Rosiny v. Schmidt

185 A.D.2d 727 (1992)

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Rosiny v. Schmidt

New York Supreme Court
185 A.D.2d 727 (1992)

Facts

In 1957, Edward Rosiny, Charles McGuire, and Theodore Schmidt, the sole shareholders of Ched Realty, entered into an agreement that contained a buyout provision. The provision provided that the shareholders would be given the first opportunity to purchase each other’s shares upon sale, transfer, or death and that the share price would be determined based on the book-value approach. In 1964, Rosiny transferred his shares to his wife, Annabelle Rosiny, and a new shareholder agreement was formed. This agreement contained the buyout provision but provided that the fair-market-value approach would be used to determine price. In 1971, Schmidt died and his widow, Jeanette Priddy, acquired his shares. A third shareholder agreement was formed, which reinstated the book-value approach. In 1981, Annabelle Rosiny’s sons, Allen and Frank (plaintiffs) acquired Annabelle’s shares for tax purposes. The purchase was suggested by Ched’s accountant and close friend to the Rosiny family, Jacob Kwalwasser. A fourth shareholder agreement was formed, which contained the buyout provision based on book value and a termination provision, under which the agreement could be terminated by selling the property. In 1985, the shareholders considered selling the property but, upon conferring with counsel, Priddy and McGuire decided not to sell. In 1988, Priddy and McGuire died and the Rosinys attempted to purchase their shares pursuant to the buyout provision. Priddy’s and McGuire’s descendants (defendants) refused to sell the shares and the Rosinys sued to enforce the agreement. The descendants argued that the shareholder agreement was unenforceable because it was unconscionable. The lower court entered a verdict for the descendants. The judge explained that the Rosinys were young and educated attorneys and that Priddy and McGuire were elderly and less educated and therefore the disparity in age and education led to unconscionability.

Rule of Law

Issue

Holding and Reasoning (Memorandum opinion)

Dissent (Carro, J.)

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