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GASBARRA v. PARK-OHIO

October 8, 1974

ANTHONY J. GASBARRA, PLAINTIFF,
v.
PARK-OHIO, INC., FORMERLY KNOWN AS GROWTH INTERNATIONAL, INC., A DELAWARE CORPORATION, AND GEORGE A. BRICMONT, DEFENDANTS.



The opinion of the court was delivered by: McMILLEN, District Judge.

DECISION

This cause was heard by the Court without a jury and was taken under advisement on proposed findings and conclusions and memoranda of law by both sides. The Court has considered these filings and has reviewed the evidence and finds and concludes as follows:

Plaintiff entered into an Agreement with Bennett Industries Inc. effective July 1, 1968. The contract superseded an earlier unexpired contract with Bennett and was for a principal term of five years. Par. 1 of the contract provided:

  Term. The Company hereby employs the Executive, and
  the Executive hereby agrees to serve, as President of
  the Company or in such other executive capacity as
  the President of Growth International, Inc., and/or
  the Board of Directors of the Company may from time
  to time determine, for a period commencing as of the
  date hereof and ending on June 29, 1973 and
  thereafter until this Agreement is terminated as
  hereinafter provided. Executive has the option to
  renew this Agreement, on the same terms and
  conditions, for an additional two (2) year term after
  the expiration of the initial term of this Agreement
  by giving the Company written notice of his election
  to exercise his option prior to the expiration of
  said initial term. After July 1, 1973, if said option
  for an additional two (2) year term is not exercised
  by Executive, or if so exercised, then after July 1,
  1975, this Agreement may be terminated by either
  party at any time by giving to the other party not
  less than sixty (60) days' written notice of such
  right to terminate.

The control of Bennett Industries apparently changed early in 1970, and plaintiff was replaced as president by Carl Millsom on March 16, 1970. He was relieved of all duties because the Board of Directors believed that his management of Bennett Industries had not produced a satisfactory profit. Plaintiff was ready and willing to perform his duties as an executive of Bennett or its parent Growth International Inc., as provided in the agreement, and was paid his full salary until March 6, 1972. On that date, Growth International Inc., (a successor to the original obligee) attempted to terminate the contract by the following letter:

  You are hereby advised that your services are
  terminated immediately, and that your stock options
  and July 1, 1968 employment agreement, together with
  any and all benefits granted thereunder, are
  cancelled as of this date. . . .
  We are confident that you are in the best position to
  be fully aware of the reasons for this action.

We find and conclude that this termination was ineffective. It was, obviously, not provided for in par. 1 of the contract nor elsewhere, but defendants contend that plaintiff was found to have violated his fiduciary duties as a trustee of Bennett Industries' profit sharing fund and that this was discovered only after the new owner began investigating in January 1972. We find that the contract could not be terminated because of plaintiff's activities under the trust fund, a separate and independent entity, particularly since those activities resulted in no loss to the fund or to the company. The contract is for a fixed five year period and, although the company undoubtedly had the right to relieve plaintiff of his duties, it is difficult to conceive of any ground for depriving him of the financial benefits of the contract, short of something equivalent to embezzlement or theft from the company.

Not only the breach of trust but the other reasons now advanced for terminating the agreement were known or should have been known to defendants when plaintiff was removed from the office of president on March 16, 1970. Furthermore, the company's treasurer, on April 1, 1970, assessed interest against plaintiff for his improper borrowing from the fund, and he paid the interest promptly. The trust violation was known to other company executives by that time and probably earlier, but Chicago and Cleveland counsel advised that plaintiff's contract should not be terminated for this reason. In fact the company president orally ratified the agreement after plaintiff had been relieved of his corporate duties.

Article III-2(p) of the trust agreement provides that the trustees have the power and duty

  To furnish to the company from time to time as the
  company may request, but at least as often as each
  fiscal year of the company, a statement of account
  showing the condition of the trust fund and all
  investments, receipts, disbursements, and other
  transactions effected by the trustees during the
  period covered by the statement, which accounts shall
  be conclusive on all persons, including the company,
  except as to any act or transaction concerning which
  the company files with the trustees written
  exceptions or objections within 180 days after the
  receipt thereof, and the approval of any account,
  act, or procedure by the company shall be a full
  acquittance and discharge to the trustees with
  respect thereto;

Although this provision relates specifically to statements of account, it also requires the company to object to improper "transactions" within 180 days of the statement. An outside audit of the trust fund had been requested by plaintiff on November 11, 1969 and the accountant called attention to plaintiff's improper activities by a memo dated December 31, 1969, shown to defendant's auditor in March 1970. The audit was completed on July 17, 1970, after plaintiff had fully reimbursed the fund. Although the plaintiff's improper transactions were not reported in the audit, the defendant knew of them and was not justified in attempting to terminate plaintiff's contract some two years thereafter.

Additional reasons now advanced for terminating plaintiff's contract are afterthoughts. These include taking excessive bonuses, reimbursement of expenses without proper supporting documents, and not devoting full time to company business, all before plaintiff was removed as president in March 1970. None of these accusations have been proved by the greater weight of the evidence, and all of them were known before or shortly after the removal of the plaintiff as president. Since they were not sufficiently well-established to justify cancellation in 1970, we find and conclude the same impediment existed in March 1972. We believe that when the defendant corporation assumed control of Bennett Industries late in 1971, its management became unhappy with paying a salary to plaintiff and receiving no benefits from him. Its president, the defendant George Bricmont, said more than once that he would like to find a way to get out from under plaintiff's contract. He seized upon the breach found by his attorneys in February 1972, persuaded his company's Cleveland attorneys that this could constitute grounds for termination, and wrote the letter of cancellation on March 6, 1972. We agree with defendants that the ...


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