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CONDREN v. GRACE

January 30, 1992

WILLIAM J. CONDREN, Plaintiff, against MICHAEL P. GRACE Defendant.


The opinion of the court was delivered by: BERNARD NEWMAN

 BERNARD NEWMAN: Senior Judge of the United States Court of International Trade, sitting as a United States District Court Judge by designation.

 INTRODUCTION

 William J. Condren ("Condren"), residing in New York, brings this diversity action against Michael. P. Grace ("Grace"), residing in California, seeking damages in the total amount of $ 68,060 coupled with recompense for his attorney fees and costs, in connection with two causes of action predicated upon breach of contract. *fn1" The presence of subject matter jurisdiction is founded upon 28 U.S.C. ┬ž 1332.

 Grace denies liability and presses two counterclaims of his own sounding in legal malpractice and breach of contract. Thus, he seeks corresponding relief ranging from compensatory and punitive damages equaling $ 386,680.02 and $ 2,500,000, respectively, to demands for an accounting and the imposition of a constructive trust.

 The following constitutes this court's Findings of Fact and Conclusions of Law pursuant to Fed. R. Civ. P. 52(a):

 DISCUSSION

 The players in this episode, Condren, Grace and Corinne Grace, *fn2" his spouse, first met between late 1977 and early 1978.

 The Graces were married in 1954 but became separated as of August 1980. Grace entered into the energy business in 1960. Subsequently, he and his spouse accumulated substantial oil and gas properties in addition to uranium mine leases.

 Evidently, during 1977-78 the Graces needed to obtain financing relating to a valuable portion of the uranium leases and oil and gas property assets within their control (hereinafter "mineral properties"). Through referral by Edgar Fitzsimmons ("Fitzsimmons"), a broker with E.F. Hutton, Condren was solicited with respect to orchestrating a private placement offering as to the Graces' mineral properties.

 In assessing the requirements for the funding of the aforementioned Grace assets, Condren emphasized the need for property records and information to form the basis for the presentation of a formal offering memorandum. The Graces complied and provided certain files and records. Nevertheless, Condren decided that the information presented was not sufficient to convince any outside buyer to finance the Graces' investment proposal (Tr. 47; pltf's exh. 1).

 Premised on Condren's negative assessment of the value of the information furnished thus far he proposed instead that the Graces offer a right of first refusal to satisfy their need for cash subsidies (Tr. 47). The court refrains, however, from analyzing Condren's proposal and/or approach due to the fact that on February 22, 1978 the Graces and Condren effectuated a written right of first refusal agreement, incorporating Condren's plan (the "First Refusal Agreement") (Agreed Findings of Fact "AFF" 5; pltf's exh. 2).

 First Refusal Agreement

 The signatories to the First Refusal Agreement contemplated, in relevant part, Condren's payment of $ 50,000 to Grace in return for the right of first refusal to execute any contract for the development of the Graces' mineral properties, proposed either by the Graces or by a third party and accepted by the Graces (pltf's exh. 2).

 In further consideration of Condren's payment, the Graces agreed: "to make available to you [Condren] immediately any and all information which we [the Graces] have concerning each of our properties, which information you [Condren] would agree to hold in strictest confidence" (emphasis supplied).

 Grace argues that Condren violated this confidentiality clause following execution of the First Refusal Agreement. Condren admits contacting Modrall, Sperling, Roehl, Harris & Sisk ("Modrall Sperling"), a law firm in New Mexico, for purposes of recording his security interest, and forwarding a copy of the First Refusal Agreement with certain attached information pertaining to the mineral properties (Tr. 49-51, 380).

 It is true, of course, that the text of the confidentiality clause contains the broad phrase "any and all information." Notwithstanding, upon consideration of the qualifying harbinger "to make available to you [Condren] immediately" better reasoning excludes the First Refusal Agreement itself along with the attached property information referenced on its second page, copies of which the agreement indicated Condren had previously received.

 Given such obviously limiting intent, it is concluded that the confidentiality clause solely prohibited Condren from divulging "any and all information" he had not already been furnished as of the making of the First Refusal Agreement. Hence, it cannot be found that Condren's actions to safeguard his security interest violated the confidentiality clause of the First Refusal Agreement.

 Withdrawal Agreement

 On August 4, a second mining contract was formed between Koppen, the Graces and two corporations controlled by the Graces, pertaining to the development of certain other mineral properties equally subject to the First Refusal Agreement (the "Second Koppen Contract").

 By August 15, Condren and the Graces had collectively executed a written agreement (the "Withdrawal Agreement") by which Condren agreed to abandon his right of first refusal respecting the Second Koppen Contract, and to terminate all his remaining rights in and to the First Refusal Agreement in exchange for $ 85,000 out of the first royalties materialized in conformance with the Second Koppen Contract (AFF 10; pltf's exh.3). The text of the Withdrawal Agreement prepared by Dinsmore Adams ("Adams"), an attorney with the law firm of Phillips, Nizer, Benjamin, Krim & Ballon ("Phillips Nizer"), at the request of Grace (Tr. 229, 335-36), was drafted in the form of a letter from the Graces to Condren.

 The gravamen of the dispute herein, and the subject of Condren's first claim, concerns the proper interpretation of the following terms appearing in the ultimate paragraph of the Withdrawal Agreement: "we [the Graces] shall irrevocably advise Koppen mining to pay said $ 85,000 directly to you [Condren]."

 After reviewing the contrary assertions the court determines that this language clearly sets forth a directive instructing the Graces to notify Koppen of Condren's entitlement to receive the first $ 85,000 in royalties arising from the Second Koppen Contract.

 Significantly, there is persuasive physical evidence and testimony establishing Koppen's issuance of royalty payments to the Graces amounting to at least $ 85,000 dollars in accordance with its contractual obligations (pltf's exh. 11, 12; Tr. 128, 148-150). Indeed, according to Grace, Koppen paid out "roughly in the neighborhood of $ 800,000 to $ 1,000,000 dollars" (Tr. 151). But it is unclear to Grace who received these payments, and he personally denies receiving any royalties due to him under the Second Koppen Contract (Tr. 151-52).

 Condren asserts that the Graces' failure to so advise Koppen directly violated the Withdrawal Agreement resulting in Condren's damages of $ 50,000, plus interest. This adjusted figure reflects the $ 35,000 payment Condren had received in connection with a ...


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