v. - new hampshire superior court...the state of new hampshire supreme court no. 2012-0061 carleton,...

THE STATE OF NEW HAMPSHIRE

SUPREME COURT

No 2012-0061

CARLETON LLC

v

RICHARD BALAGUR and MTS DEVELOPMENT CORP

PLAINTIFFS BRIEF (Appellant)

Counsel for Carleton LLC and Bukk Carleton -Appellant

Schuster Buttrey amp Wing PA Barry C Schuster Esq Bar 2280 Eric G Derry Esq Bar 19325 79 Hanover Street PO Box 388 Lebanon NH 03766 603-448-4780

T ABLE OF CONTENTS

TABLE OF AUTHORITIES bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bullbull 11

QUESTIONS PRESENTED iv

STATUTORY PROVISIONS vi

STATEMENT OF THE CASE 1

STATEMENT OF THE FACTS 3

SUMMARY OF THE ARGUMENT 8

ARGUMENT 9

I Standard Of Review 9

II The Trial Court Erred In Finding That RSA 293-A1434(g) Prevents The Enforcement Of The Courts Final Order Making Carleton A Secured Creditor Of MTS 9

III The Courts March 2008 Order Making Carleton A Secured Creditor Was Final And Could Not Be Altered Or Vacated 13

IV Adrienne Balagur Is Estopped From Avoiding Her Election To Purchase Carletons Shares 14

V Corporate Dissolution Is An Equitable Proceeding 19

A RSA 293-A1434 Does Not Constrain The Trial Courts Authority To Issue Equitable Orders In Judicial Dissolution Proceedings 19

B The Dissolution Statute Empowers The Court To Enforce Principles Of Fair Play 24

CONCLUSION 28

REQUEST FOR ORAL ARGUMENT 29

CERTIFICATION OF SERVICE 29

APPENDIX (separately bound)

TABLE OF AUTHORITIES

CASES

Arsenault v Scanlon 139 NH 593 594 (1995) 13

Bendetson v Killarney 154 NH 637 (2006) 92124252627

Bogosian v Woloohojian 749 F Supp 396 399 (DRI 1990) 25

Bogosian v Woloohojian Realty Corp 923 F2d 898 (1 sl Cir 1991) 2223

Bogosian v Woloohojian Realty Corp 973 FSupp 98 (RI 1997) 23

Boynton v Figueroa 154 NH 592 (2006) 21

Carleton LLCv Balagur No 2008-0008 (NH 1-21-2009) (Carleton I) 13628

Carleton LLC v Balagur No 2009-0708 (NH 5-13-2010) (Carleton II) 1 7 1128

Carleton LLCv Balagur 162 NH 501 (2011) (Carleton III) 110

Chase v Ameriquest Mortgage Company 155 NH 19 (2007) 2124

Cohoon v IDM Software Inc153 NH 1 (2005) 17 18

Great Lakes Aircraft Co v City ofClaremont 135 NH 270 (1992) 1416

Holloway Automotive Group v Lucie 163 NH 6 (2011) 21

In re Carr 156 NH 498 (2009) 17 19

In the Matter ofAube amp Aube 158 NH 459 (2009) 21

Jones v Pfaff No 2D-11-2525 (FlaApp2 Dist 1-20-2012) 16

Kalil v Town ofDummer 159 NH 725 (2010) 13

LaMontagne Builders v Bowman Brook Purchase Group 150 NH 270 (2003) 20

Marsh v Billington Farms LLC No 04-3123 (RISuper 8-2-2007) 12 1323

Massaro v Carter 122 NH 804 (1982) 13

11

Matter 0212 East 52nd Street Corporation 185 Misc 2d 95 (2000) 2224

Mayo v Knapton 118 NH 926 (1978) 21

New Hampshire v Maine 532 US 742 (2001) 17

NH Donuts Inc v Skiptaris 129 NH 774 (1987) 24

Peckv Jonathon Michael Builders Inc No 06-0236 (RISuper 10-26-2006) 22

Redlon Co v Corporation 91 NH 502 (1941) 14

Simpson v Young 153 NH 471 (2006) 13

Struckhoffv Echo Ridge Farm Inc 833 SW2d 463 (Mo App ED 1992) 22

Terren v Butler 134 NH 635 (1991) 20

Turco v Town oBarnstead 136 NH 256 (1992) 2024

STATUTORY PROVISIONS

NH REv STAT ANN sect 293-A1434 (2009) passim

NH REv STAT ANN sect 4981 (2009) 2122

COURT RULES

NH SUPREME COURT RULE 7 13

NH SUPERIOR COURT RULE 74 13

OTHER AUTHORITIES

19 AM JUR 2d Corporations sect2375 (2004) 22

Matthew C Lucas Revoking the Irrevocable Buyout Aligning Equity with Due Diligence in Corporate Dissolution 75 ALBANY LAW REv 15 (2012) 2526

111

QUESTIONS PRESENTED

1 In a corporate dissolution proceeding under RSA 29JA 1434 where the court ordered that Carleton be removed as a shareholder and be made a secured creditor of the corporation to assure payment for his stock did the court err in failing to enforce its order and in relying on RSA 293shyA1434(g) where that subsection refers only to orders made under RSA 293-A1434(e) and where in this case the court did not issue the subject order pursuant to RSA 293-A 1434(e) or any other provision ofRSA 293-A1434

2 Where the trial court issued an order on March 12 2008 designating Carleton a secured creditor in order to protect and preserve the value of the award provided to Carleton which the parties relied on and which neither appealed did the court err when four years later it failed to enforce its prior order which had become the law of the case

3 Where the electing shareholder under RSA 293-A 1434( a) repeatedly represented that she would purchase Carletons stock no matter what was that shareholder estopped from later avoiding that obligation to purchase by seeking to dissolve the corporation and did the trial court err in refusing to enforce its order from four years earlier which determined the fair value of Carletons stock and established security for the payment of Carletons stock

4 Did the trial court err in finding that the defendants followed appropriate procedures for dissolving the corporation where the court held no hearing or took any evidence on the issue

5 Where a Carleton petitioned to dissolve a corporation owned by three shareholders Richard

Balagur (40) his elderly mother Adrienne Balagur (10) and Carleton LLC (50)

b an irrevocable election to purchase Carletons stock in lieu of dissolution was filed on behalf of Adrienne Balagur

c the trial court determined the fair value of Carletons stock

d at the Balagurs request the trial court removed Carleton as a shareholder and granted Carleton an attachment as security for the payment of the shares

e the Supreme Court affirmed the trial courts order on the fair value of Carletons stock

f the Balagurs have exercised complete control over the corporation for four years since Carleton was removed as a shareholder

g during those four years the Balagurs have withdrawn substantial assets and depleted the value of the corporation

IV

h the Balagurs now seek to dissolve the corporation to void Mrs Balagurs irrevocable election to purchase and

i instead ofpaying the fair value of Carletons stock the Balagurs offer to pay Carleton based on his former shareholding a pro-rata share of the liquidation value of the corporation an amount which would be dramatically less than the fair value of Carletons stock four years ago

did the court err in applying the provisions ofRSA 293-A1434 in failing to enforce its orders on fair value and on Carletons secured creditor status

