Mandelblatt v. Devon Stores, Inc.

132 A.D.2d 162, 521 N.Y.S.2d 672, 1987 N.Y. App. Div. LEXIS 49527
CourtAppellate Division of the Supreme Court of the State of New York
DecidedDecember 8, 1987
StatusPublished
Cited by146 cases

This text of 132 A.D.2d 162 (Mandelblatt v. Devon Stores, Inc.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mandelblatt v. Devon Stores, Inc., 132 A.D.2d 162, 521 N.Y.S.2d 672, 1987 N.Y. App. Div. LEXIS 49527 (N.Y. Ct. App. 1987).

Opinions

[164]*164OPINION OF THE COURT

Rosenberger, J.

Plaintiff-respondent, Michael Mandelblatt, served as the chief financial officer of Pantry Pride, Inc., which, in 1984, acquired defendant-appellant Devon Stores, Inc., a retail chain that sells consumer goods to military personnel. Respondent then became president and chief executive officer of Devon. In June 1985 Pantry Pride was acquired by the Mac Andrews & Forbes Group, Inc., and, at that time, respondent was asked to resign his posts with Pantry Pride and Devon. He was retained, however, as a consultant to Pantry Pride (which subsequently changed its name to Revlon Group Incorporated) pursuant to a contract entered into on July 26, 1985.

Under the terms of that agreement, respondent was to provide consulting services "in connection with the management, operation and disposition” of Devon Stores, which its parent company was attempting to sell. Respondent was to receive a base fee of $250,000, payable in monthly installments during the term of the contract from August 1, 1985 to June 11, 1986.

Respondent was also to be paid additional compensation as follows: if there was no disposition of Devon on or before June 11, 1986, he would receive $543,000; however, in the event Devon was liquidated, merged, or its stock or assets sold, either to an affiliate of Pantry Pride or to a third party, or if respondent was discharged other than for cause, all on or before June 11, 1986, he would receive $693,000; and in the event that a third party acquired Devon on or before June 11, 1986, he would also receive 1.25% of the proceeds in excess of $35,000,000 up to a maximum of $250,000. However, in the event respondent was terminated for cause, he was to receive his base fee to the date of discharge plus an additional fee of $700,000.

Paragraph 7 of the agreement provides that respondent "may be discharged as a consultant to the Company without any breach of this Agreement”: upon expiration of the contract; upon respondent’s death; in the event of respondent’s incapacity due to illness; or for "cause”. The agreement defined "cause” as: "the willful and continued failure by Mandelblatt to substantially provide the services” called for under the contract after a demand for performance had been delivered by the directors of the company; or, "the willful engaging by Mandelblatt, in his capacity as a consultant, in gross [165]*165misconduct materially injurious to Pantry Pride monetarily or otherwise”; or, respondent’s conviction of a felony under Federal or State law.

Respondent was discharged for cause by appellant Revlon’s board of directors on May 20, 1986. The notice of termination cited respondent’s "threats to fail to perform” his duties unless he received "a new and more lucrative contract” and respondent’s "lack of cooperation with and discouragement of prospective purchasers of Devon Stores, Inc.” after his demand for a new contract had been rejected by appellants. The board deemed respondent’s misconduct willful and materially injurious to the corporation. Thereafter, appellant tendered $714,785 to respondent, as required by the contract, conditioned upon his return of the company car and the execution of a release absolving appellant of all liability under the contract.

Respondent rejected the payment tendered, refused to execute the release, and retained the automobile which was then valued at $25,000. He instituted this action for breach of contract, alleging that appellants had, without his consent, attempted to change the scope of the services he was to provide under the agreement and that he had been wrongfully discharged. The complaint demanded compensatory and punitive damages in excess of $11,000,000. Appellants answered and asserted one counterclaim for conversion of the automobile. Later they moved to amend the answer to state three additional counterclaims for breach of contract, breach of fiduciary duty, and intentional interference with prospective economic advantage and prima facie tort.

In support of the motion to amend, appellants submitted the affidavit of Bruce Slovin, president of MacAndrews & Forbes Group, Inc., who had discussed with respondent his demand for a three-year agreement with increased salary and bonuses. At one time, Slovin alleged, respondent requested 10% of the proceeds in excess of $35,000,000 if Devon were sold. On various occasions, respondent allegedly expressed dissatisfaction with his position and disparaged Devon as an inferior company. Appellants rejected his demand for a long-term contract because it would have been inconsistent with their desire to sell Devon as quickly as possible. They did, however, offer respondent an extension of his contract through the end of 1986. This was unacceptable to respondent who allegedly told Slovin that he had no enthusiasm for managing Devon and would not actively assist appellants’ efforts to sell it.

[166]*166A few days after this conversation, Slovin learned from the broker who had referred three prospective purchasers for Devon that respondent had disparaged Devon’s business and financial condition in meetings with the prospective buyers. They then canceled or postponed trips scheduled to inspect Devon’s assets and operations. These acts by respondent were the basis for appellants’ added counterclaims in the amended answer.

Respondent opposed the motion to amend and moved for partial summary judgment on his claim for compensation equal to the termination fee previously tendered by appellants, less the value of the automobile which he had kept. The court below granted respondent partial summary judgment, finding that even if respondent was properly discharged for cause, he was nevertheless entitled to the $700,000 payment under the terms of the agreement. Appellants’ motion for leave to amend their answer was denied.

The court rejected the counterclaim for breach of contract on the ground that it would be "wholly inconsistent” to allow appellants "a recovery for breach of contract on the same transaction which they intended to accept as a basis for compensated severance.” Finding the language of paragraph 7 unambiguous, the court determined "from the terms of the Agreement between the parties that these acts would fall within the definition of 'cause’ for which plaintiff could be discharged with severance as provided.” Appellants’ counterclaim for tortious interference was rejected because there was no allegation that respondent had used improper or wrongful means, and the counterclaim for prima facie tort was also found deficient because it failed to allege that respondent’s acts were without excuse or justification. The court did not state what deficiency it found in the counterclaim for breach of fiduciary duty.

We reverse the order denying appellants leave to amend their answer and awarding respondent partial summary judgment. We cannot agree that the intention of the parties with respect to the termination provision was so clearly and unambiguously expressed in the agreement that it could be determined as a matter of law. The provision in paragraph 7 that "Mandelblatt may be discharged as a consultant to the company without any breach of this agreement” leaves open the question: "without any breach of the agreement” by whom— Mandelblatt or the company? This uncertain wording raises a question as to what the parties to the contract intended. [167]*167Given the ambiguity in this language, the court below erred in determining, as a matter of law, the intention of the parties therefrom.

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Cite This Page — Counsel Stack

Bluebook (online)
132 A.D.2d 162, 521 N.Y.S.2d 672, 1987 N.Y. App. Div. LEXIS 49527, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mandelblatt-v-devon-stores-inc-nyappdiv-1987.