C & Y Corp. v. General Biometrics, Inc.
| Decision Date | 18 May 1995 |
| Docket Number | No. 940340-CA,940340-CA |
| Court | Utah Court of Appeals |
| Parties | C & Y CORP., a Utah corporation; Robert A. Condie, an individual; and James Yarter, an individual, Plaintiffs, Appellants, and Cross-Appellees, v. GENERAL BIOMETRICS, INC., a Delaware corporation; Ventana Growth Fund, a California limited partnership; and Thomas Gephart, an individual, Defendants, Appellees, and Cross-Appellants. |
Before BENCH, GARFF, 1 and JACKSON, JJ.
C & Y Corp. (C & Y), Robert Condie, and James Yarter appeal the trial court's dismissal under Utah Rule of Civil Procedure 41(b) 2 of their breach of contract claim against General Biometrics, Inc. (GenBio), Ventana Growth Fund (Ventana), and Thomas Gephart. GenBio, Ventana, and Gephart cross-appeal the trial court's dismissal under Rule 41(b) of their claim that Condie and Yarter breached their fiduciary duties as directors of GenBio. 3 We affirm.
GenBio researches, develops and markets immunological tests to diagnose or screen certain infectious diseases and genetic conditions. During the time relevant to this case, the bulk of GenBio's research and administrative functions were performed at its headquarters in La Jolla, California. However, a division of GenBio, Microbiological Research Corporation (MRC), was located in Bountiful, Utah. MRC maintained the technology for one of GenBio's main product lines--immunofluorescent antibody tests (IFA). MRC also manufactured reagents for Immunodot diagnostic tests (Immunodot).
In 1987, GenBio's highest priority in securing its future was further development of the fledgling Immunodot, considered state-of-the-art technology. Immunodot was expected to eventually replace the antiquated IFA technology, which was in "harvest mode" 4 and provided GenBio's only profits. Because those profits alone could not financially support GenBio, it relied heavily on funding from stock purchases and loans made by Ventana, an investment firm. Gephart and Duwaine Townsen were Ventana's managing partners and had great control over GenBio's board of directors and operations.
Sometime in 1989, John Gordy, GenBio's president, devised a plan to sell MRC to generate operating capital for GenBio as it continued developing Immunodot. Gordy presented his plan in the November 1989 meeting of GenBio's board. At that time, the board consisted of Gordy, Townsen, Condie and Yarter. All but Condie were present in the November meeting. The board minutes reflect the directors' response to Gordy's proposal: On March 22, 1990, the entire board executed an addendum to the November 1989 minutes. In pertinent part, the addendum reads:
RESOLVED, that, in the event of the sale of the Company's Utah division (MRC), John T. Gordy will be remunerated for his efforts on the Company's behalf according to the following schedule:
MRC is sold for less than $500,000; no remuneration.
MRC is sold for $500,000 or greater; Mr. Gordy receives five (5%) percent of the net sale amount up to a maximum of Fifty Thousand ($50,000) Dollars.
The trial court found the board also pre-authorized the sale of MRC for $500,000 or more at the November meeting and Gephart had approved such a sale before the meeting.
For the next six to eight months, Gordy "regularly marketed the sale of MRC" and "met regularly" with Gephart and Townsen to report on his efforts. GenBio made listing agreements with Cleary Berlew, Waldon & Associates, and Ventura, which was a business associate of Gephart. The agreement with Ventura was entered at Gephart's request.
Meanwhile, sometime after the November 1989 board meeting, directors Condie and Yarter became interested in possibly buying MRC. Gordy testified:
[A]t some point--I'm not positive--it was December, January-point, Mr. Yarter even asked me if I would be interested in joining a group to buy MRC. And I don't think I said yes and I don't think I said no. I just said I'll tell you it's a good little company. But as you know, it's a maturing industry. But it's not going to die off, you know, in the near future. I think it would be a really good investment.
Indeed, MRC's gross profits for the first part of 1990 were impressive, "equal[ling] or exceed[ing 1989's] total on a little over half the sales volume."
On May 2, 1990, Condie and Yarter preliminarily discussed their mutual interest in possibly buying MRC. At that time, both were still on GenBio's board and Yarter was chairman of the board. The next day, Condie wrote Yarter a letter:
Following up on our conversation of Wednesday May 2nd I went out to [MRC] and talked to Bruce Ashton our manager at that facility.
There appears to be a great opportunity to increase the value of this opperation [sic] if we proceed to purchase it. Moral [sic] is not very good, [sic] I'm sure this comes from the feeling they are only needed to provide cash flow for the operation in San Diego.
The present facility has been housed in three different buildings for at least the last six years. A move to a single facility would offer great economy of operation and could possibly be done for a reduced rental.
If your travels permit it may be very helpful to spend a day here in Salt Lake going over the facility and the opportunity it offers.
....
I think it is imparative [sic] that Townsen has an understanding with John about Johns' [sic] future and future of Gen-Bio within the time frame of next year.
I look forward to working with you. As soon as I receive the material we discussed I will begin working with the banks in Salt Lake City.