6 Where good faith and fair dealing are implicit principles of the New Hampshire Business Corporation Act is it inequitable not to require the electing shareholder to fulfill her repeated promises and assurances to the court and Carleton to purchase Carletons stock and failing that not to enforce Carletons secured creditor status where the court and Carleton relied upon such representations to the point that the court even required a commissioner to enforce that promise and where now the remaining shareholders after having depleted the assets of the corporation seek to dissolve the corporation without oversight and divide the decimated corporate remains as if Carleton were a shareholder even though he was removed over four years ago

v


RSA sect 293-A1434 ELECTION TO PuRCHASE IN LIEU OF DISSOLUTION

(a) In a proceeding under RSA 293-A l430(b) to dissolve a corporation that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members ofa national or affiliated securities association the corporation may elect or ifit fails to elect one or more shareholders may elect to purchase all shares owned by the petitioning shareholder at the fair value of the shares An election pursuant to this section shall be irrevocable unless the court determines that it is equitable to set aside or modify the election

(b) An election to purchase pursuant to this section may be filed with the court at any time within 90 days after the filing ofthe petition under RSA 293-A 1430(b) or at such later time as the court in its discretion may allow

(c) If within 60 days of the filing ofthe first election the parties reach agreement as to the fair value and terms of purchase of the petitioners shares the court shall enter an order directing the purchase of petitioners shares upon the terms and conditions agreed to by the parties

(d) Ifthe parties are unable to reach an agreement as provided for in subsection ( c) the court upon application of any party shall stay the RSA 293-A l430(b) proceedings and determine the fair value ofthe petitioners shares as ofthe day before the date on which the petition under RSA 293-A l430(b) was flIed or as of such other date as the court deems appropriate under the circumstances

(e) Upon determining the fair value of the shares the court shall enter an order directing the purchase upon such terms and conditions as the court deems appropriate

(t) Upon entry of an order under subsections (c) or (e) the court shall dismiss the petition to dissolve the corporation under RSA 293-A1430 and the petitioning shareholder shall no longer have any rights or status as a shareholder of the corporation except the right to receive the amounts awarded to him by the order of the court which shall be enforceable in the same manner as any other judgment

(g) The purchase ordered pursuant to subsection (e) shall be made within 10 days after the date the order becomes final unless before that time the corporation files with the court a notice ofits intention to adopt articles ofdissolution pursuant to RSA 293-A1402 and RSA 293-A1403 which articles shall then be adopted and filed within 50 days thereafter Upon filing ofsuch articles ofdissolution the corporation shall be dissolved in accordance with the provisions ofRSA 293-A1405 through

VI

293-A1407 and the order entered pursuant to subsection (e) shall no longer be of any force or effect except that the court may award the petitioning shareholder reasonable fees and expenses in accordance with the provisions of the last sentence of subsection ( e) and the petitioner may continue to pursue any claims previously asserted on behalf of the corporation

(h) Any payment by the corporation pursuant to an order under subsections (c) or (e) other than an award of fees and expenses pursuant to subsection (e) is subject to the provisions ofRSA 293-A640

RSA sect 4981 JURISDICTION

The superior court shall have the powers ofa court ofequity in the following cases charitable uses trusts other than those trusts described in RSA564-A 1 over which the probate court has exclusive jurisdiction as provided in RSA 5473 I(c) and (d) fraud accident and mistake the affairs ofpartners joint tenants or owners and tenants in common the redemption and foreclosure of mortgages contribution waste and nuisance the specific performance ofcontracts discovery cases in which there is not a plain adequate and complete remedy at law and in all other cases cognizable in a court ofequity except that the court ofprobate shall have exclusive jurisdiction over equitable matters arising under its subject matter jurisdiction authority in RSA 547 RSA 547-C and RSA 5527

VB

STATEMENT OF THE CASE

The efforts by Bukk Carleton to divorce himself from MTS Development Corp Richard

Balagur and Adrienne Balagur have led to this fourth appeal before the Court

Carleton I - In 2004 Carleton petitioned to dissolve MTS Development Corp (MTS)

To avoid having the corporation dissolved Adrienne Balagur requested permission to elect to

purchase Carletons shares When the parties were unable to reach an agreement on the share

value the matter went to trial in 2007 and the court determined the value of Carletons shares

under RSA 293-A1434(d) This Court affirmed the trial courts order in Carleton LLC v

Balagur No 2008-0008 (NH 1-21-2009)

Carleton II - When Adrienne Balagur subsequently refused to proceed with the purchase

of Carletons shares in 2009 Carleton returned to court seeking to enforce the purchase The

court ordered that the purchase be completed within ninety days Richard Balagur and Adrienne

Balagur appealed and this Court affirmed the trial courts order in Carleton LLC v Balagur No

2009-0708 (NH 5-13-2010)

Carleton III - Faced with the order to purchase Adrienne Balagur and Richard Balagur

filed a notice of intention to dissolve MTS under RSA 293-A1434(g) The trial court ruled that

the notice of intention to dissolve was filed within ten days of the date on which Carleton II

became final In Carleton LLC v Richard Balagur 162 NH 501 (2011) this Court affirmed

the trial courts ruling 1

1 The parties briefs were limited to whether MTS filed a notice of intention to dissolve within 10 days after the order in Carleton III became final The parties did not brief or argue whether the phrase before that time in RSA 293-A1434(g) requires that the notice of dissolution be filed before the time when the order became final or before the time of the expiration of the 1 O-day period after the order becomes final

1

Carleton IV - In anticipation of dissolving MTS Richard Balagur announced that he

would distribute the liquidation proceeds from the sale of the corporate assets pro-rata according

to the former shareholdings of the Balagurs and Carleton and without regard to Carletons status

as a secured creditor ofMTS Carleton objected because both parties have relied on and acted

pursuant to the trial courts February and March 2008 orders which granted total and exclusive

control over MTS to the Balagurs and in return made Carleton a secured creditor with a

recorded attachment and lien Also during the Balagurs exclusive control ofMTS the value of the

corporation has been intentionally reduced with significant corporate assets being transferred to

the Balagur family Thus when the Balagurs proposed to disregard Carletons secured party

status Carleton requested that the trial court enforce its prior final orders making him a secured

creditor ofMTS

The trial court denied Carletons request to enforce its prior final orders as well as

Carletons challenge to the actions taken by the Balagurs in the name ofMTS to dissolve the

corporation Carletons motion to reconsider was denied and this appeal followed

2

STATEMENT OF THE FACTS

Bukk Carleton and Richard Balagur formed MTS Development Corp in 1995 to invest in

and operate commercial real estate In 2000 MTS purchased an office building in Lebanon NH

and in 2001 it acquired real property in Laconia leased for a cell tower App 10- 302 The

shareholders were Richard Balagur and Bukk Carleton each of whom owned five hundred shares

