funding the purchase of his

stock in the event of his death"

Plaintiffs contend that Avnet - who died of cancer in July 2005

- wrongfully

allowed a $600,000.00 life insurance policy to lapse in violation of the Cerro

shareholders agreement.

Article VI (A)(1) of the shareholders agreement provides that "

(t1he Corporation

hereby covenants to obtain a term life insurance policy upon the lives of each of the

Shareholders

* *

,----_ -- --"" -- ..""- -.. .. -.- -.. --..

HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

Article VI (B)(2) further states that, "(t)he Corporation shall pay all premiums due

on the policy purchased on the lives of the shareholders" but continues by stating that

(l1f any Shareholder (sic) fails to pay a premium within thirt (30)

days after the

premium due date, the Shareholder * * * may pay such premium" which "shall be

considered a loan to the Corporation * * *"

Article VI (8)(1) provides that "(u)pon the death of any Shareholder the

CORPORATION must purchase the decedent's stock from his estate and the estate

shall sell such stock to the CORPORATION.

Plaintiffs contend that since Avnet permitted the policy to lapse, there was "

insurance policy in place to fund the purchase of * * * Avent's stock * * * in favor of the

surviving shareholders" as contemplated by the shareholders agreement.

In any event, according to the Estate, since the corporations owned by the

Plaintiffs were no longer paying rent in late July 2005, Cerro "had no funds for basic

operating costs." Against this backdrop, the partes agreed to met in early 2006 to

discuss the possible sale of the Inwood propert - Cerro s only real asset, which had

recently been valued at some $1, 275,000.00.

Apparently, a consensus was reached at the meeting, pursuant to which, it was

agreed that Plaintiffs would attempt to acquire the building. A subsequentiy sceduled,

follow-uP meeting never took place. Shortly thereafter, this action was commenced.

By summons and complaint date February 2006, the Hils, Bannister, Admiral

and Cerro commenced this action against the Estate of Alicia Avnet (Michael'

s wife and

-----. -..-.-. . -- -..----- _ -- .- --.

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

co-executrix of his estate) and Hemisphere, alleging: (1) breach of the shareholders

agreement by virte of Avnefs failure to renew his life insurance poticy; (2) breach of

the so-called Bannister Space Agreement; and (3) breach of the sublet agreement with

Admiral.

Defendants have answered and interposed counterclaims for dissolution of Cerro

pursuant to BCL 1104(a) and 1104-a.

Defendants now move by order to show cause for dissolution of Cerro and for

dismissal of the Plaintiffs' first and second causes of action pursuant to CPLR

3211(a)(7) and 3212.

DISCUSSION

Defendants have sustained their

prima facie burden of establishing entitlement

to judgment as a matter of law dismissing the first and second causes

breach of

contrct cause of acton. CPLR 3212(b). See, zYennan v. Cit of New York

Y. 2d 557, 562 (1980).

First Cause of Action

With respect to first cause of action alleging breach of the shareholders

agreement, Plainti' theory is that Avent violated a persnal dut impoed

by the

shareholders agreement, which was the duty to maintain life insurance so as to ensure

the continued existence of a fund "enabling the surviving shareholders to

purcase

shares from the spouse of the deceased shareholder." The Court disagrees.

-_.

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

(The be evidence of what partes to a wren agreement intend is what they

say in their wrting." Siamow v. Del CoI, 79 N.Y. 2d 1016, 1018 (1992).

Se also,

Greenfield v. philes Records. Inc. , 98 N.Y. 2d 562, 569 (2002). Further, since "

(t1

meaning of a wrting may be distorted where undue forc is given to single words or

phrases," the court must interpret the document as a whole

- giving effect to, not

nullfyng - the agreemenfs general or primary purpe. Mattr of Wesorland Coal

Co. v. Entech. Inc. , 100 N.Y. 2d 352, 358 (2003), quoting,

roDerties Corp. v

Manufacturers Trust Co. , 288 N.Y. 242, 248 (1942) (Internal quotes omitted). See,

South Road Assocs. LLC v. International Business Machines Cor .,

4 N.Y, 3d 272, 277

(2005).

