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Matched Legal Cases: ['§ 1079', '§ 175', '§ 1520', '§ 1520', 'Art. 10', '§ 5', '§ 5', '§ 171', '§ 1384', '§ 2064', '§ 5', '§ 5', '§ 55', '§ 715', '§ 3', '§ 608', '§ 5', '§ 179']

Guilford Glazer, Appellant, v. Jerome S. Glazer and Louis A. Glazer, Appellees.jerome S. Glazer and Louis A. Glazer, Appellants, v. Guilford Glazer, Appellee, 374 F.2d 390 (5th Cir. 1967) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 1967 › Guilford Glazer, Appellant, v. Jerome S. Glazer and Louis A. Glazer, Appellees.jerome S. Glazer and...
Guilford Glazer, Appellant, v. Jerome S. Glazer and Louis A. Glazer, Appellees.jerome S. Glazer and Louis A. Glazer, Appellants, v. Guilford Glazer, Appellee, 374 F.2d 390 (5th Cir. 1967)
US Court of Appeals for the Fifth Circuit - 374 F.2d 390 (5th Cir. 1967)
Rehearing Denied May 2, 1967
The trial court's action, granting the judgment n. o. v. for the defendant and conditionally denying a new trial or remittitur, is subject to full review by this Court. The trial judge's order is an order nisi. Montgomery Ward & Co. v. Duncan, 1940, 311 U.S. 243, 61 S. Ct. 189, 85 L. Ed. 147. We have broad authority under the amended Rule 50(c), F.R.Civ.P., to set out an appropriate subsequent disposition below. See 5 Moore, Federal Practice ¶ 50.12 (2d ed. 1965 Supp., 171-173). The defendant's motion for judgment n. o. v. presented solely a question of law. The trial court had power to enter judgment n. o. v. only for one reason — the absence of any substantial evidence to support the verdict. See Danko v. Lewy, 5 Cir. 1945, 149 F.2d 66; Pratt v. Louisiana & A. Ry., 5 Cir., 1943, 135 F.2d 692; 2B Barron & Holtzoff, Federal Practice and Procedure § 1079 (Wright ed. 1961). The court could not weigh the evidence in making this determination. That the trial court did not divulge the reasons for its judgment obviously makes a difficult case more difficult.
The defendants could not assert a ground not included in their motion for a directed verdict. Lewis v. Mears, D.C.Pa.1960, 189 F. Supp. 503, aff'd, 3 Cir. 1961, 297 F.2d 101, cert. denied, 369 U.S. 873, 82 S. Ct. 1142, 8 L. Ed. 2d 276. We therefore test the judgment n. o. v. by the standards of deficiency asserted by the defendants in their motions for directed verdict and judgment n. o. v. and repeated in their appeal briefs. We find that the judgment n. o. v. was not justified on any of the grounds advanced by defendants.
Moreover, the duration of shareholder agreements has never been an important factor in determining their validity. Professor Hornstein correctly states the rule: "If not expressly stated, the intention of the parties with respect to duration must be construed in the light of the whole agreement and practical construction, if any, prior to any dispute between them. It may be construed effective as to directors or officers so long as they live, provided they remain faithful, etc. On the other hand, it may be adjudged revocable at will." 1 Hornstein, Corporation Law and Practice § 175 at 209-10 (1959). See Storer v. Ripley, 1953, 1 Misc.2d 235, 125 N.Y.S.2d 831, aff'd, 282 App.Div. 950, 125 N.Y.S.2d 339. We hold that the Glazer agreement could properly be construed by a jury to provide for compensation for a reasonable time, possibly until the death or complete retirement of one of the brothers. See Vogel v. Melish, 1964, 31 Ill. 2d 620, 203 N.E.2d 411.
The defendants regard this paragraph as nothing more than a series of general exhortations to the parties to behave decently toward one another. The plaintiff agrees that ambiguities may exist in some clauses of the agreement, but he asserts that a jury could find the agreement as a whole specific enough to enforce. We hold that the jury could find that the contract, read as a whole, does not because of vagueness fail to support the plaintiff's claim for damages. The same evidence that might clarify ambiguities in the contract's construction could also minimize the pitfalls of vagueness in its enforcement. This suit is not an action for specific performance; we need shape no equitable decree. " [E]ven though an agreement may be too indefinite in its terms to be specifically enforced, it may be certain enough to constitute a valid contract for breach of which damages may be recovered." Gulbenkian v. Gulbenkian, 2 Cir., 1945, 147 F.2d 173, 175, 158 A.L.R. 990. The defendants further assert that this agreement, as an employment contract, must be precise, definite, and certain to be enforced. However, we have already held, in discussing terminability, that this agreement does not purport to describe an ordinary employment relationship. The defendants' analogy to a legally unenforceable family agreement is also untenable. The family cases cited by defendant were all in equity; the leading ones involved continuing supervision of domestic relations.
