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PORTMAN v. AMERICAN HOME PRODS. CO.

June 25, 1951

PORTMAN
v.
AMERICAN HOME PRODUCTS CO.



The opinion of the court was delivered by: KAUFMAN

Defendant moves in the alternative: (1) for the entry of judgment for defendant notwithstanding the verdict; or (2) for a new trial on the ground that the verdict is against the weight of the evidence; or (3) for a new trial on the ground that the verdict is the result of improper influence upon the jury.

The complaint sets forth two causes of action, both arising out of the same transaction. Under the first cause of action it is alleged that in February, 1944 defendant engaged plaintiff to aid defendant in the acquisition of businesses in the veterinary serum field and agreed to pay plaintiff the reasonable value of his services; that in August, 1944 plaintiff discovered that Fort Dodge Serum Company was available for sale and so informed defendant; that plaintiff, at defendant's request, carried on preliminary negotiations, secured financial data and participated in subsequent negotiations for the acquisition of Fort Dodge Serum Company by defendant; and that in April, 1945, as a result of such negotiations, defendant acquired all the stock of Fort Dodge Serum Company.

Under the second cause of action the same facts are pleaded, except for the alleged express agreement of defendant to pay plaintiff for his services. This cause of action is based on quantum meruit for the reasonable value of plaintiff's services.

 The answer substantially admits that plaintiff rendered services to defendant as alleged in the complaint; alleges that at the time of such services plaintiff was employed as vice-president of Research Products Corporation, a wholly owned subsidiary of defendant, and rendered such services as part of his duties as such officer; and denies that there was any agreement to pay for such services except for the payment of plaintiff's salary of $ 10,000 per year as an officer of such subsidiary.

 Evidence at the trial established the following uncontroverted facts. In January, 1944 plaintiff, Dr. Weiner and certain other persons were members of a partnership, doing business under the name of Research Products, which was engaged in manufacturing veterinary pharmaceuticals in Kansas City, Missouri. During that month plaintiff initiated negotiations for the sale of that business to defendant, a corporation engaged through its subsidiaries in the manufacture and sale of drugs and other products. Plaintiff, Dr. Weiner and their attorney, Mr. Margolin, and representatives of defendant met to discuss the proposed sale during January and February, 1944. At one such meeting in Philadelphia on February 15, 1944, Mr. Alvin G. Brush, chairman of the board of directors of defendant, stated that defendant was interested in entering the veterinary pharmaceutical field, that the business of the partnership might serve as a nucleus that could be expanded, and that plaintiff could aid in that expansion by bringing to defendant's attention other companies that defendant might acquire. Further reference to that meeting will be made below.

 On February 18, 1944, plaintiff and his partners granted defendant an option, exercisable during the period 'commencing August 1, 1944 and ending September 30, 1944,' to purchase all the assets and good will of their business. At business. At the same time defendant and Dr. Weiner, who was in charge of all technical operations of the partnership, entered into an agreement which provided that, if the option should be exercised, Dr. Weiner would remain associated with the partnership business or with defendant for at least one year, and would not otherwise engage in any similar business for five years after defendant should have acquired the partnership business.

 During the period from February, 1944 until August 1, 1944, plaintiff suggested three companies for possible acquisition by defendant. Although defendant manifested an interest in these companies, it acquired none of them.

 On July 14, 1944 defendant notified plaintiff that it intended to exercise its option to purchase the partnership business on August 1, 1944, and on that day the option was formally exercised. On August 23, 1944 the transaction was closed 'as of August 1, 1944'. The assets and good will of the partnership were transferred to Research Products Corporation, a Kansas corporation organized on July 31, 1944, which became a wholly owned subsidiary of defendant. In accordance with the option defendant paid plaintiff and his partners $ 114,943.28, of which $ 100,000 represented payment for good will and $ 14,943.28 represented the net value of the partnership assets.

 Plaintiff was elected vice-president and a director of Research Products Corporation on August 7, 1944, at a salary of $ 10,000 per year. He was in general charge of the administration of the affairs of the corporation, under the direction and control of the officers of defendant and another subsidiary of defendant. The scope of plaintiff's duties will be further discussed below.

 Early in September, 1944, plaintiff and Dr. Weiner, who had also become an employee of Research Products Corporation in accordance with his agreement with defendant, made a trip to St. Paul, Minn. and Fort Dodge, Iowa to call upon customers. In the latter city they visited Fort Dodge Serum Company, the most important customer of the old partnership and the new corporation. It was Fort Dodge Serum Company which, in the negotiations between plaintiff, Dr. Weiner and Mr. Brush on February 15, 1944, plaintiff represented would be retained as a customer of Research Products Corporation in all events. On this visit plaintiff learned that Fort Dodge Serum Company might be for sale. He promptly conveyed this information to officials of defendant, and was instructed to pursue the matter. During the next few months plaintiff procured for defendant financial data concerning Fort Dodge Serum Company, visited the company with officials of defendant to inspect the properties, arranged for Mr. Brush and another senior officer of defendant to visit the company, and met with officials and stockholders of the company in Kansas City and brought them to Mr. Margolin for advice on the tax aspects of the proposed transaction.

 On January 20, 1945 representatives of the stockholders of Fort Dodge Serum Company went to New York to negotiate with defendant for the sale of that company. Plaintiff accompanied them and attended all conferences of such representatives with officials of defendant in New York. These negotiations resulted in the execution of an agreement on January 26, 1945 providing for the exchange of all the stock of the serum company for 16,520 shares of defendant having a market value on that day of approximately $ 1,160,000. The exchange of stock was made on April 3, 1945; the 16,520 shares of defendant then had a market value of $ 1,207,942.40.

 The expenses incurred by plaintiff in connection with the acquisition of Fort Dodge Serum Company were paid by Research Products Corporation on vouchers submitted by plaintiff. Such expenses related to plaintiff's original trip and at least one subsequent trip from Kansas City to Fort Dodge, Iowa, and entertainment of officials and stockholders of the serum company in Kansas City, and included all expenses of plaintiff in bringing the representatives of the stockholders of Fort Dodge Serum Company to New York on January 20, 1945 and maintaining them in New York until January 26, 1945.

 Plaintiff continued in the employ of Research Products Corporation until August 15, 1945 when he was transferred to the payroll of Boyle-Midway, another subsidiary of defendant. However, he continued to perform his duties for Research Products Corporation and worked in the same office and at the same salary until his resignation on January 21, 1946. On the same day Dr. Weiner resigned from defendant's organization.

 On February 1, 1946 plaintiff and Dr. Weiner purchased the assets of Research Products Corporation from defendant for the sum of $ 26,882.72. On the same day he and Dr. Weiner organized a new corporation to take over and carry on the business of Research Products Corporation. Shortly prior to that time defendant had released Dr. Weiner from his covenant not to engage in any business in competition with defendant and had waived ...


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