Eventually Richard Balagur gifted one hundred shares to his mother Adrienne Balagur3 Bukk

Carletons shares are now owned by Carleton LLC4 Order Carleton I pLUnder the terms of

the By-Laws and a Shareholders Agreement the officers ofMTS were designated as Richard

Balagur as President and Bukk Carleton as Vice President Secretary and Treasurer App 31 - 48

The directors were also fixed by the Shareholders Agreement to be Richard Balagur Adrienne

Balagur Bukk Carleton and Mark Klarich an accountant who had worked professionally with

both Richard Balagur and Bukk Carleton App 12

Management of the office building was allocated between Richard Balagur and Bukk

Carleton Mr Carleton was responsible for bookkeeping and all financial matters as well as

tenant leasing and tenant issues Mr Balagur worked on matters of building maintenance and on

tenant matters and leasing The third shareholder Adrienne Balagur is Mr Balagurs mother who

was then in her early nineties and living in Long Island New York She never participated in the

management of MTS nor appeared at any of the court proceedings in these cases

2 References to pages in the separately bound Appendix are provided as App _

3 Richard Ba1agur and his mother for whom he has acted throughout this litigation are collectively referred to as the Balagurs

4 Bukk Carleton and Carleton LLC of which he is the sole member are collectively referred to as Carleton

3

Mr Balagur and Mr Carleton operated under this arrangement for several years but by

2003 disagreements arose about their operations leading to a deadlock between them and an

inability to make decisions on the management of the office building App 10 - 30 Additionally

Carleton had received repeated tenant complaints about Mr Balagur and also learned among

other issues that Mr Balagur had transferred the corporations cell tower property to himself and

had paid himself unauthorized fees from the corporation all without Carletons knowledge or

approval App 14 - 18

When efforts to resolve these items failed and realizing that any reasonable business

relationship had ceased Mr Carleton brought suit in May 2004 to dissolve the corporation and to

enjoin Mr Balagurs mismanagement and self-dealing App 10 - 18 In response to the requests

for relief in Carletons pleadings the trial court approved temporary orders to limit Mr Balagurs

actions App 49 Thereafter on January 12 2005 Adrienne Balagur filed a Motion for Leave to

File Election to Purchase in Lieu ofDissolution pursuant to RSA 293-A1434(a) which the

court granted on February 17 2005 App 56 When the parties could not agree on the purchase

price offered by Adrienne Balagur for Carletons shares under RSA 293-A1434(c) they pursued

extensive discovery and lengthy pretrial proceedings before eventually proceeding to trial under

RSA 293-A1434(d) On October 222007 the court issued an order on the fair value purchase

price of Carletons shares App 6l

On January 22008 following the courts order on the value of Carletons shares the

Balagurs filed a Motion to Terminate the Rights and Status ofCarleton LLC as a Shareholder

App 83 On February 13 2008 the court granted the Balagurs motion stating that it accepts the

defendants invitation to consider Carleton a creditor ofMTS until he receives payment for the

4

shares purchased Order App 90 The court then stated that [l]ogic compels enforcement of the

statute by treating Carleton as a creditor rather than as a shareholder ofMTS following the entry

of an order valuing his shares for purchase even if [the October 22 2007] order is not final

because its has been appealed to the New Hampshire Supreme Court Id Finally the court

recognized that

[b ]y granting Carleton the status of a creditor the Court preserves his remedy of receiving payment for his shares and protects his rights Carleton therefore assumes no risk by entrusting the management of MTS to the Balagurs with whom the ownership of MTS will reside because he bears no risk of a reduction in value of the shares due to subsequent mismanagement

Id at App 91 In response to subsequent motions by the parties and in light of the repeated

concerns expressed by Carleton concerning the management of MTS the trial court issued a

subsequent order on March 122008 App 93 - 97 Elaborating on Carletons status the court

stated

To protect and preserve the value of the award provided to Carleton by the Court in granting the election remedy sought by Mrs Balagur the Court deems it appropriate and necessary to provide security to Carleton The primary asset of MTS is the Whipple Building MTS and Balagur have concerns that Carleton will waste the assets of the entity to their disadvantage while he retains the MTS books and checkbook while Carleton raises the same concerns with respect to MTS and Balagurs actions once they are placed in total control of the entity Accordingly the Court GRANTS the relief sought in Prayer E as modified herein and enters the following orders in connection with this matter

1 Carleton LLC and Bukk Carleton shall be and are granted an attachment on the Whipple Building to the extent of One Million ($100000000) Dollars This attachment shall be recorded within 15 days from the date of this order

2 MTS shall execute a security agreement to Carleton of all tangible personal property of MTS including furniture fixtures equipment inventory chattel and proceeds therefrom to the extent of One Million ($100000000) Dollars

5

3 Additionally MTS Development Corp shall execute a Conditional Assignment ofLeases and Rents to Carleton of all rent proceeds payable to MTS from all tenants This Conditional Assignment of Rents shall be considered further security for the interests of Carleton LLC and Bukk Carleton as evidenced by the Courts order on evaluation dated February 232007 Carleton will gain the ability to access this income stream on the condition of the Balagurs default or inability to pay the amount determined to be due Order App 94 - 95

The court went on to state that

This Courts order converting Carletons status from that of a shareholder to that of a creditor is therefore not final because the Motion to Reconsider tolled the appeals period and the order is not final until after the appeals period has passed See Super Ct R 74(a) (an action of the Court shall be deemed final where no motion or an untimely filed motion has been filed after verdict or decree on the thirty-first day from the date on the Clerks written notice that the Court has made the aforementioned entry grant or dismissal) Id App 96

The clerks notice of this order was dated March 122008 and became final thirty-one

days later From that time on the Balagurs assumed total and exclusive control over the

operations and finances of the corporation Pursuant to the courts order Carleton recorded his

Attachment and Collateral Assignment ofLeases and Rents in the Grafton County Registry of

Deeds at Book 2501 Page 899 Neither party appealed these orders

After Carleton received this Courts decision in Carleton I affirming the trial courts fair

value order Carleton requested payment from the electing party Adrienne Balagur Mrs Balagur

refused to purchase the shares Instead she proposed to purchase the shares by making monthly

installments over a twenty-year period Given that Mrs Balagur was well over ninety years old

and that Carleton was then over seventy years old he declined her twenty-year purchase offer

Carleton subsequently filed a Motion to Compel Purchase Pursuant to Shareholder Election App

98 - 99 and the trial court ordered that the purchase be made in full within ninety days Order on

Pending Motions App 100 - 106 The Balagurs appealed and in May 2010 this court affirmed the

6

trial courts order in Carleton II

When Richard Ba1agur moved to have Carleton removed as a shareholder in 2008 he

represented to the court that MTS will be operated in the normal course of its business and

without extraordinary payments to anyone App 85 90 In fact that was not the case Richard

Ba1agur did not operate the corporation in the normal course Since March 2008 to the present

Richard Ba1agur has used his exclusive control over the management operation and finances of

