Defendant moves to dismiss the complaint, pursuant to CPLR 3211 (a) (1) and (7), on the grounds of a defense founded upon documentary evidence and failure to state a cause of action.

Plaintiff Robert McCully is a former shareholder of defendant Jersey Partners, Inc. (JPI). In August 2001, JPI solicited its shareholders' approval for a corporate reorganization involving the merger of two of its subsidiaries. McCully exercised his right to dissent from the reorganization, under Business Corporation Law (BCL) § 623, and, pursuant thereto, became entitled, upon consummation of the reorganization, "to be paid the fair value of his shares." The reorganization was consummated on November 30, 2001. In or around December 2001, JPI commenced a special proceeding under BCL § 623 (h) (the Appraisal Proceeding) to determine the "fair value" of McCully's shares of JPI stock, and that proceeding concluded in the entry of a judgment in McCully's favor for the value of his shares so determined (see Jersey Partners, Inc. [*2]v McCully, Sup Ct, NY County, Jan. 24, 2007, Ramos, J., Index No. 606119/01).^[FN1]

While he was a shareholder of JPI, McCully had entered into a stockholders' agreement with JPI and its other shareholders, dated as of January 1, 2000 (the Stockholders Agreement). Subsection 7 (b) of the Stockholders Agreement provided that:

[i]f, and as long as [JPI] is an S Corporation, then not later than two and one half months after the end of each fiscal year of [JPI], [JPI] shall declare and pay a dividend in an amount not less than the amount of income tax that would have been payable by [JPI] for the most recently ended fiscal year if no election by the Stockholders of S Corporation treatment had been in effect, calculated using the highest incremental rate in effect in the jurisdictions in which [JPI] maintains its principal place of business.^[FN2]

According to McCully, he and JPI's other shareholders were entitled to receive distributions pursuant to the foregoing provision — so-called "tax dividends" — to enable them to pay income tax on the income allocated to them by JPI.

McCully's complaint asserts that he is entitled to recover $511,260 from JPI, together with interest at the rate of nine percent per annum from March 15, 2002, because JPI: paid him less than the full amount of the tax dividend that he was entitled to receive for fiscal year 2000; and did not pay him any tax dividend for fiscal year 2001 although he was entitled to receive such a dividend.^[FN3] JPI's fiscal year was evidently the same as the calendar year, ending on December 31st of each year.

JPI's motion is granted, and the complaint is dismissed.

The complaint alleges that McCully "received a distribution with respect to the tax return initially filed by defendant for 2000" (Complaint, ¶ 5). However, McCully claims that he was entitled to receive an additional tax dividend payment for 2000 because "a subsequently filed amended defendant tax return for 2000 resulted in an increase in the income allocated to, and related tax payable by, plaintiff, but plaintiff did not receive the corresponding additional tax distribution" (id.). The complaint does not indicate when the purported amended tax return for 2000 was allegedly filed, or the amount by which it allegedly increased either JPI's reported income or McCully's allocated share of JPI's income. Nor is it clear from the complaint what amount McCully claims to be owed on account of JPI's purported underpayment of the tax dividend for 2000, since the complaint lists two amounts which he seeks to recover, but claims interest on both of those amounts running only from March 15, 2002. [*3]

However, JPI has submitted documentary evidence which refutes McCully's claim that JPI was obligated to make an additional tax dividend payment, under subsection 7 (b) of the Stockholders Agreement, because it filed an amended tax return for 2000 which increased, for that tax year, either the amount of JPI's reported income, or the amount of JPI's income that was allocated to McCully. With its moving papers, JPI has submitted copies of what it alleges are the relevant portions of: (1) the originally filed version of JPI's federal tax return for 2000 (the Original 2000 Tax Return), and the Schedule K-1 for McCully included therein, which were filed in September 2001 (see Miller Affirm., Ex. D); (2) JPI's first amended federal tax return for 2000 (the First Amended 2000 Tax Return), and the amended Schedule K-1 for McCully included therein, which were filed on September 17, 2002 (see id., Ex. C); and (3) JPI's second amended federal tax return for 2000 (the Second Amended 2000 Tax Return; collectively, with the Original 2000 Tax Return and the First Amended 2000 Tax Return, the 2000 Tax Returns), and the second amended Schedule K-1 for McCully included therein, which were filed in 2004 (see id., Ex. G). JPI has also submitted copies of three letters (the Letters), allegedly prepared by JPI's accountant, which summarized McCully's allocated portion of JPI's income and deductions as reflected in, respectively, the Original 2000 Tax Return, the First Amended 2000 Tax Return and the Second Amended 2000 Tax Return (see id., Exs. E, F, G). The Letters were allegedly sent to McCully in addition to his aforementioned Schedules K-1.

