Motion-Secondary: Robert C Beardsley, Robyn Beardsley v. Evans Land Corp, Frederick M Manguso

On November 21, 2019 a Motion-Secondary was filed involving a dispute between Robert C Beardsley, Robyn Beardsley, and Evans Land Corp, Frederick M Manguso, for Commercial - Contract in the District Court of Cattaraugus County.

Preview
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

STATE OF NEW YORK
SUPREME COURT : COUNTY OF CATTARGUS
____________________________________________

ROBERT C. BEARSLEY and
ROBYN BEARDSLEY,

Plaintiffs,
Index No. 86157
v.
Hon. Jeremiah J. Moriarty III

EVANS LAND CORPORATION and
FREDERICK M. MANGUSO,

Defendants.

____________________________________________

REPLY AFFIRMATION OF ANNE K. BOWLING ESQ.
IN FURTHER SUPPORT OF MOTION FOR
LEAVE TO HOLD SHAREHOLDERS’ MEETING

ANNE K. BOWLING, ESQ., pursuant to CPLR 2106 and under penalties of

perjury, affirms as follows:

1. I am an attorney duly licensed to practice law in the State of New York

and a partner with the law firm of Rupp Baase Pfalzgraf Cunningham LLC, attorneys for

Plaintiffs Robert Beardsley (“Mr. Beardsley”) and Robyn Beardsley (“Ms. Beardsley”)

(collectively “Plaintiffs”) in connection with the above-captioned matter. I am fully familiar

with the facts set forth herein.

1 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

2. I submit this reply affirmation in further support of Plaintiffs’ motion for

leave of the Court to hold a duly-called meeting of the shareholders of Defendant Evans Land

Corporation (“ELC”).

POINT I

ELC SHAREHOLDERS ARE ENTITLED TO CHOOSE THEIR
BOARD OF DIRECTORS AS A MATTER OF LAW.

3. In their opposition papers, Defendants ignore, and thus essentially

concede, Plaintiffs’ arguments that ELC must be required to hold a shareholders meeting as a

matter of law.

4. Instead, they ask this Court to usurp the right of ELC’s shareholders to

decide how their corporation is run. This the Court cannot do. It is a fundamental principal of

corporate law that shareholders have the right to elect the directors who make decisions on

behalf of the corporation. See Starr v. Tomlinson, 7. Misc. 2d 916, 918 (Sup. Ct. N.Y. Co.

1957). If the Court denies Plaintiffs’ motion, forbids ELC from holding any shareholder

meetings, and denies shareholders’ their right to elect their desired board of directors, the Court

will be depriving the shareholders of their vested property rights without any legal basis.

5. Defendants’ arguments as to why such extreme measures are necessary

here are unavailing.1

1
In his November 6, 2019 letter to Plaintiffs’ counsel, Defense counsel took the position that
Mr. Beardsley’s meeting demand was invalid. See Exhibit C to the Affirmation of Anne K.
Bowling in Support of Motion for Leave to Hold Shareholders’ Meeting (dated Nov. 19, 2019)
(“Nov. Bowling Aff.”) (NYSCEF No. 7). Defendants apparently have dropped this argument
and no longer question the validity of the notice.
2

2 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

6. First, they recount the history of the dispute between the parties and assert

that this history alone is reason to prevent all ELC’s shareholders from deciding who runs the

corporation. Defendants fail to cite to a single legal authority to support their position. This is

because there is none. Whether Plaintiffs may or may not have attempted to hold a meeting that

did not comply with the ELC By-Laws in the past is irrelevant to whether ELC must call and

hold a duly noticed meeting in accordance with its By-Laws, the New York Business

Corporation Law (“BCL”), and the express agreement of counsel and this Court during the

July 13, 2018 hearing before Your Honor. See Nov. Bowling. Aff., Ex. C (NYSCEF No. 7).

7. Second, there was no agreement that all ELC shareholders would be

enjoined from voting for a board of directors during the pendency of this litigation. In fact, at the

July 13, 2018 hearing, Defendants’ request that “no meetings be allowed to take place until the

end of this litigation” was not granted. Id. at 4:1-9. Instead, the parties agreed that no meetings

would be held unless the parties agreed upon a date for the meeting or the Court so-ordered the

meeting. Id. at 4:10-13. Plaintiffs specifically reserved their right to notice another special

meeting. Id This reservation would have been meaningless if the parties had agreed that no

meetings would be held.

