The following papers numbered 1 to 8 read herein:Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1 - 3

Opposing Affidavits (Affirmations)4 - 6

Reply Affidavits (Affirmations)7

Other Papers Phase I Environmental Report8

Upon the foregoing papers, motion sequence numbers 2 and 3 are consolidated for disposition. Petitioner Adam Diel moves for an order, pursuant to CPLR 2104, enforcing the so-ordered stipulation entered into between him and respondent Shlomo Diel in court on August 17, 2012 (the Stipulation). Respondent cross moves for an order pursuant to Business Corporation Law § 1104, directing petitioner to reimburse him the sum of $12,290.90, representing one-half of the payments that he made for the ongoing expenses of Aisd Corporation (Aisd or the Corporation).

Petitioner commenced this proceeding on April 17, 2012 seeking to dissolve Aisd. Petitioner and respondent, who are brothers, each own 50% of the issued and outstanding [*2]shares of the Corporation. Aisd owns property located at 2831 West 8th Street in Brooklyn (the Property). The Property had previously been used as a gas station and then as an automobile repair shop. At the time that the Stipulation was entered into, it was rented for $15,606 per month and used as a parking lot.

This court conferenced the matter on April 19, April 30 and May 21, 2012. On July 18, 2012, in this court and in the presence of this judge, the parties agreed upon the terms of a settlement agreement, pursuant to which the Corporation was to purchase petitioner's shares. The terms of the agreement were memorialized in the written Stipulation that was signed by the attorneys for both parties and was so-ordered by this court. The Stipulation provides, in its entirety, that:

"The parties have agreed upon the basic terms of an agreement subject to a final written agreement. The basic terms are:

"payment of $1,025,000 from Corporation to Adam Diel, to be paid as follows: $500,000 within 30 days of execution of written agreement and $525,000 to be paid over 20 years in monthly installments at 6.5% interest

"the parties will agree upon reasonable security in the form of a mortgage and/or otherwise

"the parties will agree upon other reasonable terms and conditions, such as due on sale clause and suspension period in the event the bank stops paying rent for tenant

"the parties will endeavor to execute a final, written agreement within 30 days."

The Stipulation was filed with the Kings County Clerk on August 17, 2012.

In support of his motion, petitioner argues that on August 2, 2012, he delivered draft copies of a mortgage and other documents required by the Stipulation to respondent. Respondent did not sign the documents. On September 7, 2012, Rosenberg & Estis, P.C., the Corporation's landlord/tenant counsel, advised Aisd that the tenant's lender would no longer pay rent on behalf of the tenant. On September 10, 2012, respondent advised petitioner that he would not effectuate the Stipulation because there was no rental income being generated by the Property. After being so directed by this court at a conference held on September 21, 2012, respondent delivered redlined versions of the drafts to petitioner. On October 11, 2012, when the parties were scheduled to discuss edits to the documents, respondent advised petitioner that he was concerned about environmental issues and that there was no point to further discuss the settlement documents until a Phase II environmental study was completed.

Petitioner contends that despite respondent's representation to the contrary, made [*3]to the court in a letter dated October 12, 2012 and at an October 22, 2012 conference, respondent was fully aware of the environmental condition of the Property since at least June 2008, when the Phase I Report was completed and sent to his attorney. Petitioner claims that respondent's knowledge is evidenced by emails exchanged between Ronald B. Goodman, Esq., respondent's counsel, and Anderson Kill & Olick (Anderson), the Corporation's general counsel, discussing contamination of the Property, and by an invoice from Anderson that indicates that petitioner, respondent and an environmental consultant met at the Property on November 17, 2008 to discuss the issue. The gas tank in the ground was thereafter removed and post-excavation soil samples revealed no evidence of spillage from the tank. Accordingly, the New York State Department of Environmental Conservation closed the spill cases pertaining to the Property on August 8, 2008 and March 9, 2009.

Petitioner further avers that respondent knew that for several years, the Corporation operated a gas station at the Property. In addition, in 2008, respondent became the president of Aisd. From this it follows that respondent was fully aware of the day-to-day operations of the business, including the possibility of contamination and the issuance of the Phase I Report and its findings. Petitioner also denies that he ever told respondent that there were no environmental issues regarding the Property.

Respondent's Opposition

In opposition to the motion, respondent argues that the Stipulation intentionally included language providing that it was "subject to a final written agreement." Counsel for respondent explains that this was "because the settlement anticipated a transfer of [petitioner's] interest in the Property through the sale of his shareholder interest secured by a mortgage and thus there were numerous material terms and agreements that still needed to be negotiated and executed."

