Hekemian v. Hekemian

A-722-97T5 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: December 15, 1998

CONTRACTS; SPECIFIC PERFORMANCE—A Court may order specific performance of even an incomplete contract and give an equitable receiver powers equivalent to those of a statutory receiver.

A series of disagreements arose among the shareholders of a family-owned close corporation. Eventually, the shareholders met and, after extended negotiations, adopted the company’s first shareholders’ agreement. Among other things, that agreement provided that either of the two brothers that held the largest number of shares would have the right to initiate dissolution of the corporation if in his sole opinion the working climate was not favorable to the circumstances of the business. That right could not be exercised until at least one year from the date of the agreement. One year later, one of the brothers exercised his right to have the company dissolved. Shortly thereafter, the matter found its way to the courts where the other brother successfully requested appointment of a special fiscal agent to oversee the operation and business affairs of the company. Six months later, the first brother requested the Court to order that the company be dissolved in accordance with the shareholders’ agreement. In response, the other sought an order appointing a special fiscal agent as statutory receiver or provisional director to direct the dissolution of the company in accordance with statutory corporate dissolution procedures. Essentially, he posed two arguments why the statutory dissolution procedure should be employed instead of the procedure in the shareholders’ agreement. His first claim, that the agreement was procured by concealment, fraud, or misrepresentation, was rejected by the lower court and by the Appellate Division on summary judgment. The second argument was that the shareholders’ agreement should not be enforced because it did not clearly dispose of all the company’s assets and it purported to divide assets that were incapable of being divided equally. In response, the other brother responded that the agreement was never intended to address every aspect of the dissolution and that the Court and the receiver were capable of resolving any unresolved issues. The Court agreed that the shareholders’ agreement could be specifically enforced despite its incompleteness. In the Court’s view, it is not necessary for a writing to contain every possible contractual provision to cover every contingency in order to qualify as a binding agreement. Some issues can be determined by operation of law, or the parties may resolve their differences by subsequent agreement, or a contract may be silent in some respects. Any gaps left by the parties should not frustrate their intention to be bound. Moreover, as specific enforcement is an equitable remedy, the courts have a great deal of flexibility in shaping any contract to be specifically enforced. In the exercise of sound judicial discretion, specific performance may be granted upon such terms and conditions as justice requires, even to the extent that the ordered performance not be identical with that promised in the agreement. Even though the receiver would act as an equitable, and not a statutory receiver, he was granted statute-like powers and obligations to dissolve the company. While the main distinction between equitable and statutory receivers is the power to liquidate, here the receiver could act as an arm of the Court which itself has the inherent authority to sell assets within the custody of court-appointed receivers. Consequently, the inherent power of a receiver, and its supervision by a court, provided an adequate method for resolving any corporate dissolution issues not covered by the agreement.