A review of the shareholders agreement reveals that there is nothing in that

docment which obligates the individual shareholders to pay lif insurance premiums.

To the contrry, the language of the agreement provides that the

Corp18ti hereby

covenants to obtain a term life insurance policy upon the lives of each of the

Shareholders," and furter states in that "rtJhe COrpo18tion shall pay all premiums due

on the policy purchased on the lives of the shareholders" (Emphasis added).

Although paragraph VI (A)(2) does provide, "(i1f any shareholder fails to pay

premium within 30 days after the premium due date,

the shareholder . . may pay such

premium," the Defendants and their attomey-draftman have demonstrted that the

phrase "any shareholder fails 10 pay,

. is simply a tyraphical elTr and should, when

. viewed in context, be constred to mean: "W the Corp18ti fails to pay

' . '

' This

... -.-. --. .."," ....-,. ...- --.

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

view is buttressed by the fact that the sentence as written, would constitute a virtual

non

seuitur, to wit: "If the shareholderfails to pay" then the

shareholder may pay . . ."

(emphases added). Such an absurd result should be avoided.

More significantly, Defendants' construction is in accord with the unambiguous

language of the two prior provisions quoted above, which provide that: (1) the

cooration was to aCQuire the policies; and (2) the corporation was then to pay the

premiums due. Even as written, the shareholder's agreement doe not stte that

shareholder must or is duty-bound to pay premiums but provides at best, that he or she

may" make those payments. Addfiionally, since there is no relevant ambiguity with

respec to the import of the corporations obligation to pay the premiums,

extnsic

evidence of the partes' intent may not be considered.

See, e.

g.,

South Road Asso.,

LLC v. Intemational Business Machines Cor. supra at 278; Madisn Ave. Leasehold,

n Bentiev Assocs. t.LC. 30 A. D. 3d 1, 12 (1" Dept. 2006); 767 Third Ave.

JJC v. Orix Capital Markets. LLC.26 A.D. 3d 216 (1st Dept. 2006).

Accordingly, the first cause of action, which is predicated upon the breach of a

personal duty to maintain insurance coverage, must be dismissed.

Second Cause of Action

Plaintiffs' second cause of action is based upon Avnet's alleged breach of the

unwren, Bannistr Space Agrement by which he purporly agre - but failed to -

place new tenants in the space formerly occupied by Escort.

. .

----

HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.

Index No. 3541-06 More particularly, the second cause of action states, in sum, that

(1)some six

years prior to Michael Avnefs death, he allegedly (and orally) agreed that

certin

porto of the building would be leased to tenants "posfiiQned to refer business

" to

Admiral; and (2) Avnet later reneged on the agreement.

Defendants contend that the transaction as pleaded by the Plaintiffs is inclusively

pleaded, makes no reference to the existnce of a viable consideration and. amounts to

no more than a inconclusively depicted agreement to agree.

In general, the formation of a contrct reuire at least tw parties wi legal

capaci to contrct, mutual assent to the termS of the contrct and consideration. See

gen lIy, Exec owers AtY!C. v. Metr Constrction Servce Inc. , 9 Mise.

1109(A) (Sup. Ct., Nassau Co. 2005);

I!Exres

es anct ermnal Corp.

New Yor State-1ept. of TransDortation, 93 N.Y. 2d 584, 589-590 (1999);

Elias v.

Serota, 103 A.D. 2d 410, 414-5 (2"" Dept. 1984); and 22 NY Jur 2nd,

Contrct. 11,

13).

Further, "(i)n order to plead a breach of contract cause of action, a complaint

must allege the provisions of the contrct upon which the claim

is base (and) (t)he

pleadings must be suffcientiy partcular to give the court and (the) partes notice of the

transactions, occurrences, or series of transactions or occurrences, intended to be

proved as well as the material elements of each cause of acton or defense. Atknson

205 A.D. 2d 719, 720 (2"" Dept. 1994) (Internal quottio mark

-'U

_"" -'.. '-" " .. -.. , - "-" ,-,, '_.'""-- " ".-- . . ..- "

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-06 omittd). See also, Peters v. Accrate ekg. lnspers Div. of Ubell Ent.. Inc. , 29 A.