D. Illegality. The defendants further assert that the agreement, as construed by the jury, is illegal as a matter of corporate law.12 The court cannot enforce the contract, they say, because not all the shareholders of all the corporations involved were parties to it. At the heart of their argument is language in West v. Camden, 1890, 135 U.S. 507, 10 S. Ct. 838, 34 L. Ed. 254 to the effect that an agreement among shareholders, dividing directorships and corporate offices among themselves, breaches a fiduciary duty to the other shareholders and the corporation, and the agreement is illegal and void. The defendants contend that the presence of outside shareholders in any one of the Glazer corporations voids the agreement as to all the corporations. They assert that the parties intended that the agreement cover all twenty-one Glazer family corporations, and they note that five of these companies had outside shareholders in the period between the signing of the December 1957 agreement and the plaintiff's 1959 ouster.
We look to state law in determining the enforceability of the agreement. That the family companies are incorporated in four states complicates the problem. As in any diversity case, we apply the conflict-of-laws rule of the forum state — here Louisiana. Klaxon Co. v. Stentor Elec. Mfg. Co., 1941, 313 U.S. 487, 496, 61 S. Ct. 1020, 85 L.Ed 1477; Palmer v. Chamberlin, 5 Cir. 1951, 191 F.2d 532, 536, 27 A.L.R.2d 416. Louisiana law is silent on which law determines the validity of a shareholders' control agreement involving foreign corporations. But since Louisiana's other conflict-of-laws rules closely resemble those of other states, we can refer to the general law on this issue. Mansfield Hardwood Lumber Co. v. Johnson, 5 Cir. 1959, 268 F.2d 317, 319.
The defendants contend that if the agreement is unenforceable as to any one Glazer corporation in any one state, it must be held invalid as to all the corporations in all the states. We reject this argument, in favor of a state-by-state determination of the agreement's enforceability as to each one of the Glazer companies. If the agreement were held unenforceable as to Glazer Steel, the base of the corporate pyramid, the whole pyramid might collapse. Glazer Steel generated this case. As it happens, we find the agreement fully enforceable as to the salaries and bonuses payable by Glazer Steel. The contract may be unenforceable as to compensation payable by only one of the corporations, West Virginia Development. That possible defect, one that could turn on a fact undisclosed in the record, will not defeat the enforceability of the agreement as to compensation payable by the other twenty Glazer family companies.24 This result is consistent with the well-established "divisibility" principle of contract law. " [A] bargain can be lawful, and enforceable, in part, even though the remainder is unlawful and unenforceable". 6A Corbin, Contracts § 1520 at 754 (1962). In this case, we have an adequate "method of determining those `parts' and the basis of separation." Ibid.
The pre-Erie Supreme Court case, West v. Camden, 1890, 135 U.S. 507, 10 S. Ct. 838, 34 L. Ed. 254, relied on by the defendants, may be distinguished in the same way as Cummins. Although West v. Camden has occasionally been cited for broad condemnation of voting agreements,30 that case has a narrow holding: A contract between directors of a corporation (Maryland in that case) to keep one of them in office irrespective of changed circumstances is unenforceable where the promisor is the trustee for the majority shareholder and the promisee has only a small minority interest. Its rationale is simple and specialized: As "to the directors of a private corporation, charged with duties of a fiduciary character to private parties, * * * it is public policy to secure fidelity in the discharge of * * * [their] duties." 135 U.S. at 521, 10 S. Ct. at 841, 34 L. Ed. at 258. In this case, we cannot say that the parties had a significant fiduciary obligation to private persons that would be violated by their agreement.
We hold that the Sanford brothers' forty per cent outside participation in West Virginia Development does not void the agreement as to all the other Glazer corporations. "Enforcement in part will never be granted if such enforcement enables a party to attain his illegal purpose, even in part." 6A Corbin, Contracts § 1520 at 757 (1962). But if as in this case "such attainment is wholly avoided, if the degree of illegality is not great, and if enforcement in part is not unfair and unreasonable, the court may be justified in declaring that the transaction is divisible and in enforcing the lawful part." Ibid. Cf. Pennington v. United Mine Workers, 6 Cir. 1963, 325 F.2d 804, rev'd on other grounds, 1965, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626.
