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WOLGIN v. ATLAS UNITED FIN. CORP.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


July 7, 1975

SIDNEY WOLGIN
v.
ATLAS UNITED FINANCIAL CORPORATION, ATLAS FINANCIAL CORPORATION and JAMES M. FAIL S. THEODORE BLUMENFELD v. ATLAS UNITED FINANCIAL CORPORATION, ATLAS FINANCIAL CORPORATION and JAMES M. FAIL

The opinion of the court was delivered by: LUONGO

SUR PLEADINGS AND PROOF

 LUONGO, DD. J.

 These cases were tried simultaneously before the court without a jury on December 3, 1974. After the conclusion of oral testimony and following the filing of certain supplemental information, the court noted what appeared to be a jurisdictional defect and brought it to the parties' attention. Rule 12(h)(2), F.R.C.P. Thereafter the matter was briefed and argued. Based upon the pleadings and proof, I make the following

 FINDINGS OF FACT

 1. Plaintiffs, Sidney Wolgin (in C.A. 74-221) and S. Theodore Blumenfeld (in C.A. 74-222), are individuals who reside in and are citizens of the Commonwealth of Pennsylvania.

 2. Defendant Atlas United Financial Corporation (Atlas United) is a Delaware corporation having its principal place of business in Atlanta, Georgia.

 3. Defendant Atlas Financial Corporation (AFC) is a Pennsylvania corporation having its principal place of business in Atlanta, Georgia.

 4. Defendant James M. Fail is an individual domiciled in the state of Alabama whose last known address was 1700 Daniel Building, Birmingham, Alabama.

 5. Prior to December 2, 1971, AFC was a wholly owned subsidiary of Scientific Resources Corporation, a publicly owned company.

 6. During the time when AFC was a subsidiary of Scientific Resources Corporation, Wolgin was President and Blumenfeld was Executive Vice President and General Counsel of AFC.

 7. On December 2, 1971, Scientific Resources Corporation entered into an agreement to sell the stock of AFC to Fail.

 8. To effectuate the transaction, Fail created a new corporation, Atlas United, to acquire the stock of AFC. Atlas United was formed as a wholly owned subsidiary of an Alabama insurance company, Public National Life Insurance Company, controlled by Fail.

 9. The documents connected with the sale were signed in Philadelphia on December 2, 1971, at a meeting at which Fail, Atlas United, Scientific Resources Corporation and AFC were all represented by counsel.

 10. Contemporaneously with, and as part of the sale transaction, Atlas United entered into separate employment agreements with Wolgin and Blumenfeld. Fail signed the employment agreements as president of Atlas United and AFC.

 11. The employment agreements were dated December 2, 1971, and each provided that the employee (Wolgin and Blumenfeld respectively) was to be employed as an executive officer of Atlas United for a period of six years at a compensation of $50,000 a year, payable in equal monthly installments, or as otherwise mutually agreed. (Wolgin opted for bi-monthly payments in the amount of $2,083, and Blumenfeld elected bi-weekly payments of $1,923.08.) Each employee was to provide consultation services with respect to liquidation of the loan portfolios of Atlas United and perform such other duties as determined by the Board of Directors and consented to by each employee, consistent with the position of an executive officer. Each employee was to serve without additional compensation as director or officer of Atlas United or any of its subsidiaries and, if employed by a subsidiary, the subsidiary would be jointly and severally liable with Atlas United for the payments due the employee. The employment agreements also provided that each employee was to devote so much of his time and energy as was reasonably required to perform his duties for Atlas United, no minimum time being specified. The agreements provided that they were to be governed by and construed under the laws of the Commonwealth of Pennsylvania.

 12. Fail, personally, and AFC each signed the agreements as surety for all payments required to be made by Atlas United to each of the employees.

  13. All of the documents relating to the sale of stock by Scientific Resources Corporation to Fail, and the employment agreements between Atlas United and Wolgin and Blumenfeld, were conditioned upon the repurchase by AFC of $19,600,000 of notes from institutional lenders at a discount price of $14,300,000. Upon the fulfillment of this condition, the sale of stock was to be consummated, and all agreements, including the employment agreements, were to be effective as of the date of signing, December 2, 1971. The condition was satisfied on December 29, 1971, the closing of the transaction was completed on that date, and in accordance with the terms of the agreements, they then became effective as of December 2, 1971.

 14. Following the closing of the sale transaction, Wolgin and Blumenfeld performed services for AFC, but performed none for Atlas United.

 15. Neither Wolgin nor Blumenfeld has been employed by nor taken an active interest in any other company since December 2, 1971, and each has been available to perform services pursuant to the employment agreements.

 16. From December 1971 through October 15, 1973, Atlas United made the payments to Wolgin and Blumenfeld provided for in the employment agreements. Atlas United failed to make the payments due at the end of October 1973.

 17. On November 6, 1973, Wolgin and Blumenfeld each gave notice to Fail, in accordance with the suretyship agreements, that Atlas United was in default under their respective employment agreements for non-payment of the salary installments due on October 31, 1973 and demanded payment.

 18. Having received no payments subsequent to October 15, 1973, plaintiffs instituted the present actions on January 30, 1974.

 19. No payments have been made to Wolgin under his employment agreement since October 15, 1973.

 20. Pursuant to arrangements between Blumenfeld and Fail made in April 1974, all arrearages in compensation to Blumenfeld under his employment agreement were paid up to that date and payments were thereafter made to him through but not including the installments due September 20, 1974. No payments have been made to Blumenfeld since September 20, 1974.

 21. On September 20, 1974 a receiver was appointed for AFC in an action, now pending in the Northern District of Georgia, entitled Payne [ successor to Bookout ] v. Atlas Financial Corp., 395 F. Supp. 1338 (D.C. 1974).

 22. On the date of trial, there was due and owing to Wolgin (a) bi-monthly installments of salary, with interest thereon computed from the due date of each installment, as follows: Payment Date Amount Interest 10/31/73 $2,083 $140.60 11/15/73 2,083 135.40 11/30/73 2,083 130.19 12/15/73 2,083 125.00 12/31/73 2,083 119.80 1/15/74 2,083 114.60 1/31/74 2,083 109.40 2/15/74 2,083 104.20 2/28/74 2,083 99.00 3/15/74 2,083 93.80 3/31/74 2,083 88.60 4/15/74 2,083 83.40 4/30/74 2,083 78.20 5/15/74 2,083 73.00 5/31/74 2,083 67.80 6/15/74 2,083 62.60 6/30/74 2,083 57.40 7/15/74 2,083 52.20 7/31/74 2,083 47.00 8/15/74 2,083 41.80 8/31/74 2,083 36.60 9/15/74 2,083 31.40 9/30/74 2,083 26.20 10/15/74 2,083 21.00 10/31/74 2,083 15.80 11/15/74 2,083 10.60 11/30/74 2,083 5.40 $56,249 $1,970.99 = $58,219.99 (b) salary for the two days from the last payment date until trial (December 1 and 2, 1974), com- puted at a daily rate of $138.87, for a total of 277.74 TOTAL $58,497.73

19750707

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