8. To the extent that the parties may have agreed that the shareholders would

not hold their own meeting to elect a board of directors (which Plaintiffs dispute), that is not

what Plaintiffs are asking to do. Here, Mr. Beardsley demanded that the corporation itself notice

and hold a special meeting. See Nov. Bowling Aff., Ex. B (NYSCEF No. B). He is not seeking

to notice and hold a meeting himself.

3 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

9. Third, in his affirmation, Mr. Manguso states – without citation to fact or

authority – that he has “significant doubts as to the validity of the proxies which the Plaintiffs

have alleged to possess.” See Affidavit of Frederick Manguso in Opp’n to Plaintiffs’ Mot., ¶35,

sworn to November 26, 2019 (NYSCEF No. 22) (“Manguso Aff.”). This argument is a red

herring. Defendants have not seen any proxies in Plaintiffs’ possession and therefore cannot

know whether they are valid or invalid. To the extent that the Defendants’ argue that the proxies

are invalid because they were issued by individuals who do not currently hold ELC stock, the

parties can resolve those issues at the time of the meeting.

10. And regardless, even if some (or all) of the proxies Plaintiffs hold are

invalid, the meeting can still go forward, and a new board can be elected by the shares present.

Section 614(a) of the BCL provides that directors of a corporation “shall . . . be elected by a

plurality of the votes cast at a meeting of shareholders.” See also ECL By-Laws at 11(4),

Bowling Aff., Ex. A (NYSCEF No. 5). There is no requirement in the BCL or ECL’s by-laws

that every share be voted at a meeting before a board may be elected.

11. Finally, Mr. Manguso and counsel argue that Mr. Manguso is more

qualified to serve as president of the ELC board than Mr. Beardsley. This argument is of

moment here.

12. At this time, we do not know if Mr. Beardsley would be nominated let

alone elected to serve on the Boar. But, even if Mr. Beardsley was nominated to run for a

director position and that a majority of shareholders would vote for Mr. Beardsley (both of which

are speculative), this is not an issue for the Court to decide. Instead of trying to convince this

4 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

Court that he is the better candidate, Mr. Manguso should lobby the ELC shareholders to vote for

him based on his alleged past performance. If a majority of shareholders agree that

Mr. Manguso is more qualified, then presumably, they will retain him as the president of the

board.

13. In sum, Defendants have put forth no legal or factual reason that

Plaintiffs’ motion should be denied. This Court should order ELC to comply with its By-Laws

and the BCL and notice a meeting of the shareholders on or before December 31, 2019.

POINT II

DEFENSE COUNSEL HAS AN IMPREMISSIBLE
CONFLICT OF INTEREST.

14. In his affirmation, Defense counsel fails to differentiate between the

position of ELC and the position of Mr. Manguso. If counsel is raising these arguments on

behalf of both parties, then ELC is taking a position contrary to law and one that allows

Mr. Manguso’s interests to trump ELC’s interest.

15. As stated, it is a fundamental principal of corporate law that shareholders

have the right to elect the directors who run their corporation. See Starr, 7. Misc. 2d at 918.

Some (if not the majority of) ELC shareholders disagree with the manner in which Mr. Manguso

is running the corporation and would like to hold a meeting so that all ELC shareholders may

vote on whether Mr. Manguso should remain as a director. In their papers, Defendants are

asking this Court to ignore ELC’s By-Laws and the BCL and infringe on ELC’s shareholders’

right to decide how their corporation is run. Such position works a detriment to ELC

5 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

shareholders and inures only to the benefit of Mr. Manguso. By asserting one argument on

behalf of both Defendants, counsel is putting Mr. Manguso’s interests ahead of ELC’s in

violation of N.Y. Rule of Professional Conduct 1.7(a). This is a clear conflict, and counsel

should recuse himself.

16. Plaintiffs have not waived this argument. Although Plaintiffs’ notice of

motion did not specifically request an order that Defense counsel set forth the positions of each

of his clients, Defendants had notice of the relief demanded, an opportunity to respond to the

arguments Plaintiffs raised, and did, in fact, respond to these arguments. There is thus no reason

the Court could not grant the relief sought. See Frankel v. Stavsky, 40 A.D.3d 9148, 918-19

(2d Dept. 2007); Shields v. Carbone, 99 A.D.3d 1100, 1102 (3d Dept. 2012).