IN WITNESS WHEREOF the parties hereto have executed this agreement in triplicate this the day and date first above written. GERTRUDE A. WALLACE GUILFORD GLAZER First Party PAUL F. ROACH LOUIS A. GLAZER Second Party FRANK L. DIGGS JEROME S. GLAZER Witnesses Third Party"
Name of Guilford's Year State of Corporation Ex-capacity Organized Incorporation 1. Glazer Steel Corp. Pres. & Chmn. 2/21/46 Tenn. 2. Mayfair Village Corporation Pres. 8/16/49 Florida 3. Troy Construction Corp. Vice-Pres. & Chmn. 3/17/50 Tenn. 4. Tennessee Television, Inc. Pres. 1951 or 1952 Tenn. 5. The Swifton Corp. Pres. 1/12/56 Ohio †6. The Jerome Corp. Vice-Pres. & Secy. 1/8/52 Tenn. #7. G & K Machinery, Inc. Vice-Pres. & Secy. 1/8/52 Tenn. *8. Trustee Corp. Pres. & Treas. 6/12/52 Tenn. 9. Glencoe, Inc. Pres. 7/8/53 Tenn. 10. Barbizon Terrace, Inc. Vice-Pres. 12/24/53 Tenn. 11. Builders Investments, Inc. Vice-Pres. 4/16/54 Tenn. 12. Roach Ins. Agency, Inc. Vice-Pres. 12/24/54 Tenn. 13. General Development Corp. Pres. 9/23/55 Ohio 14. Drake Apartments, Inc. Vice-Pres. 5/26/55 Tenn. *15. Magnolia Apartments, Inc. Pres. 6/24/55 Tenn. *16. West Virginia Development Corp. (40 per cent non-family interest) Pres. 1/31/56 W.Va. 17. Swifton Management Corp. Pres. 7/12/56 Tenn. 18. Park Management Corp. Pres. 11/12/57 Tenn.
† Jerome Glazer was sole shareholder.
Name of Year State of Corporation Organized Incorporation *1. Colonial Village Corp. 6/20/50 Tenn. *2. Shelbourne Towers, Inc. 6/27/50 Tenn. 3. Champion, Inc. (Guilford sole shareholder) 1/ 8/52 Tenn.
Art. 10. "The form and effect of public and private written instruments are governed by the laws and usages of the places where they are passed or executed. But the effect of acts passed in one country to have effect in another country, is regulated by the laws of the country where such acts are to have effect. The exception made in the second paragraph of this article does not hold, when a citizen of another State of the Union, or a citizen or subject of a foreign State or country, disposes by will or testament, or by any other act causa mortis made out of this State, of his movable property situated in this State, if at the time of making said will or testament, or any other act causa mortis, and at the time of his death, he resides and is domiciliated [with his family] out of this State."
Jerome Glazer, who requested the deletion, later testified that he struck out the language "because I did not feel that I should be required to stay on any particular job within the Glazer complex corporation". (Emphasis added.)
See 1 O'Neal, Close Corporations §§ 5.16-5.17 (1958). See generally Id. §§ 5.01-5.39; O'Neal & Derwin, Expulsion or Oppression of Business Associates: "Squeeze-Outs" in Small Enterprises (1961); 1 Hornstein, Corporation Law and Practice §§ 171-187 (1959); 3 Oleck, Modern Corporation Law §§ 1384-1396 (1959); 5 Fletcher, Corporations §§ 2064-2067 (Wolf ed. 1952); Anno., 45 A.L.R.2d 799 (1956); Chayes, Madam Wagner and the Close Corporation, 73 Harv. L. Rev. 1532 (1960); Robinson, Shareholder Agreements and the Statutory Norm, 43 Corn.L.Q. 68 (1957); Delaney, The Corporate Director: Can His Hands Be Tied in Advance, 50 Colum. L. Rev. 52 (1950); Hornstein, The Future of Corporate Control, 63 Harv. L. Rev. 476 (1950); Hornstein, Stockholders' Agreements in the Closely Held Corporation, 59 Yale L.J. 1040 (1950); Ballantine, Voting Trusts, Their Abuses and Regulation, 21 Texas L.Rev. 139 (1942); Meck, Employment of Corporate Executives by Majority Stockholders, 47 Yale L.J. 1079 (1938); Note, Freezing Out Minority Shareholders, 74 Harv. L. Rev. 1630 (1961); Note, Removal with Cause of Corporate Executives Under Agreement, 109 U.Pa.Rev. 224 (1960); Note, Validity of Voting Agreements to Continue Shareholders as Directors, 52 Mich. L. Rev. 1243 (1954); Note, Validity of Stockholders' Voting Control Agreement, 47 Mich. L. Rev. 580 (1949)