MTS to take extraordinary actions removing value from the corporation and transferring it to his

family As ofApril 2010 Mr Ba1agur had paid himself and his mother over $320000 for their

own use and used corporate assets to pay their attorneys fees for this very litigation Motionfor

Reconsideration 110 - 1115 At the same time through the very inattention and mismanagement

that Carleton alleged eight years ago MTS has lost tenants With these payments and

mismanagement Richard Ba1agur has depleted the financial resources of the corporation

reducing its value while enriching himself A pro-rata distribution of the liquidation proceeds from

a corporate sale now after the Ba1agurs have already removed significant value from the

corporation will only reward that conduct

5 In contrast prior to Carletons removal as a shareholder the shareholders each had received about $24000 per year App 111

7

SUMMARY OF THE ARGUMENT

In March 2008 following the determination of the fair value to be paid by Adrienne

Balagur for Carletons shares the trial court removed Carleton as a shareholder and granted to

the defendants exclusive control over the operation and finances ofMTS Because the trial court

deem[ ed] it appropriate and necessary to provide security to Carleton once the Balagurs were

placed in total control of the entity the trial court made Carleton a secured creditor ofMTS

with an attachment on the corporations real estate

When the defendants proposed to dissolve MTS disregard Carletons secured party

status and instead pay Carleton only a pro rata share ofthe liquidated proceeds of the

corporation the trial court refused to enforce its prior final orders In doing so the trial court

erred in its application ofRSA 293-A1434 and erred in failing to enforce its final order in this

case

8

ARGUMENT

I Standard Of Review

Two standards of review apply to this appeal The Supreme Court conducts a de novo

review of the trial courts interpretation and application of statutes See Bendetson v Killarney

154 NH 637 641 (2006) (applying de novo review to trial courts interpretation ofRSA 293shy

A 1434) The Supreme Court reviews the trial courts exercise of discretion to determine

whether the record establishes an objective basis sufficient to sustain the courts discretionary

judgment Id at 647 The trial court has wide latitude in rendering decisions in equity according

to the circumstances of a particular case and will be upheld unless the decision is unsupported

by the evidence or is legally erroneous Id

II The Trial Court Erred In Finding That RSA 293-A1434(g) Prevents The Enforcement Of The Courts Final Order Making Carleton A Secured Creditor Of MTS

The trial court stated that the provisions ofRSA 293-A1434(g) void the provisions of

RSA 293-A 1434(e) Order App 6 Utilizing subsection (g) as a basis for not enforcing

Carletons status as a secured creditor is incorrect Because the court made Carleton a secured

creditor without regard to RSA 293-A1434(e) its reference to RSA 293-A 1434(g) as the basis

for not enforcing Carletons secured party status was in error

As of March 2008 the only proceedings that had occurred under RSA 293-A 1434 were

those conducted pursuant to subsections (a) (b) and (d) As of that date no further orders under

any of the other subsections had been issued In particular no order on purchase terms and

conditions had been made under subsections (c) or (e) and thus there could not have been any

orders issued under subsection (t) See RSA 293-A 1434(t) (Upon entry of an order under

9

subsections (c) or (e) the court shall dismiss the petition to dissolve the corporation and the

petitioning shareholder shall no longer have any rights or status as a shareholder of the

corporation except the right to receive the amounts awarded to him by the order of the court

which shall be enforceable in the same manner as any other judgment) (emphasis added)

Because the parties never agreed on a price for the stock no order was ever issued under

subsection (c) The order on purchase terms and conditions under subsection (e) was only issued

some seventeen months after the court made Carleton a secured creditor and occurred only at

Carletons request when Adrienne Balagur refused to proceed with the share purchase See

Order dated July 292009 App 100 The defendants acknowledged that no order on terms and

conditions under subsection (e) had been issued when they argued for a hearing on the matter

stating that

[u]nder RSA 293-A1434(e) the Court is required after determining the shares fair value to enter an order directing the purchase on such terms and conditions as the court deems appropriate

Before setting the terms and conditions for the purchase of the shares the Court should hold a hearing at which the parties would be given an opportunity to present evidence regarding the respective equities

Defendants Opposition to Motion to Compel Purchase Pursuant to Shareholder Election App

117 - 118 See also Defendants Brief in Carleton III at p 10 fn 4 (The terms and conditions

of payment were set by the trial court in July of 2009)

The Balagurs acknowledgment that no order had been issued under subsection (e) as of

2009 corroborates that the order making Carleton a secured creditor was issued not pursuant to

subsection (e) but rather pursuant to the courts inherent equitable authority See eg RSA 293shy

A 1434(b) (After an election has been filed by the corporation or one or more shareholders the

10

proceeding under RSA 293-A1430(b) shall not be discontinued or settled nor may the

petitioning shareholder sell or otherwise dispose ofhis shares unless the court determines that it

would be equitable to the corporation and the shareholders other than the petitioner to permit

such discontinuance settlement sale or other disposition) Because the order making Carleton

secured creditor was not issued under subsection (e) subsection (g) could not have voided it See

RSA 293-A 1434(g) (Upon filing of such articles of dissolution the order entered pursuant

to subsection (e) shall no longer be of any force or effect) (emphasis added)

The courts error in referencing subsection (g) not only misreads the statute but imposes a

substantial detriment and prejudice to Carleton After this Court affirmed the trial courts orders

on purchase tem1S and conditions in Carleton II Richard Balagur sought to dissolve MTS

asserting that Carleton would be paid only a pro-rata share ofthe liquidation proceeds without

regard to the security granted to Carleton by the trial court in March 2008 The difference is

significant and the trial court recognized that it would result in the realistic expectation of a

substantially lower payout [to Carleton] than was ensured under the fair value analysis Order

November 302011 App 6 - 7

When the trial court determined the fair value of Carltons stock the value of the real

estate and liquid assets of the corporation was determined to be $1748513 Order on Motion to

Reconsider December 5 2007 App 82 Both before and after the courts fair value

determination Carleton questioned both Adrienne Balagurs financial ability to purchase the stock

and Richard Balagurs ability and trustworthiness to manage the corporation See eg Motion

for Contempt and Appointment ofProperty Manager App 122 Motion to Require Sale of

Property App 127 Motion to Show Cause to Demonstrate Ability to Purchase Stock App 129

11

Memorandum Regarding Receivership App 133 At the same time Richard Balagur sought to

remove Carleton from all managerial aspects of the corporation See App 83 The trial court

addressed these continuing disputes between the parties by granting the defendants motion to

remove Carleton as a shareholder but in so doing the court also recognized Carletons concerns

about receiving payment and the Balagurs management ofMTS Thus the court made Carleton a

secured creditor in order to preserve the integrity of the statutory scheme set out under RSA

293-A et seq Order March 122008 App 89 93 Compare with Marsh v Billington Farms

LLC No 04-3123 at 23-24 (RISuper 8-2-2007) (electing parties are the only individuals who

must bear the future risks arising from ownership of the entity)

