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Graziano v. Grant

December 09, 1999


Before Judges Stern, Kestin and Steinberg.

The opinion of the court was delivered by: Steinberg, J.A.D.


Argued: September 23, 1999 - Decided December 9, 1999

On appeal from the Superior Court of New Jersey, Chancery Division, Camden County.

Defendant/third-party plaintiff Dr. Gerald Grant appeals from the following orders of the Chancery Division: (1) order of December 15, 1998, granting summary judgment in favor of third-party defendant Dr. Marla Tiffany, dismissing Grant's third-party complaint and all claims associated with it; (2) order of January 4, 1999, requiring Grant and defendant South Jersey Allergy Associates, P.A. (South Jersey or the corporation) to pay Tiffany's attorney's fees in the amount of $7,500 and costs in the amount of $514.60, as well as an order of January 20, 1999, extending the time for payment of those fees, and further directing that the corporation shall not be responsible for payment of costs or counsel fees; (3) order of January 21, 1999, granting summary judgment to plaintiff, Dr. Linda M. Graziano; and (4) order of January 25, 1999, requiring Grant to pay Graziano $25,071.81 for attorney's fees and costs. The order of January 21, 1999, mandated specific performance of an agreement Graziano alleges Grant entered into calling for his retirement and Graziano's succeeding him in the practice. That order also required Grant to turn over his stock certificates in the corporation and any other corporate documents within ten days; permitted Graziano's attorney to return to her $9,000 held in escrow pursuant to a prior order of the court; required Grant to pay Graziano $3,276 for automobile expenses; prohibited Grant from treating his former patients of the corporation anywhere for a period of three years from December 11, 1998; prohibited Grant from practicing medicine for three years from December 11, 1998, within a twenty mile radius of the corporation's office; and dismissed, with prejudice, Grant's cross-claim against the corporation and his counter-claim against Graziano. The trial Judge denied Grant's request for a stay pending appeal. We subsequently stayed the orders pending appeal. We now affirm in part; reverse in part, and remand for further proceedings.

The corporation is a medical practice specializing in allergy and asthma treatment. It had been established by Grant and his brother, Dr. Norman Grant, each of whom had twenty-five shares prior to the retirement of Norman Grant. Tiffany had entered into an employment contract with the corporation in 1987. Tiffany's employment contract provided that if the relationship was mutually satisfactory, Grant would sell her nine shares of stock at a purchase price of $5,800 per share. The agreement further provided that the corporation would redeem seven shares of Grant's stock, resulting in Grant and Tiffany each owning nine shares of stock. In September 1992, Tiffany paid Grant $52,200 for the purchase of nine shares of the corporation's stock. Apparently, the corporation never redeemed Grant's seven additional shares.

In 1993, Graziano became a part-time employee of the corporation. Sometime in 1994, Grant and Tiffany agreed that Graziano was doing a good job and would be a good addition to the practice. Accordingly, Grant discussed with the corporation's accountant, Isidore A. Francescone, the preparation of a document that would enable Graziano to become a shareholder in the corporation. According to Tiffany and Graziano , Grant intended to retire. Grant testified at a deposition that he had serious health problems and was concerned that he would not survive three years. According to Grant, the parties contemplated that he would sell his shares of stock, but he contemplated working in some capacity for the corporation. However, that fact was not communicated to Tiffany or Graziano. Francescone prepared a document which began with the phrase "Preliminary proposed conditions".

According to Grant, the document was merely a proposal. On the other hand, Tiffany and Graziano contend that the document (the proposal) was an agreement. One of the "preliminary proposed conditions" contemplated that Grant would stop practicing at South Jersey on October 1, 1994, and would then be paid deferred compensation for three years. However, the proposal also noted that Grant's duties and services for the three-year period "needed to be discussed." The proposal also provided that each share of stock was valued at $8,236. Although the proposal provided that Graziano would acquire nine shares of "corporate stock" for $74,124 and that the corporation would redeem his remaining seven shares for $57,652, the parties appear to agree that in essence Graziano was purchasing the nine shares from Grant. Accordingly, Grant was to receive a total of $131,776, nine-sixteenths to be paid by Graziano for nine of his shares, and the remaining seven-sixteenths of that amount to be paid by the corporation for the redemption of Grant's remaining seven shares. *fn1 The proposal further provided that "[a]ltogether, [Graziano] must pay $74,124 and [Grant] must receive $131,776". In addition, the proposal provided that "[a] 3 year period beginning October 1, 1994 is established to accomplish above".

The proposal further provided that Grant would receive a "deferred compensation contract for three years" paying him $3,750 per month for the first year, for a total of $45,000; $3,250 per month for the second year, for a total of $39,000; and $2,650 per month for the third year, for a total of $31,800. The deferred compensation package was therefore $115,800. However, the deferred compensation package was not in addition to the $131,776, but appears to be a method of funding the pay-out to Grant since the next paragraph provided that the $115,800 in deferred compensation left [Grant] $15,976 "short of the total $131,776 agreed upon price of his sixteen shares". Moreover, the proposal provided that a value of $1,000 per share would be placed on the stock, presumably for redemption purposes, and further provided that Grant would receive $7,000 from the corporation for the redemption of his seven shares, and $9,000 from Graziano for her purchase of his nine shares. That $16,000, coupled with the deferred compensation of $115,800, would totally compensate him in accordance with the proposal.

The proposal went on to provide that in addition to the $9,000 payment Graziano was required to make for her purchase of the shares, the balance of her obligation of $74,000 would be accomplished through reduced salary for the three years. According to the proposal, at the expiration of the three-year period Tiffany and Graziano would own nine shares of the corporate stock and be equal shareholders.

As previously indicated, the proposal further provided that "[t]he continued duties and services expected of [Grant] for the three year period should be discussed." In addition, it specifically provided that "[t]he timing of the actual redemption of the $7,000 by the corporation and the $9,000 payment by [Graziano] to [Grant] must also be discussed." Although the basic intendment of the parties was clearly expressed in the "proposal", some issues were left unresolved.

Since the proposal appears to contemplate that Graziano's salary for three years would have been reduced by a total of $65,000, which would have been her contribution towards the corporation's deferred compensation package to Grant, the parties appear to have permitted Grant to receive $2,000 per month, and Graziano's pay check was correspondingly reduced. At his deposition, Grant testified that this was done in order for Graziano to satisfy her obligation with "before-tax dollars".

Grant did not retire in October 1994. Apparently his health had improved. He contended that he worked two days per week, and Tiffany and Graziano worked three days per week. We cannot determine from the record if there is a factual dispute regarding that contention. In addition, the parties appear to agree that Grant continued to be the administrator of the practice. In addition to his salary, Grant continued to pay sums of money to himself as bonuses.

The parties appear to agree that in early 1997, the relationship between Tiffany and Graziano, on the one hand, and Grant, on the other, became strained. Tiffany and Graziano took the position that Grant should completely stop practicing with them effective October 1, 1997. In April 1997, a meeting took place at Francescone's office in an effort to resolve the lack of harmony. The meeting was attended by Tiffany, Graziano, Grant, Francescone and Graziano's husband, a practicing New Jersey attorney. The differences were not resolved and, on September 26, 1997, Graziano filed suit seeking specific performance of what she contended was the agreement, together with damages, both compensatory and punitive. Simultaneously, the Judge signed an order to show cause which prohibited Grant from: (1) entering the offices of the corporation after September 30, 1997, and (2) contacting or attempting to contact, directly or indirectly, patients of the corporation; and requiring Grant to return lists of patients of the corporation which were in ...

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