previously reported on a March 2009 appellate decision in a case called Yemini v. Goldberg involving a fight over stock ownership in a holding company called ANO, Inc.  The appeals court reversed a trial court decision denying Oded Goldberg’s application for a preliminary injunction against Ari Yemini.  The dispute centered on the enforceability of a Nominee Agreement that identified Goldberg as the “true owner” of a 50% interest in ANO and designated Yemini as Goldberg’s nominee to act on the latter’s behalf with respect to the acquisition and operation by ANO of what became a two-thirds interest in another company called Candlewood Holdings, Inc.  The appeals court held that the Nominee Agreement was an enforceable “declaration of trust” notwithstanding that Goldberg’s 50% interest never was reflected in ANO’s corporate records or tax returns, or that other corporate documents including a shareholders agreement expressly identified Yemini as 100% stockholder, or that Goldberg omitted ANO in his net worth affidavit in legal proceedings with his ex-wife.

Now the other shoe has dropped on Yemini.  Following the appellate decision Goldberg moved for partial summary judgment prohibiting Yemini from holding himself out as ANO’s 100% owner and directing Yemini to issue and deliver certificates to Goldberg’s wholly-owned assignee, Goldberg Commodities, Inc., reflecting its 50% ownership of ANO.  In addition to the Nominee Agreement, Goldberg offered evidence of his funding of the Candlewood acquisition and a subsequent $1.5 million loan agreement that identified each of Goldberg and Yemini as 50% owners of ANO.

In opposition, Yemini contended that the Nominee Agreement was subject to a verbal agreement conditioning its effectiveness on Goldberg investing in the Candlewood acquisition.  Yemini alleged that the approximately $200,000 Goldberg claimed to have invested in fact was cash provided by Yemini to Goldberg, which Goldberg deposited and then wire transferred to ANO’s account, and thus represented Yemini’s contribution, not Goldberg’s.  Yemini also offered a $122,000 promissory note dated over a year later from Goldberg to Yemini, and a letter from Goldberg a few years after that referring generally to a “verbal agreement” surrounding the Nominee Agreement.

The decision dated November 17, 2009 (2009 NY Slip Op 32745(U)), by Nassau County Commercial Division Justice Stephen A. Bucaria, rejected Yemini’s contentions as unsupported by any probative evidence, and it therefore granted Goldberg’s summary judgment motion.  Justice Bucaria found that Yemini offered no documentary proof that he gave the funds to Goldberg, such as a signed receipt, or that Yemini even had the cash available.  He found no connection between the promissory note and the funds used to finance the Candlewood acquisition.  Justice Bucaria also cited Yemini’s testimony that those funds eventually were repaid to Goldberg, and he found that Goldberg’s letter referring to a “verbal agreement” reinforced Goldberg’s position rather than weakened it.  In the letter, Goldberg revoked Yemini’s authority as his nominee, which made no sense unless Yemini was Goldberg’s nominee in the first place.

Justice Bucaria also faulted Yemini’s position for attempting to vary the terms of the Nominee Agreement, writing as follows:

When the parties set forth their entire agreement in a writing, a party may not introduce extrinsic evidence or prior or contemporaneous statements to establish that a different oral agreement exists.  (See, e,g., W.W.W. Associates, Inc. v. Giancontieri, 77 NY2d 157, 162) (“Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add or vary the writing.”); Braten v. Bankers Trust Co., 60 NY2d 155 (refusing to enforce oral agreement that contradicted the terms of the parties’ written agreement); Harris v. Hallberg, 36 AD2d 857, 2nd Dept., 2007).  Plaintiff’s [Yemini] argument is contradicted by the express wording of the ANO Nominee Agreement that states the agreement is effective as of the date of the agreement.

The second issue addressed in the decision is Goldberg’s transfer of his 50% interest in ANO to his company, Goldberg Commodities.  Goldberg asserted that he wanted the interest to be held by Commodities because the funds for his capital contribution came from Commodities via its lending facility and to take advantage of Commodities’ tax situation.  Yemini argued that he never would have consented to the transfer because Commodities’ pre-existing debt might impair Candlewood’s ability to secure outside financing.  He also argued that a provision in the Candlewood shareholders’ agreement prohibited any transfer of Goldberg’s ANO interest without the consent of the third Candlewood investor named Moore.

Justice Bucaria readily dispatched Yemini’s objections.  First, there was no written agreement with Goldberg, or any provision in ANO’s bylaws, that prohibited the transfer to Commodities.  Second, Moore testified at the hearing that he had no objection to the transfer so long as Goldberg remained the 100% owner of Commodities.

Re-reading the prior lower court decision by Justice Leonard Austin (who subsequently was elevated to the Appellate Division) denying Goldberg’s injunction motion, what comes through is the court’s disdain for Goldberg’s “unclean hands” based on the concealment of his interest in ANO from his ex-wife and tax authorities.  The subsequent appellate reversal paid no attention to those factors in finding that the Nominee Agreement was enforceable in accordance with its plain terms.  Perhaps what makes this case different from others in which the courts have refused relief based on somewhat similar circumstances is Yemini’s apparent knowing participation in at least some of the artifices.

Update October 7, 2011:  In a Decision and Order dated October 4, 2011 (read here), an appellate panel denied Yemini’s appeal from Justice Bucaria’s February 2010 order granting Yemini’s motion to reargue and, upon reconsideration, adhering to his November 2009 summary judgment ruling discussed above.

Update March 25, 2013:  By Order dated March 5, 2013 (read here), Justice Bucaria directed the dissolution of Candlewood Holdings, Inc. upon application by Yemini.

Update February 20, 2016:  In January 2015, the Appellate Division, Second Department, reversed the order dissolving Candlewood (read here).