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Magnus v. Magnus Organ Corp.

Decided: January 11, 1962.


Conklin, J.s.c.


This matter was previously heard on an order to show cause which has been filed, the opinion of the court having been rendered orally. Counsel could not settle the form of judgment, and therefore counsel for the plaintiff served notice of motion for entry of judgment. Simultaneously, a cross-motion was filed for notice of application for reargument by the firm of Kristeller, Zucker, Lowenstein & Cohen. Said firm initially appeared for all defendants, but now represents defendants Bernard A. Mitchell, David Berdon, Eugene A. Tracey, and Maurice Preville. Pitney, Hardin & Ward now serve as counsel for defendant Magnus Organ Corporation.

At reargument defendant corporation took issue with the oral opinion of the court. It was urged that "the Board of Directors may remove the plaintiff as President as he held office during the pleasure of the Board under the Bylaws of the said Corporation; that in its judgment the court was interfering with the internal affairs of a corporation, that the restraint was improper, that they should be permitted to discharge Finn Magnus and his remedy then would be in arbitration." In these arguments the directors concur,

and argue together with the corporation that specific performance of the employment contract exceeded the limits of the application to vacate or modify; that such remedy was unwarranted by reason of the absence of mutuality of remedy; and further, that the action of the court was contra to R.S. 14:7-6 and 14:7-1.

Finn Magnus, the plaintiff, is an exceptional individual who in publications has been termed a "Horatio Alger"-type personality. An immigrant, he founded the defendant corporation in 1957. In 1958, negotiations ensued between the individual defendants and the plaintiff, whereby the individual defendants acquired a majority of the stock of the defendant corporation. At that time plaintiff transferred patents and inventions to the corporation, in addition to allowing said corporation to utilize his name. The agreement also provided that plaintiff would be employed by the corporation for a period of five years at a stated salary, and would be paid $1.50 for each organ manufactured and sold. It further stated that without additional salary he could serve as president or in other offices of the corporation to which he might be elected. The agreement provided that irreconcilable disagreements between Magnus and the corporation would be settled by arbitration before the American Arbitration Association. It also imposed restrictions on the activities of Magnus during the term of his employment.

The final closing occurred on July 29, 1958. On that date assignments of stock were made to the defendants, which vested 55% of the stock interest in them. Amendments were made in the bylaws to enlarge the board of directors, etc., and to conform the bylaws to the agreements to be entered into on that date. As contemplated, an agreement was entered into, bearing the same date. Mitchell acted for himself and his associates, the corporation, and plaintiff. A separate agreement on the same date was entered into by Mitchell and the corporation, for a term of five years as to the employment of plaintiff. The assignments of stock were executed, whereupon a special meeting of the stockholders

was held, and the agreement between Magnus, Mitchell, and the corporation was approved by the stockholders. Subsequently, there was a meeting of the board of directors, wherein plaintiff's employment agreement with the corporation was approved. The provision in part is as follows:

"1. The term of your employment hereunder shall be from August 1, 1958, to and including July 31, 1963.

2. You are employed hereunder as chief executive officer of our company below the chairman of the Board of Directors and your duties shall consist of supervision of our production and such other duties as our Board of Directors shall delegate to you, all of your duties in our employ to be under the supervision and control of our Board of Directors. Without additional compensation in excess of that hereinafter provided, you will serve as president or in such other office of our company to which you may be elected."

As disputes arose with respect to Magnus' employment agreement, notice was given of a special directors' meeting to be held in New York City on November 20, 1961. In response, by letter dated November 16, 1961, counsel for plaintiff notified the directors that as the dispute arose out of Magnus' employment agreement, demand was made that the dispute be submitted to arbitration as provided in the agreement. Apparently nothing occurred at the meeting called by the defective notice, for on November 21 notice of another special meeting was sent to the directors. This meeting was scheduled for November 27, in Miami Beach, Florida. The notice of this meeting specified the following purposes:

"1. To consider the removal of Finn H. Magnus as President of the corporation, in accordance with the ...

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