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River Oaks Marine, Inc. v. River Oaks Marina Associates, Inc.
Citations: 227 A.D.2d 897; 643 N.Y.S.2d 798; 1996 N.Y. App. Div. LEXIS 6791Docket: Appeal No. 3
Court: Appellate Division of the Supreme Court of the State of New York; May 31, 1996; New York; State Appellate Court
Order affirmed with costs. The petitioner argued that the Supreme Court wrongly dismissed its request for a judgment to compel River Oaks Marina Associates, Inc. to hold a special shareholders' meeting. The petitioner sought this meeting to vote on the removal of current Board members and to elect replacements. Claiming ownership of 132 shares, the petitioner asserted its right to call the meeting under section 2.03 of the Association by-laws. However, the Association denied the request, stating that the petitioner was not a holder of duly issued and outstanding stock, and thus lacked the authority to call for a special meeting. The court upheld the dismissal, determining that any ambiguity in the offering plan and related documents should be interpreted against the petitioner, who was responsible for their preparation and obligated under General Business Law article 23-A to ensure the offer was detailed and accurate. Section 2.03 of the by-laws specifies that a special meeting may only be called by shareholders owning at least 15% of the outstanding capital stock. The offering plan grants voting rights to unit owners, yet no documentation indicated that the petitioner, as the holder of unsold shares, was entitled to vote those shares. The Association's documents require that stock is issued only upon the execution of a proprietary lease by the purchaser. The petitioner did not fulfill this requirement, as it neither purchased the unsold shares nor executed the necessary leases when the offering plan was enacted, meaning the shares remained unsold and unissued. Additionally, section 3.02 of the by-laws restricts the petitioner to a minority representation on the Board, and allowing control based on unsold shares would contravene this provision. The petitioner’s president acknowledged in correspondence that, despite being a 51% shareholder, the shares could not be voted according to the prospectus. The court reviewed and found the petitioner's other arguments meritless.