The opinion of the court was delivered by: DUFFY
Plaintiff, Bernard Press, seeks a preliminary injunction prohibiting the sale of shares of stock of White Lamps, Inc. ("White"), and TDA Industries, Inc. ("TDA") which are owned by the plaintiff and held by TDA, one of the defendants herein, as collateral security for the payment of a promissory note. The defendants have cross-moved to vacate the temporary restraining order presently in effect. Jurisdiction is founded on diversity of citizenship, 28 U.S.C. § 1332.
A narrative of the facts is essential to an understanding of the motion. On August 1, 1974, Bernard Press executed a Purchase Agreement with TDA and White. Under the terms of the agreement Press acquired 19.15% of the outstanding common stock of White. Prior to that time TDA had been the sole shareholder of White. The price for the shares was $100,000 of which $75,000 was paid in cash. Plaintiff executed a non-negotiable promissory note for the remaining $25,000. The note by its terms was subject to the Purchase Agreement. It was agreed that the White stock would be held by TDA as collateral for the note, together with $25,000 worth of TDA stock also owned by Press.
The Purchase Agreement granted plaintiff the right of first refusal to purchase shares of White sold by TDA. The Agreement further provided that Press was to be elected President and a member of the Board of Directors of White and would be given a 37 month employment contract.
In early December 1974, TDA notified plaintiff of its intentions to sell all of its remaining shares of White to Marvalan Industries, Inc. ("Marvalan"). Apparently, the terms of the sale were advantageous to the principals of Marvalan, Andrew Greystoke, Alexander Kogan, Jr., and Marvin Gersten, each of whom is named with Marvalan as a defendant. Press indicated his intention to exercise his right of first refusal. The principals of Marvalan began negotiating with Press to obtain his waiver of that right.
On or about December 16, 1974, an understanding was arrived at under which Press would receive 25% of the stock of Marvalan, a $5,000 payment, and a more advantageous employment agreement with White in return for the waiver of his right of first refusal. A formal agreement incorporating these provisions was to be executed.
As a precondition to the Press-Marvalan agreement, it was necessary that Press obtain the return of his White shares from TDA. Plaintiff agreed with TDA on December 21, 1974 that TDA would cancel the Purchase Note and return the White stock to plaintiff in return for plaintiff's TDA shares which were also held by TDA as collateral security. It was understood that this agreement between TDA and Press was subject to the Marvalan transaction with Press.
On January 2, 1975, plaintiff alleges that he indicated to the Marvalan principals that he would be unwilling to waive his right of first refusal unless and until a written agreement was executed. Press also claims that at that time they promised that a written agreement would be entered into when he returned from a trip on January 10, 1975, provided that Press executed a release of his right of first refusal in time for the January 6, 1975 closing. Press states that in reliance upon this understanding he executed a waiver of his right of first refusal.
With these preliminary problems seemingly worked out, the TDA-Marvalan closing was scheduled for January 6, 1975. An attorney allegedly selected and paid for by Marvalan represented Press at the closing. Immediately prior to the closing, Press gave his consent telephonically and telegraphically.
As part of the closing TDA and Press, through his attorney, entered into an escrow agreement whereby the promissory note of Press and the shares of White Lamp would be turned over to Press in exchange for the TDA stock held by TDA and mutual releases. The note, the White and TDA shares, and releases from White and TDA were turned over to an escrow agent to await a general release from Press to TDA. If the release was not delivered to the escrow agent within two weeks, the note, stock and releases were to be returned to the attorney for TDA and White.
According to the allegations of the complaint, Press returned from his trip on January 10 and discovered that the terms of the Marvalan-TDA transaction differed materially from those contained in the notice of sale. He alleges that he attempted to get the Marvalan principals to execute the written agreement as promised but that his requests were refused. On or about January 16, 1975, Press advised TDA that in light of Marvalan's failure to execute its agreement with him, he would not go through with the escrow arrangement.
It was on January 20, 1975, that Press first learned of TDA's position that he was in default on the August 29, 1974 note. Press received a letter dated January 17, 1975, from TDA which notified him that in light of his failure to pay the required $195.83 interest on January 1, the due date for the month, or during the ten day grace period which followed, he was in default and the entire principal and interest was immediately due. On January 20, 1975, Press mailed the interest check to TDA with the following note:
"In view of the fact that it appears as though the escrow arrangement has been terminated, attached is my check for payment of interest for the month ...