After receiving this letter, Yarter sent his personal financial statement dated May 8, 1990 to Condie to use in exploring financial backing for buying MRC. Yarter attached to the statement a note, which reads in part:
On May 24, 1990, Condie sent Yarter a letter with the following statement at the bottom:
I talked to Bruce Ashton today concerning the [MRC] opportunity. He feels very positive about the potential of increased sales. Gull Laboratories, a Salt Lake firm is in the same field we are in. Three years ago their sales were approximately 1 million dollars. Their 1990 sales will be 4.2 million. Most of the increase comes from the European market. There is no reason we cannot accomplish the same. (I have not indicated our desire to buy [MRC] with Bruce).
Yarter became president of GenBio in June 1990. During the summer of 1990 Condie gathered financial information about MRC. Regarding this information, the trial court found: "The information Mr. Condie or Mr. Yarter obtained in making their decision to pursue the purchase of the MRC Division was not of a confidential nature and was the same information which had been sent to other potential purchasers." The trial court further found: "Information relating to the MRC Division, including financial information, was segregated for the express purpose of providing this information to prospective purchasers." Also during that summer and fall, Condie and Yarter were involved in preliminary discussions about moving MRC to a more cost-effective facility.
On November 29, 1990, Yarter submitted a letter in which he resigned as a director and chairman of the board of GenBio effective December 1, 1990. On December 13, 1990, Condie made a written offer to purchase MRC addressed to Townsen. The first paragraph states: The letter goes on to state terms of an offer.
Sometime before the end of the year, Gephart, not Townsen, telephoned Condie to reject the offer but showed interest in Condie's proposal. Condie resigned his directorship effective December 31. Gephart and Condie spoke on the phone again sometime before January 7, 1991. The trial court found that during their conversation Gephart "offered to sell MRC for $500,000 at $400,000 down with the balance in 60 or 90 days." On January 7, 1991, Condie responded to Gephart with the following letter:
Our group has authorized me to accept your offer to sale [sic] to us the assets of MRC from GenBio for $500,000.00. Our purchase will be as follows:
A. Purchase price $500,000.00
B. Cash--Upon closing $350,000.00
C. 75 days after closing $ 75,000.00
D. 120 days after closing $ 25,000.00
It is necessary to have written acknowledgement of our agreement by Friday, January 11th. Upon receipt of this acknowledgement, I will have our attorneys draw up a written contract of purchase.
To discuss concerns bred by Condie's "acceptance"--i.e., the obvious mathematical discrepancy--Gephart and Condie spoke again on either January 8 or 9. On January 10, 1991, Gephart wrote to Condie a letter reading in part:
Pursuant to your January 7 correspondence and to our telephone conversation yesterday afternoon, I would like to provide a written acknowledgement of the agreement regarding the sale of assets and liabilities of MRC from GenBio for $500,000. As I mentioned, we generally agree with your proposal.
Please note, however, that the...
To continue reading
Request your trial
-
Richard Barton Enterprises, Inc. v. Tsern
...the intentions of the parties are controlling. Winegar v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991); C & Y Corp. v. General Biometrics, Inc., 896 P.2d 47, 52 (Utah Ct.App.1995). Where a contract term is not a term of art or one of common use in a particular industry, a trial court should......
-
State v. Strieff
...these fact findings, and we therefore must accept them as the district court found them. See generally C & Y Corp. v. General Biometrics, Inc., 896 P.2d 47, 52 (Utah Ct.App.1995) (stating that where the party has not challenged the factual findings, appellate courts “must accept th[e] findi......
-
State v. Gunter
...offered in support of a new trial. Because he has not challenged that finding, we accept it as true. See C & Y Corp. v. General Biometrics, Inc., 896 P.2d 47, 52 (Utah Ct.App.1995) (stating that, because the appellant did not challenge the trial court's finding, this court was required to a......
-
Patterson v. American Fork City
...9 We will therefore review the trial court's grant of a motion to dismiss under rule 41(b) for correctness. C & Y Corp. v. Gen. Biometrics, Inc., 896 P.2d 47, 53 (Utah Ct.App.1995). Alternatively, "[W]hen `determining whether a trial court properly dismissed an action under rule 12(b)(6), w......
-
Utah Standards of Appellate Review – Revised [1]
...1998), cert, denied, 119 S.Ct. 1803 (1999). (4) Whether a party breached a fiduciary duty. See C & Y Corp. v. General Biometrics, Inc., 896 P.2d 47, 53 (Utah Ct. App. 1995) (granting "ample" discretion). (5) Whether an easement exists. See Orton v. Carter, 970 P.2d 1254,1256 (Utah 1998); Va......
-
Utah Standards of Appellate Review - Third Edition
...reviewed for correctness. See miller v. San Juan Cnty., 2008 UT App 186, ¶ 6, 186 P.3d 965 (citing CandY Corp. v. Gen. Biometrics, Inc., 896 P.2d 47, 53 (Utah Ct. App. 1995)). (24) Rule 42 - Consolidation; Separate Trials A trial court has broad discretion under Rule 42 to bifurcate trials,......