Miller v. Dixon Industries Corp., 83-463-A
Decision Date | 21 July 1986 |
Docket Number | No. 83-463-A,83-463-A |
Parties | Robert Rulon MILLER, v. DIXON INDUSTRIES CORPORATION et al. ppeal. |
Court | Rhode Island Supreme Court |
This case comes before us on appeal from a judgment entered in the Superior Court. The trial justice, sitting without a jury, awarded damages to the plaintiff as a result of Dixon Corporation's breach of an employment contract. Both parties appeal. We affirm in part and reverse in part. The facts, insofar as pertinent to this appeal, are as follows.
The plaintiff, Robert Rulon Miller (Miller), bought Dixon Lubricating Saddle Company from his wife's family in the early 1950s. Following this purchase, Miller became president of the company and changed its name to Dixon Corporation. Under Miller's direction, the Dixon Corporation was very successful, and a plan was devised whereby the corporation was reorganized into a holding company, Dixon Industries Corporation (DIC), and several wholly owned operating subsidiaries, including Dixon Corporation and Penntube Plastics. Under this new reorganization plan, DIC held the stock in the various operating subsidiaries.
Over the years, various shares of DIC were transferred outside the Miller family as a result of acquisitions and stock-option plans. However, until 1973, Miller owned or at least controlled approximately 60 percent of DIC stock.
In late 1971 Bundy Corporation (Bundy), through its president, Wendell Anderson, Jr. (Anderson), and vice president, William E. Eckhardt (Eckhardt), expressed to Miller an interest regarding Bundy's possible acquisition of all the assets of DIC. Although Miller was reluctant to sell the company, he agreed to let Bundy's representatives examine the corporate books in exchange for a sum of money that was paid by Bundy to DIC. Anderson thereafter suggested a purchase price, and Miller, negotiating on behalf of himself as 60 percent shareholder and on behalf of the company as chairman of the board, suggested a figure of $7.5 million. Anderson agreed that Bundy would meet the $7.5 million selling price. Essential to the consummation of this transaction, however, was Miller's desire to enter into an employment contract that would survive the transfer of DIC's assets to Bundy. Bundy agreed to retain Miller following the changeover, and an employment agreement was negotiated between the parties, the terms of which provided that for eight years Miller would not work or hold any interest in any business that competed with Dixon Corporation or did similar work; that he be available to work for Dixon Corporation for the contract term; and that he refrain from divulging any trade secrets of Dixon Corporation or its subsidiaries. In exchange, Miller was to receive a $25,000 annual salary and continuation of certain fringe benefits that were also being offered to other company executives. Both parties agreed to the provisions of the proposed employment agreement, and documents were prepared in anticipation of concluding the transaction on October 1, 1973.
In mid-July 1973, Miller, through his attorney, forwarded a copy of the proposed employment agreement to Anderson. However, in late July of that year, Miller reconsidered the proposal and determined that the $7.5 million selling price was too low. He thereafter informed Bundy that all negotiations for the purchase of DIC were terminated.
The following August, Miller again reconsidered Bundy's offer to purchase DIC and informed Anderson that he would be willing to sell DIC for $8.5 million. Bundy agreed to meet the $8.5 million selling price, and a new closing date was scheduled for December 1, 1973. The employment agreement was executed in the exact terms as that prepared for the October 1, 1973 closing date. Specifically, the December 1, 1973 employment agreement between Miller and Dixon Corporation, provided in pertinent part:
The sale of DIC's assets to Bundy was effectuated on November 30, 1973, at which time DIC was dissolved, and Dixon Corporation remained the operating company, 1 1 with Bundy as the controlling corporation. The employment agreement between the new Dixon Corporation (hereinafter referred to as Dixon), as a Bundy subsidiary, and Miller was executed on the same date in conjunction with the sale and was signed on behalf of Dixon by its president, Saul Ricklin (Ricklin). Following the execution of the employment agreement, Miller became employed by Dixon, the new operating company, in an executive capacity.
For a period commencing in October 1974 and extending through 1977, Dixon through its controlling corporation, Bundy, made stock options available to certain managerial employees, including Ricklin, Dixon's president. Under that stock-option plan, Ricklin could elect to buy 1,000 shares of Bundy stock at $9 per share, but he could not exercise that option before October 16, 1976. Other similar provisions granted Ricklin options to purchase additional shares of Bundy stock at prices varying between $6 and $10 per share and exercisable at various set dates over the next few years. Throughout the duration of Ricklin's options, the market value of the Bundy shares was in excess of the option price.
Over the same period, Dixon was also providing cash-bonus programs to many of its executives. However, from 1973 through 1977 neither Bundy nor Dixon advised Miller that these stock-option plans and various other cash-bonus plans were being provided to Ricklin or any other Dixon executive. Miller, relying on paragraph 4 of the employment agreement, notified Bundy of his belief that he also was entitled to the stock option plans and cash-bonus programs being offered to the other employees. Miller was advised by Eckhardt, through a letter dated October 26, 1978, that Bundy did not regard him as qualifying for the stock-option plans or cash-bonus programs being offered to the other employees. As a result, Miller commenced action against Bundy and Dixon in the Superior Court, seeking damages for breach of contract.
The trial justice determined that the dispute between Miller and Bundy involved two issues:
The trial justice determined that there can only be two categories of compensation--salary and fringe benefits. He held that the cash bonuses were not "additional fringe benefits" as contemplated in paragraph 4 of the employment contract. However, he held that the stock-option plans were an "additional fringe benefit" and that Bundy and Dixon breached the contract by not offering those option plans to Miller.
The trial justice awarded plaintiff $24,257.75 in...
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