In an effort to move the matter forward, counsel reviewed the draft documents provided by petitioner. In respondent's memorandum of law, counsel alleges that the proposed settlement documents included numerous provisions not set forth in the Stipulation, i.e., a provision requiring the assignment of a life insurance policy which the Corporation maintained on petitioner's life; a restriction on the sale of the Property for two years; a provision which released petitioner from the obligation to repay loans obtained by him to purchase his 50% share of the Corporation; a provision requiring respondent to indemnify petitioner for liability for any environmental contamination; and a promissory note that included a default rate of interest of 18%, a late fee of 5%, the payment of reasonable attorneys' fees and a time is of the essence acceleration provision in the event of default. Further, the mortgage included a provision for an escrow fund in the event of default; a requirement that respondent indemnify and hold petitioner harmless for any environmental liabilities; and the requirement that respondent obtain the consent of petitioner before selling the Property, which consent could be withheld in petitioner's sole discretion. Petitioner also included a personal guaranty to be signed by [*4]respondent. Counsel concludes that the inclusion of these documents and agreements that were not included in the Stipulation, along with the extent of the redlining, evidences the disagreements between the parties.

Respondent explains in his affidavit that because of the number of outstanding issues, he began to explore the possibility of purchasing petitioner's share in the Corporation outright. The tenant's bank then informed the Corporation that it would no longer pay the rent on behalf of the tenant occupying the Property. Respondent thus avers that he "determined at that time that the discontinuance of the rent payments on behalf of the Tenant materially changed the risk calculus for [his] purchase of [petitioner's] interest and [his] ability to secure independent financing." Respondent accordingly directed his attorney to inform the court that he was no longer willing to go forward with the purchase of petitioner's share of the Corporation.

Respondent also claims that he did not see a copy of the Phase I Environmental Report until October 2012. In so arguing, respondent alleges that the Report was obtained by petitioner when he was president of the Corporation and was paid for by him out of his own funds, for which he then signed a check from the Corporation reimbursing himself. Respondent admits that he knew that a company had been retained in 2008 to remove a below the surface oil tank on the Property, but he did not know that a company had been retained to determine whether the property was contaminated with hazardous substances. Respondent also alleges that Mr. Goodman represented his uncle, Itzhak Diel, when petitioner and respondent were negotiating to buy out his uncle's one-third interest in Aisd, so that Mr. Goodman did not represent him at that time and did not send him a copy of the Report. This assertion is corroborated in an affirmation from Mr. Goodman. Respondent then asserts that had he been aware of the possible contamination of the Property, he would not have agreed to buy out petitioner's interest for $1,025,000, since in setting that price, he relied upon an appraisal that valued the Property at $2,220,000, based on the assumption that the Property had no environmental issues.

Respondent thus concludes that because the Stipulation was made conditional, i.e., subject to the execution of final settlement documents, and because petitioner mislead him with regard to the possible contamination of the Property, petitioner's motion to enforce the Stipulation should be denied.

The Law

It is a fundamental principle of contract law that "[i]n determining whether a contract exists, the inquiry centers upon the parties' intent to be bound, i.e., whether there was a meeting of the minds' regarding the material terms of the transaction" (Central Federal Sav. v National Westminster Bank, 176 AD2d 131, 132 [1991], citing Martin Delicatessen v Schumacher, 52 NY2d 105 [1981]). Stated differently, "[t]o create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms" (Matter of Express Indus. & Term. v New York State Dept. of Transp., 93 NY2d 584, 589 [1999], [*5]rearg denied 93 NY2d 1042 [1999]). "Thus . . . in a matter where parties seek enforcement of a contract, the court has the responsibility of effectuating the true intent of the parties, and where the terms are unambiguous, this intent must be gleaned from the plain meaning of the words used by the parties" (Fukilman v 31st Ave. Realty, 39 AD3d 812, 813 [2007], citing Matter of Wallace v 600 Partners Co., 86 NY2d 543, 548 [1995]; W.W.W Assoc. v Giancontieri, 77 NY2d 157, 162-163 [1990]; Rainbow v Swisher, 72 NY2d 106, 109 [1988]). "[I]n determining whether the document in a given case is an enforceable contract or an agreement to agree, the question should be asked in terms of whether the agreement contemplated the negotiation of later agreements and if the consummation of those agreements was a precondition to a party's performance'" (Amcan Holdings v Canadian Imperial Bank of Commerce, 70 AD3d 423, 427 [2010], lv denied 15 NY3d 704 [2010], quoting IDT v Tyco Group, S.A.R.L., 13 NY3d 209, 213, n 3 [2009], lv dismissed 15 NY3d 741 [2010]).