The 2000 Tax Returns appear to indicate that JPI would not have been obligated to make any additional tax dividend payment for 2000, pursuant to subsection 7 (b) of the Stockholders Agreement, as a result of either the First Amended 2000 Tax Return or the Second Amended 2000 Tax Return. The First Amended 2000 Tax Return, vis-À-vis the Original 2000 Tax Return, apparently decreased the amounts of JPI's reported income and foreign tax credits, and the amounts of JPI's income and foreign tax credits that were allocated to McCully. The Second Amended 2000 Tax Return, vis-À-vis the First Amended 2000 Tax Return, apparently did not alter the amount of JPI's income, or the amount of JPI's income allocated to McCully, but decreased again the amount of JPI's foreign tax credits, and the amount of JPI's foreign tax credits that were allocated to McCully. JPI's accountant asserts that none of JPI's shareholders received any additional tax dividend payment as a result of either the First Amended 2000 Tax Return or the Second Amended 2000 Tax Return.

Neither McCully in his affidavit, nor McCully's accountant in his affidavit, disputes, or even addresses, any of the documentary evidence submitted by JPI to refute McCully's claim that he is owed an additional tax dividend payment for 2000. Neither McCully nor his accountant disputes: that the 2000 Tax Returns submitted into evidence by JPI, including the respective Schedules K-1 for McCully, were the only federal tax returns actually filed by JPI for 2000; that McCully and/or his accountant received contemporaneously prepared copies of both those Schedules K-1 and the three Letters; that, if the 2000 Tax Returns were the only federal tax returns actually filed by JPI for 2000, then JPI would not have been required to pay an additional tax dividend, under subsection 7 (b) of the Stockholders Agreement, as a result of either the First Amended 2000 Tax Return or the Second Amended 2000 Tax Return; or that none of JPI's shareholders received an additional tax dividend payment as a result of either the First Amended 2000 Tax Return or the Second Amended 2000 Tax Return.

McCully's only reference, in his affidavit, to his claim that he was not paid the full amount of the tax dividend that he was entitled to receive for 2000 is his statement that, [*4]"[d]uring the discovery phase of the [Appraisal Proceeding] JPI produced a spreadsheet produced by [JPI's accountant] showing that they had paid me $271,260, being partial distributions owed for years 2000 and 2001" (McCully Affid., ¶ 4). However, McCully follows that reference with a discussion of matters relating to his claim that he is owed a tax dividend for 2001, without offering any explanation as to how the numbers on the spreadsheet (the Spreadsheet), without more, could alone provide an adequate basis for a binding and enforceable obligation owed by JPI to him in connection with any tax dividend that JPI was required to pay its shareholders for 2000, as the result of an amendment to its federal tax return.

Moreover, the Spreadsheet — which appears to indicate that certain dividends were payable by JPI to McCully either in or for each of April and September of 2000 — also appears to indicate that JPI has already paid those dividends. McCully himself does not assert unequivocally that he has not been paid the purported dividends itemized on the Spreadsheet, but apparently believes that he has, in fact, already been paid at least some of them. He states, "I am awaiting confirmation from a past Banking Institution of mine regarding deposits made in 2001 and would suggest that [certain of the purported dividends itemized on the Spreadsheet, apparently including the dividend attributed to April 2000] were actually paid to myself which would reduce monies owed to me by $73,980" (McCully Affid., at 2 n **).

Since McCully's allegation that he is owed an additional tax dividend payment for 2000 as the result of an amendment of JPI's tax return for 2000 is contradicted by the documentary evidence submitted by JPI — and since McCully has offered no evidence in his opposition to JPI's motion which tends to substantiate that allegation — his claim for an additional tax dividend payment for 2000 is dismissed (see CPLR 3211 [a] [1]; Hicksville Dry Cleaners, Inc. v Stanley Fastening Sys., L.P., 37 AD3d 218, 218 [1st Dept 2007]).

McCully has also failed to adequately allege a claim to a tax dividend for 2001 based upon subsection 7 (b) of the Stockholders Agreement because: (1) subsection 7 (b) did not obligate JPI to pay a tax dividend for 2001 until "two and one half months after the end of" the 2001 fiscal year, i.e., March 15, 2002; (2) by exercising his right to dissent from JPI's reorganization and to receive payment of the fair value of his JPI shares, under BCL § 623, McCully lost the right to receive dividends declared and paid by JPI after the consummation of the reorganization on November 30, 2001; and (3) McCully does not allege that, even if JPI was not obligated to pay the tax dividend for 2001 until March 15, 2002, JPI nevertheless did declare and pay a dividend for some or all of the amount of that obligation on or before November 30, 2001.