See, e. g., Long Park, Inc. v. Trenton-New Brunswick Theatres Co., 1948, 297 N.Y. 174, 77 N.E.2d 633. See also 1 O'Neal, Close Corporations § 5.16 & n. 44, § 5.17 & n. 58; Note, Delegation of Duties by Corporate Directors, 47 Va. L. Rev. 278 (1961). Some of the more recent statutes provide for greater flexibility in the selection of corporate officers. See, e. g., N.C.Gen.Stats. § 55-34(a) (1960), which provides that the officers of the corporation may be elected by the board of directors or "otherwise chosen"; N.Y.Business Corporation Law, McKinney's Consol.Laws c. 4, § 715(b) (1963): "The certificate of incorporation may provide that all officers or that specified officers shall be elected by the shareholders instead of by the board." See also Fla.Stat.Ann. ch. 63-379 § 3 (1963), F.S.A. § 608.0102 which permits all or any part of the functions of directors to be performed by shareholders. 1 O'Neal, Close Corporations § 5.17 (1964 Supp., at 97-98)
See, e. g., West v. Camden, 1890, 135 U.S. 507, 10 S. Ct. 838, 34 L. Ed. 254; Odman v. Oleson, 1946, 319 Mass. 24, 64 N.E.2d 439; Seitz v. Michel, 1921, 148 Minn. 80, 181 N.W. 102, 12 A.L.R. 1060; Van Slyke v. Andrews, 1920, 146 Minn. 316, 178 N.W. 959, 12 A.L.R. 1068; McQuade v. Stoneham, 1934, 263 N.Y. 323, 189 N.E. 234
See, e. g., Creed v. Copps, 1930, 103 Vt. 164, 152 A. 369, 71 A.L.R. 1287; Odman v. Oleson, 1946, 319 Mass. 24, 64 N.E.2d 439, 440
Bausch & Lomb Optical Co. v. Wahlgren, N.D. Ill. 1932, 1 F. Supp. 799, aff'd 7 Cir. 1934, 68 F.2d 660, cert. den'd 1934, 29 U.S. 639, 54 S. Ct. 774, 78 L. Ed. 1491, reh. den'd 1934, 292 U.S. 615, 54 S. Ct. 862, 78 L. Ed. 1491; Smith v. San Francisco & N. P. Ry. Co., 1897, 115 Cal. 584, 47 P. 582, 35 L.R.A. 309, 56 Am.St. Rep. 119; Ringling Bros-Barnum & Bailey Combined Shows, Inc. v. Ringling, 29 Del.Ch. 610, 53 A.2d 441 (Sup.Ct. 1947), modifying 29 Del.Ch. 318, 49 A.2d 603 (Ch.1946); Thompson v. J. D. Thompson Carnation Co., 1917, 279 Ill. 54, 116 N.E. 648, Ann.Cas.1917E, 591; Wallace v. Southwestern Sanitarium Co., 1945, 160 Kan. 331, 161 P.2d 129; Brightman v. Bates, 1900, 175 Mass. 105, 55 N.E. 809; Mansfield v. Lang, 1936, 293 Mass. 386, 200 N.E. 110; Hart v. Bell, 1946, 222 Minn. 69, 23 N.W.2d 375, supplemented 222 Minn. 1946, 222 Minn. 69, 24 N.W.2d 41; Trefethen v. Amazeen, 1944, 93 N.H. 110, 36 A.2d 266; Lockley v. Robie, 1950, 301 N.Y. 371, 93 N.E.2d 895, reargument denied 1951, 301 N.Y. 731, 95 N.E.2d 409
West v. Camden, 1890, 135 U.S. 507, 10 S. Ct. 838, 34 L. Ed. 254 (bank); Van Slyke v. Andrews, 1919, 146 Minn. 316, 178 N.W. 959 (bank); Jacobson v. Barnes, 1928, 176 Minn. 4, 222 N.W. 341 (insurance company); Gage v. Fisher, 1895, 5 N.D. 297, 65 N.W. 809, 31 L.R.A. 557 (bank). See also 1 Hornstein, Corporation Law and Practice § 179 & n. 1 (1959)
Mansfield Hardwood Lumber Co. v. Johnson, 5 Cir. 1959, 268 F.2d 317, 320 & N. 6; Zahn v. Transamerica Corp., 3 Cir. 1947, 162 F.2d 36, 40, 172 A.L.R. 495; Mayflower Hotel Stockholders Protective Comm. v. Mayflower Hotel Corp., 1951, 89 U.S.App.D.C. 171, 193 F.2d 666, 668. See also Rogers v. Guaranty Trust Co., 1933, 288 U.S. 123, 53 S. Ct. 295, 77 L. Ed. 652