CPLR 2104, which pertains to the enforcement of stipulations, provides that:

"An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered. With respect to stipulations of settlement and notwithstanding the form of the stipulation of settlement, the terms of such stipulation shall be filed by the defendant with the county clerk."

Thus, it has been held that:

"If settlements, once entered, are to be enforced with rigor and without a searching examination into their substance, it becomes all the more important that they be clear, final and the product of mutual accord. These concerns obviously lie at the heart of CPLR 2104, a neutral statute enacted to promote certainty in settlements, which benefits all litigants."

(Bonnette v Long Island College Hosp., 3 NY3d 281, 286 [2004]).

As is also relevant herein, it is well settled that:

"A stipulation entered into in open court, with the parties and counsel present, is a binding contract (see, Barzin v Barzin, 158 AD2d 769). Only where there is sufficient cause to invalidate a contract, such as fraud, collusion, mistake, or accident, will a party be relieved from the consequences of a stipulation made during litigation (see, Hallock v State of New York, 64 NY2d 224, 230)."

(Bellefleur v Gervais, 201 AD2d 524 [1994]). " [O]pen court' as used in CPLR 2104, is a technical term that refers to the formalities attendant upon documenting the fact of the stipulation and its terms'" (Diarassouba v Urban, 71 AD3d 51, 57 [2009], citing Popovic v New York City Health & Hosps. Corp., 180 AD2d 493, 493 [1992], lv dismissed 70 [*6]NY2d 747 [1987], citing Matter of Dolgin Eldert Corp., 31 NY2d 1, 4-5 [1972]). Similarly, " [a] so-ordered stipulation is a contract between the parties thereto and as such, is binding on them and will be construed in accordance with contract principles and the parties' intent'" (Schober v Hudson Val. Humane Socy. for Prevention of Cruelty to Animals, 89 AD3d 715, 717 [2011], quoting Aivaliotis v Continental Broker-Dealer, 30 AD3d 446, 447 [2006] [internal quotation marks omitted]; accord Palmieri v Town of Babylon, 87 AD3d 625, 626 [2011]).

"Stipulations of settlement are favored by the courts and are not lightly cast aside" (Hallock, 64 NY2d at 230). Thus, it is clear that " [a] change of heart is insufficient' (Sontag v Sontag, 114 AD2d 892, 893 [1985] [internal quotation marks omitted], lv dismissed 66 NY2d 554 [1986]), and a settlement agreement will not be set aside merely because [a party], upon reevaluation, has decided that the claim is worth more (see Muller v City of New York, 113 AD2d 877 [1985])" (Gyabaah v Rivlab Transp., 102 AD3d 451, 454 [2013]). Indeed, the Appellate Division, Second Department, has specifically rejected the contention that a stipulation was not final and binding because it was entered into subject to the execution of a formal written document (Popescu v Comoletti, 130 AD2d 724, 725 [1987], citing Sontag, 114 AD2d 892).

Moreover, as was recently held by the Appellate Division, Second Department, in Alshawhati v Zandani (82 AD3d 805, 807 [2011]):

"Here, the plaintiff clearly failed to comply with the terms of the valid stipulation, which required him to purchase [defendant's] 50% interest in the subject property for the sum of $1,000,000 on February 19, 2010. Therefore, the Supreme Court properly granted that branch of the respondents' motion which was to enforce the stipulation."

Similarly, in Fukilman (39 AD3d at 813-814), the Appellate Division, Second Department, found that the stipulation entered into between the parties clearly and unambiguously expressed the parties' intent that the corporate assets, including the building and real property, were to be appraised at full market value and sold in the event that no one exercised their buy-out option, so that the court properly directed compliance with the unambiguous terms of the parties' settlement agreement.