When the defendants attempted to dissolve MTS in 2011 in order to avoid the payment

orders affinned by this Court Carleton requested that the trial court enforce its final orders that

removed him as a shareholder and made him a secured creditor of the corporation Renewed

Motion to Enforce Creditor Status App 136 The court declined to do so holding that

subsection (g) ofRSA 293-A1434 barred enforcement of its prior equitable orders Order

App 7 In light of the statutory scheme under RSA 293-A 1434 and the proceedings which had

occurred as of March 2008 when Carleton was made a secured creditor the courts reference to

subsections (g) as voiding that secured creditor status was in error Because Carleton was

removed from MTS in March 2008 well before the purchase tenns and conditions order was

issued in July 2009 under subsection (e) ofRSA 293-A1434 subsection (g) ofRSA 293shy

A1434 is inapplicable to Carletons status as a secured creditor of the corporation The trial

court erred in finding that the application ofRSA 293-A1434(g) prevented it from enforcing

Carletons secured party status

12

III The Courts March 2008 Order Making Carleton A Secured Creditor Was Final And Could Not Be Altered Or Vacated

On February 13 2008 the trial court granted the Balagurs motion to terminate

Carletons rights as a shareholder App 89 In response to Carletons motion to reconsider the

trial court issued a subsequent order on March 122008 stating that its February 13 2008 order

converting Carletons status from that of a shareholder to that of a creditor was not final because

the [plaintiffs] Motion to Reconsider tolled the appeals period App 93 It then advised the

parties that the order is not final until after the appeals period has passed citing Superior Court

Rule 74(a) Id The date of the clerks notice of the latter order was March 122008 As no

appeal was filed the courts order became final on April 12 2008

These two orders transferred Carletons status from that of a shareholder to that of a

secured creditor and granted the Balagurs exclusive control over the operations and finances of

MTS See Marsh v Billington Farms LLC No 04-3123 at 23-24 Neither parties appealed the

order SUP CT R 7(1) (2) and both parties proceeded to act in accordance with the order once

it became final See generally SUPER CT R 74 Kalil v Town oDummer 159 NH 725 729

(2010) (The trial court issued its final order in the ZBA appeal on April 15 2008 This order

became a final judgment thirty-one days later) (citation omitted) Arsenault v Scanlon 139

NH 593594 (1995) (The trial courts order ofJuly 201992 became a final judgment when

the plaintiffs failed to appeal within the required period) (citing SUPER CT R 74) Simpson v

Young 153 NH 471 473 (2006) (Because the defendant did not appeal the final order or file a

cross-appeal we will not review it) (citations omitted) CI Massaro v Carter 122 NH 804

806 (1982) (final judgment had not been entered allowing trial court to reverse itself) (citing

13

Redlon Co v Corporation 91 NH 502 503 (1941))

Once this Court affinned the trial courts order on the fair value of Carletons stock the

trial courts role in the dissolution and election proceedings under RSA 293-A34 was completed

All of the proceedings since have only concerned the enforcement of that order No appeal and no

further proceedings were held on issues relating to Carletons secured party status see SUPER

CT R 74(a) which became a final order on April 13 2008 See Order on Pending Motions App

93 As a final order the designation of Carleton as a secured party may not be reversed or

vacated

IV Adrienne Balagur Is Estopped From Avoiding Her Election To Purchase Carletons Shares

Estoppel may generally be defined as a bar which precludes a person from denying or

asserting anything to the contrary of that which has in contemplation of law been established as

the truth by his own deed acts or representations either express or implied Great Lakes

Aircraft Co v City ofClaremont 135 NH 270 289 (1992) (citation and ellipsis omitted) In the

present case Adrienne Balagur is both equitably and judicially estopped from avoiding her

purchase of Carletons shares for which she requested pennission from the trial court in 2005

and then represented she would purchase no matter what the Supreme Court decides

Defendants Memorandum in Opposition to Appointment ofReceiver App 148 Compare with

Order on Pending Motions App 94 ([Defendants] do offer security for MTS stock to

adequately protect Carleton from any risk ofloss as the result of the divestiture of its interest in

the company)

14

In the seven years since Adrienne Balagur made her election to purchase she and her son

have repeatedly represented that she would follow through on the purchase of Carletons shares

regardless of the circumstances The following is a sample of the representations the Balagurs

have made regarding their commitment to proceed with the share purchase

1 June 8 2006 - Defendants Opposition to Motion to Show Cause Ability to Purchase

Stock When Carleton questioned Mrs Balagurs financial ability to purchase

Carletons stock her attorney wrote that Carleton needs to accept the fact that

his shares of stock will be purchased by Mrs Balagur App 155

2 February 13 2007 - Reply Memorandum ofDefendant Richard Balagur and Adrienne

Balagur to Carleton LLCs Supplemental Memorandum Mrs Balagur has

sufficient assets to either purchase the shares outright or with financing depending

on the value set by the court and other economic factors App 160

3 January 22008 - Defendants Motion to Terminate Rights and Status ofCarleton

The court has set a value for Carletons MTS shares there will be a closing to

transfer those shares Adrienne Balagur has a right to expect that until the closing

the Company would be operated in the normal course App 85

4 February 82008 - Defendants Memorandum in Opposition to Appointment of

Receiver Mrs Balagur will be purchasing the shares no matter what the Supreme

Court decides App 148

5 May 222009 - Defendants Memorandum in Opposition to Plaintiffs Motion to

Compel Purchase Pursuant to Shareholder Election Carleton would be well

secured under the proposed transaction by a first mortgage on the Whipple

15

Building App 171

6 May 19 2010 - The defendants voted Carletons shares in adopting articles of

dissolution The records of the Secretary of State show that Richard Balagur

signed and filed Articles of Dissolution on July 172010 App 177 - 178 The

Articles indicate that a vote was taken on May 19 2010 and that 1000 shares

voted in favor of dissolution Since Richard Balagur held 400 shares and Adrienne

Ba1agur held 100 shares the remaining 500 voted shares were those formerly of

Carleton and were voted not by Carleton but by the defendants App 14 22 6

The party asserting estoppel must prove four essential elements first a representation or

concealment ofmaterial facts made with knowledge of those facts second the party to whom the

representation was made must have been ignorant of the truth of the matter third the

representation must have intentionally or through culpable negligence induced the other party to

rely upon it and fourth the other party must have been induced to rely upon the representation to

his or her injury Great Lakes Aircraft Co 135 NH at 289 (citation omitted)

In this case Adrienne Balagur represented that she would buy Carletons stock no matter

what App 148 Carleton and the trial court relied on these statements and had no reason to

doubt Adrienne Balagurs intentions as stated above Her statements made through her counsel

were intended to induce Carleton and the trial court to believe she in fact would follow through

6 The voting of a petitioning shareholders stock by the shareholder who elected to purchase those shares was noted in Jones v Pfaff No 2D-11-2525 at n1 (FlaApp2 Dist 1-20shy2012) where the appellate court stated that Floridas statute speaks in terms ofthe corporations filing such a notice of dissolution The court observed that [ w] e question whether Pfaff as a fifty percent shareholder who was at odds with the other fifty percent shareholder had the authority to file the notice on behalf of the corporation App 182

