The opinion of the court was delivered by: BRODERICK
Guenter Reimann ("plaintiff"), an expert in international finance and monetary matters, developed, between 1947 and 1973, various informational publications on finance which were subscribed to, for substantial annual fees, by a constantly growing group of clients. The publications were made available through International Reports, Inc. ("Reports"), a New York corporation wholly owned by plaintiff.
Reports was a successful venture. Plaintiff (and to a lesser extent his wife) drew substantial funds from the venture by way of salary. He was elderly, but he had a young family for which he wished to provide adequately. He was notified by his attorney that the only way in which he could realize upon the very substantial equities which had resulted from his success in developing the business of Reports was to sell the company. In 1973, therefore, and perhaps even before that, plaintiff explored various possibilities for the sale of Reports.
Defendant The Curtis Publishing Company ("Curtis Publishing") is a Pennsylvania corporation. Defendants The Saturday Evening Post Company ("Saturday Evening Post") and Curtis International, Ltd. ("Curtis International") are Delaware corporations which are wholly owned subsidiaries of Curtis Publishing. All defendants maintain their principal offices for the transaction of business in Indianapolis, Indiana. They are collectively referred to herein as "the defendant."
Curtis Publishing has had a long history in the magazine publishing field. It fell upon hard times, and in 1972 it completed a plan of recapitalization. Curtis Publishing had substantial federal taxable loss carryovers to the years 1973 through 1976, and in 1973 was actively seeking to acquire profitable small corporations, so that this loss carryover could be applied to their income.
In the spring of 1973 plaintiff and Curtis Publishing were brought together, apparently by two finders who were operating independently. From that time and until October 17, 1973, plaintiff, through his attorney, and Curtis Publishing participated in oral negotiations and exchanged proposed drafts of an agreement. Plaintiff discussed the drafts, as well as the final agreement, with his attorneys and with his accountant. Plaintiff sold Reports to Saturday Evening Post as nominee of Curtis Publishing by a Stock Purchase Agreement ("the Agreement") dated October 17, 1973.
In 1975 plaintiff brought this action.
This court has jurisdiction of the matter under 28 U.S.C. § 1332(a) since more than $ 10,000 is involved and there is diversity of citizenship between plaintiff and each of the named defendants.
I have held a bench trial. I find that none of the allegations in the complaint has been established, and the complaint is dismissed. I find that defendant is entitled to immediate possession of Reports, and that no further monies are due and owing to plaintiff. Plaintiff is enjoined from interfering with defendant's operation of Reports or from attempting to lure customers or correspondents of Reports to plaintiff for his own benefit.
The agreement executed by the parties provides that the agreement is to be interpreted in accordance with the law of New York, and I shall accordingly apply New York law in the interpretation of the agreement and in determining the issues raised in the common law counts. Levey v. Saphier, 83 Misc.2d 146, 370 N.Y.S.2d 808 (Sup.Ct.1975). Federal law is applicable with respect to the securities counts of the complaint.
On October 17, 1973, a complete and integrated Agreement was executed by plaintiff and defendant at a formal closing. In normal course the execution of such an agreement bars consideration of parole evidence intended to vary the import of the agreement. 3 Corbin on Contracts § 573 at 357 (1960). The allegations of fraud and of mistake of fact require, however, that, if necessary, parole evidence be considered in determining the issues raised by those allegations. Id. § 573 at 366, § 580 at 431. I therefore received evidence of the background of the Agreement and of the negotiations which led to its execution.
The portions of the Agreement crucial to the case before me
are set forth below:
2. Base Purchase Price. The "Base Purchase Price" shall be $ 1,650,000. The Buyer is paying the Seller, as the first payment of the Base Purchase Price, in cash, $ 100,000. . . . the second installment (is) $ 300,000. On the first day of each February thereafter Buyer shall pay Seller an amount equal to one-half of the Post-Affiliation Cash Flow of the Company (as of) the previous December 31 . . . and on the first day of each May Buyer shall pay Seller the remainder of the Post-Affiliation Cash Flow for the previous year until either (a) the total Base Purchase Price plus interest shall have been paid, or (b) until the May 1, 1977, payment shall have been made. In either event, no further payments on the Base Purchase Price shall be made.
3. Additional Purchase Price. In the event that the Post-Affiliation Cash Flow during the Computation Term shall exceed the sum of the deferred balance of the Base Purchase Price and the interest thereon, as provided in paragraph 2, the Buyer shall pay the Seller, as additional purchase price for the Common Stock, one-half of such excess Post-Affiliation Cash Flow on May 1, 1977.
The import of the underlined sentence in paragraph 2 is that payments by defendant to plaintiff for the purchase of Reports would cease as of May 1, 1977; the full purchase price would equal whatever payments had been made as of that date, whether less than or greater than the Base Purchase Price of $ 1,650,000. Thus, if before December 31, 1976, the cash flow of Reports as defined in the Agreement exceeded the Base Purchase Price of $ 1,650,000 and interest thereon, plaintiff would receive as purchase price $ 1,650,000 and in addition one-half of that cash flow in excess of the $ 1,650,000 plus interest. If such cash flow did not equal the Base Purchase Price of $ 1,650,000, plaintiff would receive only the full amount of such cash flow. In either case, full payment was to be made by May 1, 1977.
On October 17, 1973, plaintiff and defendant Saturday Evening Post executed a promissory note ("the Note") whereby said defendant promised to pay to plaintiff the sum of $ 1,550,000 with interest ($ 100,000 had been paid at the closing). The Note provided that all of the terms of payment are contained in the Agreement. The Note was subject to the same cutoff date of May 1, 1977 as discussed Supra regarding the Agreement. My findings herein as to the validity of the ...