On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County.
O'Brien, Simpson and Scalera. The opinion of the court was delivered by Scalera, J.s.c. (temporarily assigned).
This appeal stems from the trial court's order removing defendants Morty Wolosoff and Milton Hendler as trustees of the defendant, CSI Liquidating Trust. Implicated are the legal principles to be applied in a court's forcible removal of trustees as well as consideration of the proofs necessary to properly determine that issue.
Cable Systems Incorporated (CSI) was incorporated in 1973, and operated a cable television company in southern New Jersey and was the owner of several municipal cable franchises. Ultimately, the ownership of stock was held as follows
Morty Wolosoff (a defendant) 5%
Milton Hendler (a defendant) 10%
Irving B. Kahn (a defendant) 20%
Thomas B. Troehler (a defendant) 10%
Gloria Wolosoff (wife of Morty) 20%
James K. Wolosoff (the plaintiff and
Audubon Electronics, Inc., (Audubon) was also a cable television company with franchises contiguous to those of CSI. Audubon was owned 100% by Irving Kahn (Kahn). Both CSI and Audubon were operated by substantially the same personnel and primarily utilized CSI equipment pursuant to agreement of the companies. Both CSI and Audubon eventually flourished as cable television companies. In or about 1979 and 1980 Kahn began to negotiate for the sale of both his company, Audubon, and CSI, of which he was a minority stockholder. In 1980, as a result of Kahn's efforts, Audubon and CSI entered into formal contracts for the purchase of all of their assets by The New York Times Company (Times). The price for CSI was $23,000,000 and the price for Audubon was $59,000,000.
The CSI sale agreement provided for the majority of the purchase price to be paid in installments through two non-negotiable notes totalling $3 million dollars and four negotiable notes totalling $17 million dollars. The agreement was structured to permit the Times to offset "future construction costs" against the purchase price not to exceed the $3 million dollars represented by the non-negotiable notes.
It was at the time of negotiations for the sale of CSI and Audubon that the "warfare" between the parties began. Plaintiff James K. Wolosoff, as owner of the largest percentage of CSI stock (25%), objected to the proposed sale of CSI to the Times. He believed that the price negotiated for CSI was
deliberately under-valued and that the price to be paid for Audubon (owned entirely by Kahn) was deliberately overstated.
The litigation commenced when plaintiff herein brought suit in the United States District Court of New Jersey against CSI, Audubon, Kahn, Thomas B. Troehler (Troehler), Milton Hendler (Hendler), Morty Wolosoff (Morty W.), Gloria Wolosoff (Gloria W.) and Jerimiah E. Hastings (Hastings). James Wolosoff (plaintiff) did not seek to "block" the sale of CSI to the Times, but instead sought damages from the individual defendants and Audubon contending that they had committed fraud, had engaged in conflicts of interest and had breached fiduciary duties in participating in the negotiation and sale of CSI and Audubon. Defendants in that suit brought a motion for summary judgment as a result of which plaintiff sought to submit to a voluntary dismissal without prejudice. The District Court Judge refused to accept the tender and ultimately entered a dismissal of the suit with prejudice subject to recommencement only upon terms and conditions. He took this course to facilitate the sale of CSI and Audubon to the Times pursuant to the agreements of sale. The closing between CSI and the Times took place as scheduled on March 2, 1981.
Soon thereafter plaintiff filed another suit against Hendler, Hastings, Troehler, Morty W., Gloria W. and CSI seeking repayment of a loan allegedly made by him to CSI and compelling payment to him of his share of the CSI sale proceeds. The defendants counterclaimed, claiming ...