16

on her commitment to purchase Carletons shares In March 2008 Carleton was removed from

any role in the corporation but he relied on her statements and assurances Carleton did not

appeal the trial courts order removing him from the corporation in reliance upon defendants

statement and the courts order and in consideration of his having been made a secured creditor

Moreover Adrienne Balagur and her son held themselves out to the Secretary of State as the

owners of Carletons shares when they voted the shares to adopt articles of dissolution App 177

Adrienne Balagur is now estopped from denying her representations which were confirmed by her

actions in voting Carletons shares in the Balagurs attempt to dissolve MTS

Although similar to equitable estoppel judicial estoppel also prevents Adrienne Balagur

from denying her obligation to purchase Carletons shares Judicial estoppel protect[s] the

integrity of the judicial process by prohibiting parties from deliberately changing positions

according to the exigencies of the moment New Hampshire v Maine 532 US 742 749-750

(2001)

As this Court has stated

The doctrine ofjudicial estoppel generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase We have noted three factors that typically inform the decision whether to apply the doctrine in a particular case

One factor to consider in deciding whether to apply the doctrine ofjudicial estoppel is whether the partys later position is clearly inconsistent with its earlier position Courts also regularly inquire whether the party has succeeded in persuading a court to accept that partys earlier position A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped

Cohoon v IDM Softrvare Inc 153 NH 1 4 (2005) (citations ellipsis and quotations omitted)

Cf In re Carr 156 NH 498 503 (2009) Gudicial estoppel found not to apply where party

17

asserting it failed to establish any unfairness resulted from the allegedly inconsistent positions of

the opposing party)

In this case the defendants current position seeking to avoid the purchase of Carletons

stock is clearly inconsistent with their earlier positions where Adrienne Balagur committed herself

to purchase Carletons shares regardless of the circumstances See Defendants Opposition to

Motion to Show Cause Ability to Purchase Stock App 150 Memorandum in Opposition to

Appointment ofReceiver App 141 Cf Articles ofDissolution App 177 Since requesting leave

from the trial court in 2005 to purchase Carletons shares Mrs Balagur has defended her right to

purchase them made proposals to purchase the shares represented to the court that she would

purchase the shares no matter what and has voted the shares despite never having completed

the purchase Now she seeks to avoid the share purchase to which she committed herself in

direct contradiction to her earlier position Cohoon 153 NH at 4

Mrs Balagur succeeded in persuading the court to accept her election to purchase and

continually represented her intention to complete the purchase over the course of the last seven

years App 56 141 150 When she sought to remove Carleton as a shareholder in 2008 Adrienne

Balagur convinced the trial court that Carleton should have no further role in the corporation

because she would be purchasing his shares App 89 93 148 The court accepted her position

and removed Carleton from all participation in the corporation Cohoon 153 NH at 4 (Courts

also regularly inquire whether the party has succeeded in persuading a court to accept that partys

earlier position)

Finally Adrienne Balagurs attempt to avoid the election would provide an unfair

advantage to the defendants who have maintained sole financial control over MTS for the last

18

four years Cf In re Carr 156 NH at 503 Pennitting the change in position she now seeks

would impose an unfair detriment to Carleton by depriving him of the fair value ofhis stock which

she had requested permission and then with the approval of the court committed to purchase

App 60 In exchange for the Balagurs having total control over the corporation Carleton

accepted his status as a secured creditor with an attachment to assure the payment for his shares

The trial court erred in not enforcing its prior order establishing Carletons secured creditor

status having permitted the Balagurs free and complete control over the corporate assets to their

own advantage for the past four years leaving Carleton with a pro rata share of the depleted

liquidated corporation

V Corporate Dissolution Is An Equitable Proceeding

A RSA 293-A1434 Does Not Constrain The Trial Courts Authority To Issue Equitable Orders In Judicial Dissolution Proceedings

In the Order that is the subject of this appeal the trial court was fully aware of Carletons

untenable position

The underlying thread of Carletons argument is that it was unfair to be thrown out three years ago as shareholder be held in abeyance for three years go through multiple hearings resulting in orders and appeals to the Supreme Court during which time Richard Balagur controlled the destiny of MTS without regard to Carletons rights and then simply changes the rules three years later to bring Carleton back in as a shareholder with the realistic expectation of a substantially lower payout than it was ensured under the fair value analysis

The court is not unsympathetic to Carletons plight

Order App 6 - 7

However the trial court continued stating that it was constrained by the application of

19

RSA 293-A1434(g) and that the trial court had no authority to enforce Carletons position as

creditor in view ofthe statutory provisions established Order App 7 (emphasis added) This

statement is legally erroneous and does not properly reflect the role of the court in corporate

dissolution proceedings By not enforcing Carletons status as a secured creditor the trial court

erred in retreating from its prior equitable order

The trial court is empowered and at times expected to exercise its equitable authority

under the appropriate circumstances to promote justice See eg Turco v Town ofBarnstead

136 NH 256 264-265 (1992) (finding defendant town was estopped from not maintaining road

and remanding with instructions to fashion appropriate equitable remedy) LaMontagne Builders

v Bowman Brook Purchase Group 150 NH 270274-275 (2003) Terren v Butler 134 NH

635641 (1991) (upholding alter-ego equitable remedy where evidence showed inter alia that the

subject corporation continued to distribute its assets at a time when several claims had been

made against it) In some cases these equitable considerations require the issuance of orders

and remedies outside the statutory provisions found under RSA chapter 293-A See eg RSA

293-A 1434(b) (petitioning shareholder may not sell or otherwise dispose of his shares unless

the court determines that it would be equitable to the corporation and the shareholders other than

the petitioner to permit such discontinuance settlement sale or other disposition)

The court exercised exactly this equitable authority when it removed Carleton as a

shareholder and made him a secured creditor of the corporation See Order On The Motion To

Terminate App 89 As the trial court then stated it accepts the defendants invitation to apply

other jurisdictions solutions and consider Carleton a creditor ofMTS until he receives payment

for the shares purchased Logic compels enforcement of the statute by treating Carleton as a

20

creditor Id at App 90 This same understanding was expressed by the trial court in its

subsequent order where it found that in order to preserve the integrity of the statutory scheme

set out under RSA 293-A et seq certain safeguards are appropriate Order on Pending

Motions App 94 This Court has upheld similar orders to enforce the principles of fair play that

the legislature intended in enacting RSA 293-A1434 See Bendetson 154 NH at 645

The trial court in this case was mistaken that it was constrained by the application of

RSA 293-A1434(g) in its ability to address the circumstances of this case The trial courts

inherent equitable authority empowered it to address the circumstances of this particular case to

order that which in fairness and good conscience ought to be or should have been done Chase

v Ameriquest Mortgage Company 155 NH 19 24 (2007) (It is the practice of courts of

equity having jurisdiction to administer all relief which the nature of the case and facts demand)

