Panciera v. Vetelino

         Washington County Superior Court

          For Plaintiff: Joseph V. Cavanagh, Jr., Esq. Lynne B. Dolan, Esq.

          For Defendant: Daniel P. McKiernan, Esq.

          DECISION

          STERN, J.

          Before this Court are Plaintiffs Richard C. Panciera (Panciera) and Louis Panciera, Inc.'s (LPI) (collectively, Plaintiffs) motion for summary judgment, as well as Defendant Lawrence C. Vetelino's (Vetelino) motion for partial summary judgment. Both motions seek a declaration of interpretation regarding the validity of certain rights afforded to Vetelino in his employment contract after LPI exercises its right to repurchase Vetelino's shares in LPI. Jurisdiction is pursuant to Super. R. Civ. P. 56(c) and G.L. 1956 §§ 9-30-1 et seq.

         I

          Facts and Travel

         Around 1934, Panciera's father, Louis Panciera, founded LPI, an insurance and real estate agency with its primary business located in Westerly, Rhode Island. Compl. ¶ 5. He operated and managed the company for over fifty-three years until his death in 1987. Id. In the 1950s, Louis Panciera purchased another smaller insurance and real estate agency called Richmond & Nichols, Inc. (Richmond & Nichols) in Hope Valley, Rhode Island. Id. at ¶ 6. His wife, Grace Panciera, operated and managed Richmond & Nichols until her death in 2001. Id.

          Panciera was the only child of Louis and Grace Panciera and in 1975 became a practicing attorney in Rhode Island. Panciera Aff. ¶¶ 1-2. Since 1975, Panciera has been substantially involved in the affairs of LPI and Richmond & Nichols as general legal counsel. Id. at ¶ 6. Additionally, between 1981 and 1987 he was Vice President of LPI and became LPI's President after his father's death in 1987. Id.

         When Grace Panciera passed away in 2001, Panciera became the sole owner of both LPI and Richmond & Nichols; he assumed sole responsibility for the management of LPI and continued to rely on many long-term employees to service LPI's customers and conduct day-today affairs. Id. at ¶¶ 8-9. Since 2001, Panciera personally loaned LPI almost $300, 000 to pay off loans incurred by the agency but, as of this Decision, has yet to be fully repaid. Id. at ¶ 10. Panciera also funded the construction of new LPI offices on land owned by Princess Pines Estate, Inc., a corporation owned and organized by the Panciera family. Id. Since 2001, Panciera has been the sole personal guarantor of LPI's working capital loan from Washington Trust. Id.

         Louis Panciera hired Vetelino in or around 1971; he worked at LPI without an employment contract or non-competition agreement. Pls.' Mem. in Supp. of Mot. for Summ. J. (Pls.' Mot.). Over his time at the agency, Vetelino had pursued an ownership interest in LPI: he first asked Louis Panciera, but his request was rejected because Louis Panciera did not want to turn the agency into a partnership. See id. After Louis Panciera's death, Vetelino pursued his ownership interest with Grace Panciera; however, she, for the same reasons as her husband, also refused. Id. Then, in or around 2005, Vetelino pursued Panciera for the same reasons, and, after having a change of heart, Panciera decided to enter into negotiations. Id. After drafting at least four versions, Panciera finalized an Employment Contract (Contract) on December 22, 2006. Id.

          The Contract provided Vetelino with a number of terms and conditions. First, and most important to this Decision, LPI was to issue a forty percent minority interest in LPI at no cost to Vetelino. Employment Contract Art. 6. Second, LPI was required to pay the cost of health insurance benefits up to Vetelino's death and thereafter for the remainder of his spouse's life. Id. at Art. 4(A). Third, LPI was responsible for paying the premiums on Vetelino's life insurance policy as and when due until the death of Vetelino. Id. at Art. 4(B). Fourth, upon Vetelino's retirement, LPI had to purchase a reasonable automobile at the sole cost and expense of LPI. Id. at Art. 4(C). Fifth, any indebtedness that LPI would undertake had to be specifically consented to by Vetelino in writing, except for debt reasonably incurred in the ordinary course of business with Vetelino's prior consent. Id. at Art. 5. Sixth, the Contract provided a "Right of First Refusal" for Vetelino whenever LPI or its shareholders decided to "sell, transfer, assign, convey or dispose of . . . substantially all of the assets or stock of [LPI]." Id. at Art. 7. Seventh, in the event that Vetelino were to voluntarily retire, LPI was required to pay him fifty percent of Vetelino's gross income from the prior year and such weekly payments would continue until Vetelino turned sixty-eight years old. Id. at Art. 8. Eighth, in the event that Vetelino were to become totally and permanently disabled, LPI was required to pay him his then-current salary and benefits for a period of six months from the date of his total and permanent disability, and, at that point, he would be deemed to have voluntarily retired. Id. Ninth, LPI could not voluntarily assign this Contract or any of its duties and obligations without the prior written consent of Vetelino; this section further defines an assignment as a "change of control of the ownership of [LPI], whether directly or indirectly." Id. at Art. 14(b). Lastly, LPI was required to pay premiums on Panciera's life insurance policy that could not be less than $750, 000. Id. at Art. 14(c). However, upon Panciera's death and the payment of such life insurance policy to Panciera's designee, all of the stock would then be transferred to Vetelino. Id.

         Besides the rights granted to Vetelino, the Contract also contained provisions relevant to this Decision. For example, the repurchase right granted to LPI provided: "In the event that the stock or assets of [LPI] have not been sold by the time [Vetelino] has attained the age of sixty-six (66) years, [LPI] shall have the option to repurchase the shares of stock of [LPI] held by [Vetelino]." Id. at Art. 7. Notably, this provision is located under the same article that granted Vetelino his right of first refusal; in fact, this article is titled "Right of First Refusal." See id.

         Additionally, the Contract provided an acceleration clause of all rights, duties, obligations and liabilities set forth in the Contract if there ever was a separation of employment between Vetelino and LPI for any reason prior to Vetelino's voluntary retirement. Id. at Art. 8. Furthermore, if Vetelino were to predecease Panciera or die prior to the disposition of LPI's stock or assets, only LPI's obligation to pay health insurance premiums for Vetelino, the forty-percent stock transfer, and Vetelino's right of first refusal would survive Vetelino's death and inure to the benefit of his spouse for the remainder of her natural life. Id. at Art. 9. Upon ...