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Gaines v. Monroe Calculating Machine Co.

Decided: January 29, 1963.

DRUMMOND F. GAINES, PLAINTIFF-APPELLANT,
v.
MONROE CALCULATING MACHINE COMPANY, INC., ETC., ET AL., DEFENDANTS-RESPONDENTS



Conford, Gaulkin and Kilkenny. The opinion of the court was delivered by Gaulkin, J.A.D.

Gaulkin

[78 NJSuper Page 171] The Chancery Division granted defendants' motion for summary judgment dismissing the first three counts of plaintiff's four-count complaint, and "dismissing

those allegations contained in paragraph 1 of the Fourth Count which incorporate by reference the allegations of the First, Second and Third Counts." Plaintiff appeals. We pass the question whether the judgment is in the form required by R.R. 4:55-2 to make it appealable without our prior leave, since both sides seem to agree that it is.

The complaint was filed July 31, 1961 and named as defendants Monroe Calculating Company, Inc. (Monroe), Litton Industries, Inc. (Litton), Electro-Dynamics Stock Trust Fund, an unincorporated association of California (Electro-Dynamics), Foundation of the Litton Industries, a California corporation (Foundation), Fred R. Sullivan (Sullivan) and Charles B. Thornton (Thornton). Monroe, Litton and Sullivan appeared and filed answers; the others have not. There is nothing before us to indicate that plaintiff has made any effort to effect service of process upon the defendants who did not appear, in a fashion which would make a judgment binding upon them. Therefore, all references hereafter to defendants will mean the defendants who appeared.

On August 23 and 24, 1961, and before filing their answers, the defendants took plaintiff's deposition. On September 12 defendants filed their answers. On September 14 plaintiff served notice upon defendants of his intention to take the depositions, on September 25, of defendants and their directors, officers and supervisory personnel, and demanding production of documents and records. By agreement of counsel, the taking of the depositions was postponed to November -- at the request of defendants, says plaintiff. On October 16 defendants served upon plaintiff notice of the application for summary judgment and "for an order staying the taking of the depositions * * * and the production of certain records * * * until such time as the defendants' motion for summary judgment shall be determined by the court." The result was that plaintiff did not have whatever benefit the depositions and the records he sought might have afforded him. This is of some significance in determining the propriety of the summary judgment because defendants

filed no affidavits and the motion for summary judgment was made (and granted) solely "upon the oral depositions given by the plaintiff on August 23 and 24" and the pleadings. Cf. Judson v. Peoples Bank & Trust Co. of Westfield , 17 N.J. 67, 76 (1954); Bilotti v. Accurate Forming Corp. , 39 N.J. 184 (1963).

It is true that the complaint is, as defendants say, "verbose and confusing," and, as the trial judge found it to be, ambiguous, with the allegations pertaining to the two agreements hereafter mentioned "intermingled and juxtaposed with resulting confusion." However, the motion for summary judgment was granted essentially for the reason that none of the first three counts of the complaint, as amplified and particularized by plaintiff's deposition, stated a cause of action. In such a situation we search the complaint and the depositions "in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." Di Cristofaro v. Laurel Grove Memorial Park , 43 N.J. Super. 244, 252 (App. Div. 1957); cf. Judson v. Peoples Bank & Trust Co. of Westfield, supra; Bilotti v. Accurate Forming Corp., supra.

With these principles in mind we shall ignore the convolutions of the complaint and simply summarize the facts alleged therein and supported in plaintiff's deposition upon which plaintiff claims he is entitled to recover.

Plaintiff was a highly successful sales executive in the business machines field and, in 1959, was vice-president of Smith-Corona at $40,000 per year. In July of that year control of Smith-Corona changed hands and the new management asked plaintiff to surrender his contract. For this Smith-Corona offered to pay plaintiff his salary for the remaining term of the contract (which ran to early 1961), amounting to about $66,000, and to reimburse him for various expenses in the sum of about $9,000, on the sole condition that he not take employment with a competitor of Smith-Corona.

When it became known in the industry that plaintiff was available, he received numerous offers, among the offerors being Litton and Toledo Scale Company. The Toledo offer appealed to plaintiff most because Toledo Scale was not a competitor of Smith-Corona, and plaintiff could take a position with them and still receive the $75,000 from Smith-Corona.

However, says plaintiff, Litton urged him to come with it and its subsidiary companies (among which is Monroe). Litton offered him the same salary he had been receiving at Smith-Corona, namely $40,000 per year. He told Charles B. (Tex) Thornton, president of Litton, and defendant Sullivan, president of Monroe, who were doing the urging, of the Smith-Corona $75,000 which he would forfeit if he turned down the Toledo offer and joined the Litton organization. Thornton replied that if plaintiff received $40,000 per year from Toledo and $40,000 per year more from Smith-Corona for the balance of his contract, "Uncle Sam would get the majority of it." Plaintiff testified that Thornton "mentioned that he, he and Mr. Sullivan, would offer me 1,500 shares of Litton Industries stock at one-half of the then current market value which was in the neighborhood of $100. This would make my cost of those 1,500 shares $75,000; but my profit on those 1,500 shares would be $75,000" which "would only be taxable at 25% long term capital gains." However, Thornton said this had to be done under a stock plan. Since the following excerpts from plaintiff's deposition contain the heart of the entire controversy, we quote them even though they are lengthy. Questioned by defense counsel, plaintiff testified (emphasis ours):

"Q. Well, tell us what he [Thornton] said would be your arrangement with Litton-Monroe or Litton if you came with them. A. What they were prepared to offer me was, one, a job as executive vice president with the possibility of becoming president in a year or a year and a half to take over the administrative duties of Mr. Sullivan, to relieve him to work on mergers and other acquisitions, it would be at an income rate of $40,000 a year which was the same that I was currently making; and they were prepared to offer me

1,500 shares of Litton stock which was selling for $100; and this then would have a net value before taxes of $75,000, the approximate figure that I had mentioned that I had coming to me from Smith-Corona, but that this was much more valuable to me than the Smith-Corona because it stood to appreciate and to increase in value as it had previously.

The one fly in the ointment was that when this stock option agreement had been set up originally in the forming of the corporation, because of its technical nature, the stock could only be exercised over a period of five years; this was a problem; and, therefore, they were, would do this, since it could not as the typical stock option be exercised immediately, they could not toy with it, as I understood it, lest those that had already been granted would be upset, but to recompense me for this $75,000 which I would forfeit from Smith-Corona by going to work, they would guarantee me non-cancelable, non-revocable, 1,500 shares of Litton stock; and that they -- there seemed to be some question originally as exactly how they were going to do this; and it was stated to me very plainly that they would assure me and guarantee me five years employment so that I would receive the 1,500 shares of Litton stock.

Now, I would definitely not, as I told them, have accepted the job with Litton-Monroe if there was any question about the $75,000 to recompense me for my loss under the Smith-Corona contract. So it was not that I was asking for an employment contract. It was their suggestion, it was not my suggestion as a means of guarantying the stock option; it was explained -- that it was a highly technical nature -- and it was explained that it could possibly yet prove that it was illegal; that they did not want to toy with it or upset it; but they would guarantee and assure me and promise me that I would have 1,500 shares of Litton stock.

Q. Well, now, at this time did anyone mention the fact that there never were any contracts at Monroe-Litton for employment? A. No. It was mentioned, I think, this was an exceptional agreement only to get me, that they did not do this as a normal thing. Yes.

Q. They did not do what as a normal thing? A. Make such guarantees, that the stock option was designed for another purpose or so it seemed to me; but, my particular arrangement with them was -- well, ...


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