Discussion

In this case, there is no dispute that the Stipulation was entered into in open court, was reduced to writing, signed by the parties' attorneys, so-ordered by this court and filed with the County Clerk. Thus, the Stipulation is enforceable. In reaching this conclusion, the court further finds that the parties intended that the Stipulation settle the dispute between them. Further, it is clear that the agreement is simple in its terms and enforceable as written, i.e., it explicitly contemplates the sale of petitioner's ownership interest in the Corporation for $1,025,000, with $500,000 payable within 30 days of execution of the Stipulation and the remaining $525,000 to be paid over 20 years, with interest at the rate of 6.25%, with the payment to be secured by a mortgage. Thus, this [*7]case is clearly distinguishable from the cases relied upon by respondent. For example, Amcan Holdings (70 AD3d 423) involved a transaction to obtain financing for the acquisition of a company, as well as refinancing for the existing debt of two others and additional funding. Therein, both the draft summary and summary documents relied upon clearly stated that the credit facilities "will only be established upon completion of definitive loan documentation," which would contain such "other terms and conditions" as reasonably required. IDT (13 NY3d 209) involved a joint venture to construct a fiber optic communications network and a right of use of certain fiber optic capacity free of charge for a 15-year period, which capacity was to be on a subsea cable system planned to connect North America, Asia and Europe that was not yet constructed. The agreement also provided that the terms and agreements would be put in writing. Clearly, these cases involve very complicated matters, where the documents intended to finalize the matters would, of necessity, be complex and contain many matters not set forth in the summary settlement agreements.

In contrast, the case herein concerns a simple agreement to buy shares of a Corporation for a specified price, at a specified time, with the transaction to be secured by a mortgage. Thus, this case is analogous to Alshawhati (82 AD3d at 807), wherein the court ordered the enforcement of a stipulation that provided for the purchase of a 50% interest in the subject property, and Fukilman (39 AD3d 813-814), wherein the court enforced a settlement agreement that provided for the buy out of a corporate asset. Nor is this conclusion altered by the provision in the Stipulation stating that the agreement was subject to a written agreement, since in this case, the parties intended to secure respondent's obligation to pay petitioner with a mortgage and a mortgage must be in writing to be enforceable and recorded (see generally Real Estate Economic Resources v Armendariz, 162 AD2d 303 [1990]). In ordering enforcement of the Stipulation, however, the court agrees that petitioner improperly sought to include the provisions identified above by respondent as being beyond of the terms of agreement entered into between the parties, since those provisions were not included in the Stipulation. Accordingly, these provisions shall be stricken from the documents to be executed by the parties.

The court also declines to find that petitioner withheld information from respondent with regard to the possibility of contamination of the Property. In the first instance, as the owners of property valued at over $2,000,000, the parties must be presumed to be sophisticated business persons. From this it follows that both must be presumed to have been aware of the potential for contamination of property used as a gas station having under underground storage tanks, and for an automobile repair shop using hydraulic lifts that could also leak and contaminate the Property. Thus, even if respondent had no specific knowledge of the Phase I Report, his knowledge of these uses certainly put him on notice that the Property may be contaminated. In fact, respondent relies upon language in the Phase I Report that states that the Property may be [*8]contaminated in arguing that a Phase II report is needed. Moreover, respondent was represented by counsel during his purchase of his uncle's interest in the Property and throughout the negotiations of the Stipulation, and he admits having dealt with an environmental consultant in connection with the removal of the underground storage tanks. Thus, the court finds respondent's contention that petitioner fraudulently withheld information from him to be specious, since respondent cannot reasonably deny that he knew of the possibility of contamination.

In addition, as a director dealing with his own corporation, respondent "is chargeable with such knowledge as to its affairs as he actually possessed, or which in the discharge of his duties he should have had" (Logan v Fidelity-Phenix Fire Ins. Co., 161 App Div 404, 410 [1914], 220 NY 688 [1917], citing Ward v City Trust Co., 192 NY 61 [1908]; Syracuse Savings Bank v Merrick, 182 NY 387 [1905]). Further:

"It is well settled that with regard to a contract for the sale of real property, if the facts represented are not matters peculiarly within the party's knowledge, and the other party has the means available to [it] of knowing, by the exercise of ordinary intelligence, the truth, or the real quality of the subject of the representation, [it] must make use of those means, or [it] will not be heard to complain that [it] was induced to enter into the transaction by misrepresentations' (Schumaker v Mather, 133 NY 590, 596; accord, Danann Realty Corp. v Harris, 5 NY2d 317, 322; Long v Fitzgerald, 240 AD2d 971, 973)."

(CFJ Assocs. of NY v Hanson Indus., 274 AD2d 892, 895 [2000]).