17. Second, Plaintiffs’ motion is timely. It is well settled that, when one

attorney represents multiple parties, a conflict may arise during the course of litigation.

See Kleeberg v. Eber, No. 16-cv-9517, 2019 WL 2284727 (S.D.N.Y. May 29, 2019). Plaintiffs

assert that such conflict has now arisen in connection with the instant motion and have promptly

sought to investigate the conflict further. Therefore, their motion is timely.

18. Contrary to Defendants’ arguments, discovery would not assist the Court

in deciding this issue because such discovery is an impossibility unless Defendants intend to

waive privilege and allow Plaintiffs’ to seek discovery into advice given to them by counsel.

19. Therefore, this Court should find that Defense counsel has an

impermissible conflict of interest and require counsel to recuse himself or face disqualification.

6 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

20. Plaintiffs’ reserve their right to file a subsequent motion to disqualify

Defense counsel from representing the Plaintiffs in this action pending resolution of the present

motion.

POINT III

ELC’S OPERATIONS LIKELY WILL NOT BE AFFECTED BY A SHORT
INJUNCTION FROM THE DATE OF THE COURT’S ORDER TO THE
DATE THE SHAREHOLDERS’ MEETING IS HELD.

21. A brief injunction preventing ELC from divesting any corporate assets

between the date of the Court’s order and the date a meeting is held should not prevent ELC

from operating.

22. Plaintiffs are requesting that the Court order a shareholders meeting be

held on or before December 31, 2019 – less than four weeks from the return date of this motion –

and that the injunction expire after the meeting is held.

23. Mr. Manguso states that ELC currently has no expenses besides paying

“for a workers’ compensation and insurance policy for the directors and officers.” Manguso Aff.

¶¶30-31. If this is the case, then Plaintiffs’ would not object to allowing ELC to make any

payments required under these policies during the term of the injunction. According to

Mr. Manguso, ELC should have no further expenses during the pendency of the shareholders

meeting and thus suffer no harm from an injunction.

24. Mr. Manguso further represents that ELC does not have any current plans

to sell any real property. Manguso Aff. ¶37. Notably, he does not state that ELC does not have

current plans to sell any of its personal property or to transfer or use ELC funds. Indeed, upon

7 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

information and belief, Mr. Manguso is currently selling ELC personal property. On or around

November 4, 2019, Mr. Manguso sent an email to the ELC board of directors explaining that he

is chopping down trees and selling the cut trees to a logging company. See Affirmation of

Sally Needham, Ex. A.

25. There is a dispute regarding whether the Ash trees cut were truly dead and

needed to be cut. See id.

26. ELC will not be able to re-plant these large trees and return its land to the

condition it was in prior to Mr. Manguso’s logging efforts. Therefore, ELC will be harmed

irreparably by the loss of these trees on its property. See Brenntag Int’l Chemicals, Inc. v. Bank

of India, 175 F.3d 245 (2d Cir. 1999).

27. In sum, because ELC would not be injured by a brief injunction but would

be irreparably harmed if Mr. Manguso is allowed to continue to divest the corporation of its

property, the equities balance in favor of granting the injunction. The injunction thus should be

granted.

8 of 9
FILED: CATTARAUGUS COUNTY CLERK 12/03/2019 11:57 AM INDEX NO. 86157
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 12/03/2019

WHEREFORE, I respectfully request that the Plaintiff’s motion be granted in its

entirety, and that this Court order all other relief this Court deems just and proper.

Dated: December 3, 2019
Buffalo, New York

RUPP BAASE PFALZGRAF CUNNINGHAM LLC
Attorneys for Plaintiffs

By: /s/ Anne K. Bowling
Anne K. Bowling, Esq.
1600 Liberty Building
Buffalo, New York 14202
(716) 854-3400
bowling@ruppbaase.com

9 of 9

Case Info

Judge

Jeremiah Moriarty Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

December 03, 2019

Case Filing Date

November 21, 2019

County

Parties

For full print and download access, please subscribe at https://www.trellis.law/.