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Stark v. Reingold

Decided: April 25, 1955.


For reversal -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. For affirmance -- None. The opinion of the court was delivered by Jacobs, J.


The plaintiffs have appealed and the defendants have cross-appealed from a final judgment entered in the Chancery Division. We certified on our own motion under R.R. 1:10-1(a).

In 1949 Philip Stark and his brother Max Stark were interested in Paramount Motors, Inc., a Hudson car dealer at 187 Passaic Street, Hackensack, and Irving Reingold and his wife Sally Reingold were the owners of premises located at 175 Essex Street, Hackensack, where a gas station, a U-Drive business and a Kaiser-Frazer dealership were operated by Irving Reingold. After some negotiations Philip Stark and Irving Reingold decided to join forces and enter into partnership and related ventures. Philip Stark states that there was an oral understanding that his brother Max would be recognized "as a 25% partner" when certain difficulties he was having with the New York law enforcement authorities (see Stark v. Livermore, 3 N.J. Super. 94 (App. Div. 1949), certification denied 3 N.J. 365 (1949)) were over; this is denied by Irving Reingold and the partnership agreements contain no provision indicating that Max Stark would ever be a partner. Four agreements were executed on April 27, 1949 and were to the following effect:

(1) Philip Stark as one party and Irving and Sally Reingold as the other, agreed to form a corporation to be known as "Paramount-Hudson, Inc." for the purposes of selling cars, operating gasoline service stations, and engaging in such other businesses as the board of directors determined from time to time. Philip Stark was to acquire equipment from Paramount-Motors, Inc. and transfer it to the new corporation and the Reingolds were to transfer the Essex Street property to the new corporation. Philip Stark was to purchase a half interest in certain assets being transferred by Irving Reingold to the partnerships being formed under other agreements

and was to pay for them by notes executed by Philip Stark and endorsed by Max Stark. The directors of the corporation were to be Philip Stark and his nominee and the Reingolds, and the officers were to be Irving Reingold, president, Sally Reingold, vice-president, Philip Stark, secretary and treasurer and Irving Levitt (Philip Stark's nominee) assistant secretary and treasurer. Irving Reingold and Philip Stark were to be employed "as co-managers" and were to devote their "entire time and efforts to the affairs of the corporation, except as to their joint management of any partnership interest existing between them." Philip Stark was "to cause the discontinuance of all business of Paramount Motors, Inc. in the exercise of its present Hudson Motor cars franchise" and Irving Reingold was "to discontinue the operation of the present business or businesses now operated by him on the premises described except as to the intended partnerships with Stark."

(2) An agreement between the Reingolds and Philip Stark provided that the Reingolds would not sell their stock in Paramount-Hudson, Inc. without first offering it to Philip Stark at book value and that Philip Stark would not sell his stock without first offering it to the Reingolds at book value. The same agreement indicated that 25 shares each would be issued to Irving and Sally Reingold and that 49 shares would be issued to Philip Stark and one share to his nominee Irving Levitt.

(3) An agreement between Irving Reingold and Philip Stark set forth that they thereby formed a partnership under the name of "Bergen County U-Driv-it Hertz Lic." to conduct the general business of renting automobiles "commonly called in the trade a U-Drive System." Paragraph seven of the agreement provided that neither party would (without the consent of the other) "assign, mortgage or sell his share in the partnership, or in its capital assets, or property, or enter into any agreement as a result of which any person shall become interested with him in the partnership, or to do any act detrimental to the best interests of the partnership or which would make it impossible to carry on the ordinary business

of the partnership." Paragraph ten provided that either partner could retire on three months' notice, in which event the other partner could purchase his interest for book value in accordance with the terms of the agreement.

(4) An agreement between Irving Reingold and Philip Stark set forth that they thereby formed a partnership under the name of "Rein Motors" to conduct the general business of "the maintenance and operation of a gasoline service station, including the purchase and sale of automobiles." This agreement contained provisions similar to those embodied in the agreement which formed the partnership under the name of "Bergen County U-Driv-it Hertz Lic."

After the four agreements were executed the parties proceeded to carry out their terms. The "Bergen County U-Driv-it Hertz Lic." partnership began operations at the Essex Street property and later changed its name to "Bergen County U-Driv-It"; it is still being operated profitably at the same premises now owned by Paramount-Hudson, Inc. Rein Motors acquired real property on Route 17 in Paramus and erected a large gas station thereon; this station, along with a gas station located at the Essex Street property, are still being operated profitably by Rein Motors; in addition, real property located in Hasbrouck Heights was purchased and is now owned by Rein Motors. Paramount-Hudson, Inc. is no longer engaged in the sale of cars but is operating profitably as a real estate holding corporation. Under date of December 14, 1949 the Reingolds entered into a written agreement with Philip Stark and Max Stark which authorized Philip Stark to transfer 25 shares of his stock in Paramount-Hudson, Inc. to Max Stark; this transfer was duly made and Max Stark is now the holder of 25 shares of stock in the corporation. Irving Reingold states that after he and Philip had formed the corporation and the partnerships Max Stark wanted to join them and that although he "did not want to have any part of it" he ultimately agreed to allow Philip to transfer half of his shares to his brother. Max was employed by the corporation as a salesman for "six or seven weeks."

Although the corporation and the partnerships operated harmoniously for a while, this situation was short-lived. Reingold testified that the partners "had a lot of troubles" and that they were all caused by the persistent efforts of Max to join them. He testified further that he has no grievances against Philip but that he would not be satisfied "to continue in partnership with him on the basis outlined in the partnership agreements of April 27, 1949." He pointed out that Philip had started legal proceedings seeking dissolution and that he intended to try to finish them. Philip testified that since early in 1951 he and ...

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