Thus, the court finds that respondent simply changed his mind after entering into the Stipulation, when the tenant stopped paying rent and the Property was no longer generating income. In fact, respondent so states in his affidavit. It is beyond dispute, however, that the parties addressed this possibility in the Stipulation, since it provides that the agreements to be executed to effectuate the settlement would include a suspension of payment in the event that the tenant stopped paying rent.

Accordingly, the court concludes that the parties negotiated and executed a valid and enforceable settlement in court, while represented by counsel, reduced it to writing and had it so-ordered by this court, and that respondent fails to submit any evidence to establish that the agreement should be set aside on the basis of fraud, collusion, mistake, or accident (see generally Caroli v Allstate Ins. Co., ___ AD3d ___, 2012 NY Slip Op 8086 [2012]). In this regard, it is also noted that in his cross motion, respondent does not move for an order setting aside or vacating the Stipulation.

In support of his cross motion, respondent argues that although petitioner agreed to pay for one-half of the cost of the attorney fees incurred in evicting the tenant, he did not do so. In addition, respondent contends that petitioner should be directed to pay one-half [*9]of the ongoing operating expenses of the Corporation, including the cost of preparing a Phase II Report. To support this demand, respondent alleges that since petitioner received 50% of the rent of $15,606 generated by the Property over the years, less expenses, he should now be obligated to pay one-half of the Corporation's expenses, including, for example, insurance premiums, legal fees, accountant fees, taxes and the remaining payments due for the buy out of Itzhak's interest in the Corporation. Thus, respondent concludes that petitioner should be ordered to pay his one-half share of the costs of the Corporation, which total $12,290.90, plus $3,351.39 in attorneys' fees.

Petitioner's Opposition

In opposition, petitioner first alleges that he did not agree to pay one-half of the attorneys' fees incurred by the Corporation to evict the tenant. At the court's suggestion, however, he agreed to pay one-half of the amount billed in September 2012, which he did. Petitioner goes on to assert that the law is clear that a shareholder is not personally liable to pay the expenses of a Corporation.

The Law

Business Corporation Law § 1104, the statute relied upon by respondent, pertains to a petition in case of deadlock among directors or shareholder.

In addressing the liability of an individual shareholder, it is well settled that "[t]he general rule . . . is that a corporation exists independently of its owners, who are not personally liable for its obligations, and that individuals may incorporate for the express purpose of limiting their liability" (East Hampton Union Free School Dist. v Sandpebble Bldrs., 66 AD3d 122, 126 [2009], affd 16 NY3d 775 [2011]). Further, it has been recognized that "[o]ne of the primary and completely legitimate purposes of incorporation is to limit or eliminate the personal liability of corporate principals" (Miranco Contr. v Perel, 57 AD3d 956, 958 [2008)], citing Bartle v Home Owners Coop., 309 NY 103, 106 [1955]). "Equity will intervene to pierce the corporate veil' and permit the assertion of claims against the individuals who control the corporation, in order to avoid fraud or injustice" (Damianos Realty Group v Fracchia, 35 AD3d 344, 344 [2006]; see also Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 140-141 [1993]). To disregard the corporate form, it must be established not only that an individual controlled a corporation, but also that the corporation was used for the transaction of the shareholder's personal business (see generally Port Chester Elec. Constr. v Atlas, 40 NY2d 652 [1976]). "The party seeking to pierce the corporate veil has the burden of establishing that there is a basis to do so" (Katz v New York Tint Taxi, 213 AD2d 599, 600 [1995], citing Ravel v Dirco Enters., 159 AD2d 564 [1990]; Marino v Dwyer-Berry Constr., 146 AD2d 750 [1989]).

Discussion

Since Business Corporation Law § 1104 pertains to a petition in case of deadlock among directors or shareholders, it has no application to respondent's demand that petitioner pay one-half of the day-to-day operating costs of the Corporation [*10]

As discussed above, the general rule is that the owners of a corporation are not liable for corporate debts and in order to hold an individual shareholder personally liable, it is necessary to pierce the corporate veil. Since respondent offers no basis whatsoever to support a finding that the court should do so and hold petitioner personally liable for any of the corporate debts, respondent's cross motion is denied.

For the foregoing reasons, petitioner's motion to enforce the Stipulation is granted. Petitioner is directed to forward documents effectuating the agreement, as discussed herein above, to respondent within 20 days of service of a copy of this decision with notice of entry. Respondent is directed to execute the documents and to return them to petitioner within 20 days of receiving them.

The foregoing constitutes that decision and order of the court.

E N T E R,

J. S. C.