(citation and quotation omitted) The superior court is such a court of equity see Holloway

Automotive Group v Lucie 163 NH 612 (2011) and its inherent equitable authority has been

recognized in a variety situations See generally Boynton v Figueroa 154 NH 592 608 (2006)

(trial court has inherent equitable authority to require defendants in negligence action to post

security) (citing RSA 498 1) In the Matter ofAube amp Aube 158 NH 459 462 (2009) (trial

courts have the inherent discretion when equitably dividing assets under RSA 458 16-a)

(citation omitted) Mayo v Knapton 118 NH 926 928 (1978) (We agree that a trial court has

in the exercise of its sound discretion inherent power and authority to set aside a summary

judgment) Additionally the role of equity as incorporated in the dissolution statutes is

furthered by RSA chapter 498 which grants the trial courts the powers of a court of equity in

the affairs of partners j oint tenants or owners and tenants in common cases in which there is

21

not a plain adequate and complete remedy at law and in all other cases cognizable in a court of

equity RSA 4981 (2009) Compare with Bogosian 923 F 2d 898 904 (1 st Cir 1991) (court

maintains its equity powers throughout dissolution and buyout proceedings)

Moreover corporate dissolution and reorganization proceedings are traditionally

proceedings in equity giving the trial court broad discretion to address the factual background of

the matter under consideration Id See also 19 Am Jur 2d Corporations sect2375 at 481 (2004)

(The dissolution of a corporation is an equitable action in which jurisdiction is granted by statute

and a court of equity is to take jurisdiction of the cause and then exercise its discretion in

granting or refusing equitable relief) (citing Struckhoffv Echo Ridge Farm Inc 833 SW2d

463 (Mo App ED 1992)) Id (Trial courts have broad discretion to issue orders protective of

corporate assets pending dissolution) (citing Matter of212 East 52nd Street Corporation 185

Misc 2d 95 (2000)) In Bogosian the First Circuit upheld the district courts exercise of its

broad equity powers to require the electing party to pay the petitioner dividends during the

pendency of the buyout proceeding in that case Bogosian 923 F 2d at 904-905 ([Defendant]

provides us with no reason nor can we think of any why a legislature would want a court to

loose its equity powers when a corporation in the midst of a dissolution proceeding elects the

buyout alternative) (citation omitted) Similarly in Peck v Jonathon Michael Builders Inc

No 06-0236 (RISuper 10-26-2006) the court looked to the historic purposes of equity in the

dissolution context and held that equity has inherent jurisdiction independently of statute to

appoint a receiver in certain cases

In this case although the trial court recognized Carletons plight Order at 7 it erred in

ruling that it was constrained by an inapplicable subsection of the statute supra at 9-12 and in

22

abandoning its prior ruling on Carletons status as a creditor ofMTS a final ruling made pursuant

to the trial courts inherent equitable authority in March 2008 Bogosian 923 F2d at 904-905

The events that followed demonstrate that both parties relied upon that ruling and why Carletons

secured party status should now be confirmed

1 the court order granting defendants the sole and complete exercise of control over the

management and financial affairs of the corporation became final in April 2008

2 the order removing Carleton as a shareholder and making Carleton a secured creditor

became final in April 2008

3 once Carleton was removed as a shareholder the Balagurs voted to removed him as a

director leaving Carleton without any access to infomlation about the operations

ofMTS

4 the trial courts determination of the fair value of Carletons stock was affirmed

5 during the four years of defendants sole and exclusive management of the corporation

they have reduced the value of the real estate

6 since April 2008 the defendants have withdrawn over $300000 in corporate funds

including funds to defend their personal interests in this litigation

7 the defendants themselves voted Carletons shares in favor of dissolution

8 having succeeded in reducing the value of the corporation the defendants offered to

pay Carleton a pro-rata share of the liquidation value of the corporation based on

his former shareholding and after having depleted corporate assets to their own

advantage for the past four years

Compare with Bogosian v Woloohojian Realty Corp 973 FSupp 98 102-103 (RI 1997)

(detailing electing partys efforts to resist making payment to plaintiff) See also Id at 110

(discussing plaintiff s forced creditor status under circumstances similar to the present case)

For the past four years Carleton has relied on the courts orders that made him a secured

creditor and assigned ownership of the corporation solely to the defendants See Marsh v

23

Billington Farms LLC No 04-3123 at 23-24 (electing parties are the only individuals who must

bear the future risks arising from ownership of the entity) The defendants proposal to pay

Carleton a liquidation value as ifhe were a shareholder is unjust in light of these events and given

the equitable authority of the court See generally NH Donuts Inc v Skiptaris 129 NH 774

783 (1987) (it is the historic purpose of equity to secure complete justice) (quotation omitted)

Chase v Ameriquest Mortgage Company 155 NH at 24 (The court has broad and flexible

equitable powers which allow it to shape and adjust the precise relief to the requirements of the

particular situation A court of equity will order to be done that which in fairness and good

conscience ought to be or should have been done It is the practice of courts of equity having

jurisdiction to administer all relief which the nature of the case and facts demand) (citation and

quotation omitted) Turco 136 NH at 265 (This court and the superior court have equitable

powersand may fashion equitable remedies) (citations omitted)

B The Dissolution Statute Empowers the Court to Enforce Principles of Fair Play

The Supreme Court has previously recognized that in enacting RSA 293-A1434 the

legislature expressly incorporated the trial courts authority to consider the equities at play in a

particular case Bendetson 154 NH at 645 Explicit reference to the courts equitable powers

in both RSA 293-A1434(a) and (b) indicates that the legislature intended to empower the court

to enforce principles of fair play in a situation that is often rife with tension and ill-will Id

Compare with Matter 0212 East 52nd Street Corporation 185 Misc2d at 100 (discussing

broad discretion available to courts under New Yorks dissolution and buyout provisions to

24

issue orders deemed protective of corporate assets pending dissolution) In this case the trial

courts orders that tenninated the rights of Carleton as a shareholder and made him a creditor

were issued after consideration of the equities in this case and reflected a fair balance of the

parties competing interests See Bendetson 154 NH at 645

These concepts of fairness and equity are discussed at length in Revoking the Irrevocable

Buyout Aligning Equity with Due Diligence in Corporate Dissolution 75 Albany Law Rev 15

(2012) App 183 where the Honorable Matthew C Lucas explained that

Judicial dissolution of a closely held corporation the corporate divorce is one of the most acrimonious expensive and by almost all accounts unpopular oflegal remedies available in business litigation

Id at App 183

Judge Lucas continued that

Apart from the predictive concerns an elective buyout option also invited a more sinister externality Courts allowing shareholder buyouts in lieu of dissolution had long decried gamesmanship on the part of the electing shareholder or corporation The election to purchase could provide an avenue for a viable business to endure a shareholders petition to dissolve its existence but it could also be used by the corporation or its majority owners as a potent weapon to temporarily silence that same shareholder leaving them free to continue with the allegedly oppressive conduct that may have given rise to the dissolution action in the first place The fear was not unfounded a majority ownership in control of the businesss assets could in theory protract the entire process to the point of breaking the minority shareholders means only to renege on its offer to buy the petitioners shares