The first sentence of BCL § 623 (e) provides that, "[u]pon consummation of the corporate action [dissented from], the shareholder shall cease to have any of the rights of a shareholder except the right to be paid the fair value of his shares and any other rights under this section." The right to receive dividends — as a shareholder right which is not explicitly excepted by the statute from those lost by a dissenting shareholder upon consummation of the corporate action dissented from — is clearly among the rights lost upon consummation of the corporate action. Indeed, BCL § 623 (e) goes on to provide that a shareholder who loses his dissenter's rights shall be "reinstated to all his rights as a shareholder as of the consummation of the corporate action, including ... the right to payment of any intervening dividend or other distribution ... ." The right to receive any dividend paid following the consummation of the corporate action could only be "reinstated" upon a dissenting shareholder's loss of his dissenter's [*5]rights if, as a prior matter, the shareholder's exercise of his dissenter's rights had triggered his loss of the right to receive any such dividend.

Moreover, if McCully were permitted to recover herein the amount of a dividend paid on his shares after November 30, 2001, such a recovery would be duplicative of his recovery of the fair value of those shares in the Appraisal Proceeding, since that fair value presumably encompassed the value of the right to receive any future dividends that would be paid on the shares. BCL § 623 (k) provides that:

[t]he enforcement by a shareholder of his right to receive payment for his shares in the manner provided [for in BCL § 623] shall exclude the enforcement by such shareholder of any other right to which he might otherwise be entitled by virtue of share ownership, except as provided in paragraph (e), and except that this section shall not exclude the right of such shareholder to bring or maintain an appropriate action to obtain relief on the ground that such corporate action will be or is unlawful or fraudulent as to him.

Pursuant to the last clause of that subsection, a dissenting shareholder, notwithstanding his exercise of the right to receive payment for the value of his shares, may also bring an action seeking equitable relief when the corporate action dissented from is unlawful or fraudulent as to him (see Breed v Barton, 54 NY2d 82, 87 [1981]). However, the words "appropriate action," in the last clause, have been deemed not to include an action such as this one — which seeks only monetary recovery and does not seek any equitable relief predicated upon unlawful or fraudulent corporate action — because:

any monetary recovery, if available at all, can only be ancillary to a grant of some form of equitable relief. In recovering the fair value of [his] stock in the appraisal proceeding, [the dissenting shareholder has] an adequate and exclusive legal remedy for the damages [he] seek[s] and thus should not be permitted to duplicate or supplement that recovery through the medium of [an additional] proceeding.

(id. at 87-88.)

Insofar as JPI, although it did not have an obligation to pay a tax dividend for 2001 until March 15, 2001, nevertheless paid some or all of the amount of that obligation by means of a dividend that was declared and paid prior to the consummation of JPI's reorganization on November 30, 2001 — but did not pay McCully that dividend — McCully may have a legitimate claim to such a dividend. Notably, McCully has not adequately alleged facts indicating that to be the case. He avers in his affidavit that:

According to [subsection 7 (b) of the Stockholders Agreement] ... it was JPI's practice to issue to all shareholders a proportionate share of JPI's income/loss on a quarterly basis to pay for the personal income tax on such company income. The last quarter payment would usually result in being paid the first quarter of the following year.

(McCully Affid., ¶ 6.) The previously-referenced Spreadsheet, submitted by McCully as an exhibit to his affidavit, appears to indicate that JPI paid dividends to McCully either in or for each of April, June, October and December of 2001. However, neither the complaint nor McCully's affidavit specifically alleges that JPI declared or paid, prior to November 30, 2001, any part of the tax dividend that it was obligated to pay for 2001. [*6]

Thus, McCully's claim to a tax dividend for 2001 predicated upon subsection 7 (b) of the Stockholders Agreement is dismissed, because subsection 7 (b) did not obligate JPI to pay such a dividend until March 15, 2002, and because McCully does not adequately allege that JPI paid any part of that obligation by means of a dividend declared and paid to its shareholders generally on or before November 30, 2001.

For the foregoing reasons, it is hereby

ORDERED that the motion to dismiss is granted and the complaint is dismissed; and it is further

ORDERED that the Clerk is directed to enter judgment dismissing the complaint accordingly.

Dated: ___________________

ENTER:

_________________________

J.S.C.