Aronson v. Sol & S Marcus Co.

• Citation: 198 N.E. 654,292 Mass. 389
• Parties: ARONSON v. SOL & S. MARCUS CO. (two cases). MARCUS v. ARONSON et al.
• Decision Date: 12 November 1935
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

292 Mass. 389

198 N.E. 654

ARONSON v. SOL & S. MARCUS CO. (two cases).

MARCUS v. ARONSON et al.

Supreme Judicial Court of Massachusetts, Worcester.

November 12, 1935

Three actions or suits, as follows: (1) Action of contract by Joseph M. Aronson against Sol & S. Marcus Company. The judge having heard the action without a jury, found for plaintiff for $4,722.21. From orders overruling its plea in abatement and demurrer, defendant appeals, and both parties bring exceptions. (2) Suit in equity by Samuel Marcus and another against Joseph M. Aronson and others. From interlocutory decrees, defendants appeal, and from the final decree all parties appeal. (3) Action of contract by Joseph M. Aronson against Sol & S. Marcus Company. Verdict for plaintiff for $10,925. To review various rulings, including an order overruling its demurrer, defendant appeals and brings exceptions.

In the first case, exceptions sustained and new trial ordered limited to the question of damages. In the second case interlocutory decrees overruling demurrer to the bill and sustaining demurrer to the counterclaim affirmed, and appeal from the findings, rulings, and order dismissed, and final decree reversed. In the third case, exceptions sustained, and judgment to be entered for defendant.

Appeals and Exceptions from Superior Court, Worcester County; Williams and Collins Judges. S. A. Seder and H. Seder, both of Worcester, for Aronson.

F. P. McKeon, of Worcester, for Sol & S. Marcus Co.

A. M. Hillman, of Worcester, for Marcus and another.

LUMMUS, Justice.

Sol Marcus and Samuel Marcus, on November 3, 1927, entered into an agreement with their nephew Joseph M. Aronson, sometimes called Joseph Aronson, which contemplated the merger of the retail shops of the two first named persons, and the change of the name and corporate structure of an existing corporation to enable it to conduct the combined business. The new name of the corporation was to be Sol & S. Marcus Company. The capital stock was to consist of $100,000 in common stock, and $50,000 in preferred stock without voting power. Of the common stock, $90,000 was divided equally between Sol Marcus and Samuel Marcus. The remaining $10,000 was awarded to Joseph Aronson, who paid for it in cash at par. Aronson was given ‘ the right out of the profits for him provided under the terms of this contract to purchase additional common stock of the corporation at the price of one hundred dollars ($100.) each per share of stock so purchased until the common stock held by the aforesaid Arsonson shall represent twenty-five (25%) per cent. of the common stock issued and outstanding. In the making of such purchases, however, Aronson shall purchase an equal number of shares from both Samuel and Sol Marcus who shall be under obligation to sell such shares to the aforesaid Aronson.’

By the agreement, Sol Marcus was to be president, Samuel Marcus treasurer, Joseph Aronson vice president, and all three of them directors. All three were to help conduct the business, but Samuel Marcus was not required to give his whole time to it. The ‘ sole management and control of the business' were to ‘ vest exclusively’ in Sol Marcus and Samuel Marcus. Their control was further assured by a provision that the common stockholders could act only by a two-thirds vote of the stock, and that the directors could act only by a vote of two-thirds of them owning two-thirds of the common stock. Thus nothing could be done without the concurrence of Sol Marcus and Samuel Marcus. These provisions of the agreement were followed in amendments of the by-laws adopted on November 10, 1927.

Aronson was to receive for his services $75 a week for the first two years, and $100 a week afterwards. Until he should own fifteen per cent. of the common stock, he was to receive an additional commission of fifteen per cent. of the net annual profits above the amount required for the cumulative dividends of six per cent. a year on the preferred stock, but ‘ the aforesaid Aronson shall use this commission in the purchase of additional stock of the corporation in the manner herein provided.’

The agreement provided that Aronson ‘ shall be retained in a responsible position in the business that the corporation conducts for a period of five (5) years.’ Paragraph 23 of the agreement was as follows: ‘ In the event that the services of Joseph Aronson are terminated after 5 yrs. by the vote of the corporation then and in that event the shares of stock held by the aforesaid Joseph Aronson in the corporation shall within a period of sixty (60) days from date of such termination be purchased by the aforesaid corporation in cash at the actual cost of the aforesaid shares to the said Joseph Aronson together with any and all cumulative dividends or profits as based upon the last financial statement of the corporation.’ The corporation not only was a party to the agreement but also accepted its terms in giving employment to Aronson for five years ‘ as assistant to the managers.’

It is of little importance whether Aronson's employment ended five years from November 3, 1927, the date of the agreement, or five years from November 10, 1927, the date of the vote of the directors giving him employment in accordance with the agreement. At any rate the employment ended in November, 1932. Without incident Aronson continued to hold his position until after the first of the year 1933. He had drawn no commission on net profits, and had bought no more common stock. The corporation had earned net profits found to be approximately $10,400 for 1928 and $13,990 for 1929, but had lost money thereafter. There was evidence that Aronson wished to obtain a new and better contract, or else to draw his commission, sell his stock, and move to Montreal. There was also evidence that Sol and Samuel Marcus wished to get rid of Aronson without buying his stock. At a special meeting of the directors on February 10, 1933, it was voted that ‘ the first floor departments of the corporation be submitted to Joseph Aronson for management and merchandising, who shall co- operate with the co-directors in the discharge of his duties,’ that ‘ the buyers in all departments including the first floor receive buying orders of the Board of Directors or a majority thereof and that no purchases be made by the buyers until such buying orders are received by them,’ and that ‘ Joseph Aronson is retained by the corporation at a salary of $60.00 per week.’ The corporation carefully avoided any vote terminating Aronson's employment entirely. Aronson left after that, and went into business in Montreal.

On February 20, 1933, Aronson brought an action of contract against the corporation, numbered 432, to recover his commission of fifteen per cent. upon the net profits of the years 1928 and 1929. On April 30, 1934, the trial judge found that the corporation owed Aronson a commission of $3,740.41 exclusive of interest, and all parties agree that this finding was warranted by the evidence. The provision of the contract that Aronson should use the commission in the purchase of stock from Sol and Samuel Marcus furnishes no defense to the action at law. It merely affords ground for specific performance against Aronson. There is nothing in the point that Aronson's rights depend upon the vote of the directors on November 10, 1927, and not on the agreement of November 3, 1927. The corporation was a party to both, and the vote of the directors did not vary the terms of the agreement by which the corporation was already bound. Even if the agreement of November 3,...