Co. , 8 A.D. 3d 348, 350 (2"" Dept. 2004). Vague and conclusory allegations wtll not

suffce. Gordon v. Dino De Laurentiis Cor .141 A.D. 2d 435, 436 (1st Dept. 1988).

See, fgr v. AmerIcan Lawver Media, Inc. , 306 A. D. 2d 113 (1" Dept. 2003);

Long

Island Women s Health Care Asociates v. Haselkom-Lomansk . 10 Mise.3d 1068(A)

(Sup. Ct. Nassau Co. 2005).

The Court agrees that the alleged transaction, as pleaded, is unclear, vague and

fails to adequately to identify terms and conditions establishing the existence of a

binding agreement with respect to Avnet in his personal capacity.

Id.

Rather, and to the extent articulated in the complaint, the transaction depicted

suggests, at bes, that certin discussions ensued many years prior to Avnefs death in

2005 and that Avnet allegedly made some sort of statement that he would take steps

to lease certain space in premisowned by the corporation.

The fact that - as the Plaintiffs claim in their opposing submissions - Avnet

(actally Hemisphere) would be able to "stop paying rent" once the disputed space was

rented, or that the "corpration as a whole" would suppoedly sere some incidental

beneft upon exection of a new lease, does not establish the extstnce of a contctal

Although it was not raised in the moving papers, it appears that this purportedagreement occrrd more than siX years prir to the

commencement of this acUn. Thus. this

cause of acton may also be barred by the applicable statute of limitations.

CPLR 213(2).

--- _.. _.-. _'- _._.

HILL, et a/., v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

duty personally binding upon Avnet, or his estate. Accordingly, the second cause of

action should be also dismissed.

Dissolution/Receiver

In support of their application, the Defendants assert, among other things, that

(1) the shareholders are deadlocked; (2) intractable, internal dissension exists within

the meaning of BCL ~ 1104(a) (1 )-(3); and (3) by virtue ofthe foregoing, Cerro

is no

longer capable of meeting its financial obligations - including mortgage, tax and utilty

expenses. Defendants further advise that Cerro s primary asset - - the Inwood

Propert - - wil be in jeopardy "if immediate steps are not taken to sell" it.

Plaintiffs do not oppose the dissolution of Cerro. Nor do they materially dispute

the relevant factual assertions advanced by Defendants in support of the applicatio

except to the extent that they request that proceedof any sale be placed in escrow

pending the outcome of this litigation.

The Court agrees that upon these facts, Defendants' unopposed counterclaim

for dissolution of Cerro should be granted. Moreover, while Plaintiffs rely on the

purported debt owed by virtue of the insurance policy lapse to support their escrow

claim, the Court has already dismissed the first and second causes of action, thereby

negating the viabilty of these factual theories.

The Court has considered the remaining contentions advanced by the Plaintiffs

including the claim that further discovery is required (Casey v. Clemente , 31 A.D. 3d

-... - -.. - -

HILL, et a/. v. THE ESTATE OF MICHAEL AVNET, et a/.,

Index No. 3541-

361, (2 Dept. 2006)), and concludes that none is suffcient to defeat the Defendants

motion.

Accrdingly, it is,

ORDERED, that Defendants' motion to dismiss the first and second.

causes of

action is granted; and it is further,

ORDERED, that Defendants' motion to dissolve Seven Cerro Street Corp. is

granted; and it is further,

ORDERED, that Defendants' motion to appoint a receiver is granted.

Defendants shall settle an order on ten (10) days notice providing for the appointment

of a receiver to sell the Inwood propert and including provisio for the posting of an

undertaking, consistent herewith; and it is further,

ORDERED, that the third cause of action is hereby severed and continued; and it

is further,

ORDERED, that counsel for the parties are directed to appear for a status

conference on October 12, 2006 at 9:30 a.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY

September 14, 2006

ENTEREDSEP 2 1 2006

NASSAU COUNTYCOUNTY CLERK' S OFFICE