Id at App 193 - 1947

7 Here the author includes the following footnote Bogosian v Woloohojian 749 F Supp 396 399 (DRI 1990) (It should not be expected that the General Assembly of the State of Rhode Island intended to vest such capricious power in a corporation or that it intended to deny an opposing shareholder her rights so completely [as to expressly limit revocably] and without a remedy Of course the statute must be construed to avoid such an absurd result)

25

While the author speaks in terms of in theory such a description could not be mltre

accurate in describing the present case Even before the commencement of Carletons efforts to

divorce himself from the Balagur family in 2004 he suggested that the corporations assets be

sold and the proceeds divided or to have one party buyout the other App 15 After Adrienne

Balagur made her election to purchase Richard Balagur offered to buy Carletons shares for a

mere twenty-percent of the value ultimately determined by the trial court Then when the fair

value of the shares was determined Richard Balagur suggested that his mother in her mid-

nineties would purchase Carletons shares in installments over a twenty-year period App 169

When that was rejected by Carleton the defendants sought to dissolve the corporation and pay

Carleton the same meager percentage that they offered in 2005 In this case the defendants have

clearly protract [ed] the entire process to the point of breaking the minority shareholders

[Carletons] means only to renege on [her] offer to buy the petitioners shares Id

The Supreme Courts opinion in Bendetson was highlighted in the same article focusing

on the proper role of equity in dissolution and election to purchase proceedings

In Bendetson v Killarney Inc the New Hampshire Supreme Court affirmed the trial courts sua sponte revocation of a shareholders election to purchase shares under the states buyout statute On appeal the court in Bendetson recognized and indeed to a degree struggled with the language ofthe buyout election provision and the sua sponte revocation by the trial court But the statutes incorporation of equitable principles triumphed over grammatical convention

One need not dive very far beneath the surface of this procedural dispute (whether a trial court could revoke an election to purchase on its own motion) to discover the strong current of equity propelling the outcome [A]ccording to the New Hampshire Supreme Court because the reference to equity in the statutes provision indicates that the legislature intended to empower the court to enforce the principles of fair play - an empowerment that apparently justified the trial courts insertion of those principles on its own accord

26

Id at 31-33 (footnotes omitted)

The exercise of equitable authority in corporate dissolution proceedings assures fairness to

all parties In this case the trial court failed to balance the competing interests of the parties as it

had done previously in 2008 and it failed to enforce the principles of fair play embodied in RSA

293-A 1434 and as recognized by this Court in Bendetson

27

CONCLUSION

The defendants specifically requested that Carleton be removed as a shareholder so that

they could have full and exclusive control over the operations of the corporation In March 2008

the trial court granted their request but recognizing Carletons justified concerns found that

certain safeguards were required to protect Carleton In accepting the defendants assurances of

purchase and their offer of security the court made Carleton a secured creditor with an

attachment on the corporations property

In light ofthe specific language ofRSA 293-A1434 and the events since that order was

issued - including the defendants repeated assurances to purchase the shares during which they

controlled MTS to Carletons exclusion - the trial court erred in not enforcing its March 2008

final order making Carleton a secured creditor an order issued to protect and preserve not only

Carletons award but also the integrity of the judicial dissolution process

The trial courts March 2008 order guaranteeing payment to Carleton and making him a

secured creditor should be enforced

28

REQUEST FOR ORAL ARGUMENT

The plaintiffs Carleton LLC and Bukk Carleton request that Barry C Schuster Esq be

allowed to present its oral argument before the Court

Respectfully submitted Carleton LLC and Bukk Carleton By their Attorneys

April 192012 BYc1E~L~ Barry C Sch ster Esq Bar 2280 Eric G Derry Esq Bar 19325 Schuster Buttrey amp Wing PA 79 Hanover Street P O Box 388 Lebanon NH 03766 603-448-4780

CERTIFICATION OF SERVICE

I hereby certify that two (2) copies of this Brief were mailed this 19th day of April 2012 to Geoffrey Vitt Esq attorney for Richard Balagur Adrienne Balagur and MTS Development Corp

LL~ Barry C Sthuster Esq 2280

29

T ABLE OF CONTENTS

TABLE OF AUTHORITIES bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bullbull 11

QUESTIONS PRESENTED iv

STATUTORY PROVISIONS vi

STATEMENT OF THE CASE 1

STATEMENT OF THE FACTS 3

SUMMARY OF THE ARGUMENT 8

ARGUMENT 9

I Standard Of Review 9

II The Trial Court Erred In Finding That RSA 293-A1434(g) Prevents The Enforcement Of The Courts Final Order Making Carleton A Secured Creditor Of MTS 9

III The Courts March 2008 Order Making Carleton A Secured Creditor Was Final And Could Not Be Altered Or Vacated 13

IV Adrienne Balagur Is Estopped From Avoiding Her Election To Purchase Carletons Shares 14

V Corporate Dissolution Is An Equitable Proceeding 19

A RSA 293-A1434 Does Not Constrain The Trial Courts Authority To Issue Equitable Orders In Judicial Dissolution Proceedings 19

B The Dissolution Statute Empowers The Court To Enforce Principles Of Fair Play 24

CONCLUSION 28

REQUEST FOR ORAL ARGUMENT 29

CERTIFICATION OF SERVICE 29

APPENDIX (separately bound)


CASES














In re Carr 156 NH 498 (2009) 17 19







11














COURT RULES



OTHER AUTHORITIES



111

QUESTIONS PRESENTED













IV





v










VI





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29


CASES














In re Carr 156 NH 498 (2009) 17 19







11














COURT RULES



OTHER AUTHORITIES



111

QUESTIONS PRESENTED













IV





v










VI





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29














COURT RULES



OTHER AUTHORITIES



111

QUESTIONS PRESENTED













IV





v










VI





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29

QUESTIONS PRESENTED













IV





v










VI





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29





v










VI





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29










VI





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29





VB









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5








Deeds at Book 2501 99 Neither party appealed these orders









6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29









Balagur No 2008-0008 (NH 1-21-2009)





2009-0708 (NH 5-13-2010)







1











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29











creditor ofMTS




2






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29






















3























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























4





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29





recognized that





stated




5

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29

















6

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29

















7












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29












case

8

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29

ARGUMENT





















9











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29











stating that










10























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























11























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























12






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29






















13








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29








vacated












the company)

14























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























15

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29

Building App 171



















16













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29













(2001)






17


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29


the opposing party)


















earlier position)



18













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29













untenable position



Order App 6 - 7


19























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























20























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























21























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29























22











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29











ofMTS
















23





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29





















24









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29









Id at App 183



Id at App 193 - 1947


25

















26






27

CONCLUSION














28









29

















26






27

CONCLUSION














28









29






27

CONCLUSION














28









29

CONCLUSION














28









29









29

v. - new hampshire superior court...the state of new hampshire supreme court no. 2012-0061 carleton,...

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