Gruen Industries, Inc. v. Biller

Decision Date30 October 1979
Docket NumberNo. 78-2358,78-2358
Citation608 F.2d 274
Parties27 UCC Rep.Serv. 798 GRUEN INDUSTRIES, INC., a Delaware Corporation, and Gruen Industries International, Inc., a Delaware Corporation, Plaintiffs-Appellants, v. Earl J. BILLER, Robert A. Hersch, and Premium Corporation of America, Inc., a Minnesota Corporation, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Robert A. Christensen, Milwaukee, Wis., for plaintiffs-appellants.

Bruce C. O'Neill, John J. Ottusch, Milwaukee, Wis., for defendants-appellees.

Before FAIRCHILD, Chief Judge, PELL, Circuit Judge, and BONSAL, Senior District Judge. *

PELL, Circuit Judge.

The plaintiffs, Gruen Industries, Inc. (Industries) and Gruen Industries International, Inc. (International) appeal from the entry of summary judgment in favor of the defendants Earl J. Biller, Robert A. Hersch, and Premium Corporation of America (PCA) on all three counts of plaintiffs' complaint. The first count of the complaint charged the defendants Biller and Hersch with breach of a contract to sell their shares in The Windsor Group, Inc. The second count against the same defendants alternatively sought recovery of expenditures based on promissory estoppel. The third charged the defendant PCA with tortious interference with the alleged sales contract between the plaintiffs and Biller and Hersch.

At the time this action was filed the plaintiff Industries was a corporation engaged in the manufacture and sale of watches. The plaintiff International was its subsidiary. Each of the defendants Biller and Hersch owned 170,000 of the 400,000 outstanding shares in a company known as The Windsor Group, Inc. The remaining 60,000 shares were owned by 23 minority shareholders. The plaintiffs, represented by Charles Evans, the Vice President of Industries, approached Biller and Hersch in early 1975 to discuss a possible acquisition of Windsor. The plaintiffs allege that in early May 1975 Hersch and Biller orally agreed to a sale of Windsor's assets, and the record contains affidavits of Evans and Industries' board chairman Peyser to this effect. Evans has also indicated that he recorded the basic terms of the agreement in a memorandum shortly thereafter. The plaintiffs also allege that at the time of the oral agreement they informed Hersch that they would not incur the expenses for preparation of the written agreement unless he would assure them that they had a firm commitment, and Hersch assured them that they did. Again, the affidavits of Evans and Peyser support this allegation. The plaintiffs then retained lawyers and the drafting process began. On May 20, 1975, the sale was restructured, for the defendants' tax purposes, as a sale of shares by them and by certain minority shareholders, and the drafting process then continued. The date to sign the written agreement was set for the middle of July, and the unsigned draft agreement in the record sets the date for the sale and purchase of the shares as on or before November 1, 1975.

According to the plaintiffs, the drafting of the agreement was virtually complete by early July. The other defendant in this action, PCA, however, made a written proposal to purchase the shares for a higher price on July 17. The defendants sold their shares to PCA, and the written agreement with the plaintiffs was never signed.

The plaintiffs brought this action against Hersch, Biller, and PCA in October 1975. All three defendants moved for summary judgment. The district court granted the defendants' motions, ruling that the alleged oral agreement to sell the shares was unenforceable against Biller and Hersch under the statute of frauds, Wis.Stat. § 408.319. Furthermore, the court ruled as to the promissory estoppel count, that the plaintiffs relied unreasonably on the promises of Hersch and therefore were not entitled to reimbursement for their costs. Finally, the district court reasoned that PCA was not liable for tortious interference with contract, because no enforceable contract existed. The plaintiffs challenge the rulings of the district court on all three counts, arguing that the court misapplied the law or, at the least, erred in granting summary judgment. We shall describe the relevant facts and arguments of the parties in greater detail as we discuss each issue.

I. The Statute of Frauds

The plaintiffs' first theory of recovery against Biller and Hersch is based on breach of contract. The plaintiffs have outlined at some length in their brief the evidence of a contract in the record on summary judgment. The defendants successfully defended on the basis of the statute of frauds however, and the district court did not determine whether the parties had agreed orally on the terms and provisions of a contract.

The cornerstone of the defense is the statute of frauds which is applicable to sales of securities, section 8-319 of the Uniform Commercial Code, codified at Wis.Stat. § 408.319. The plaintiffs rely on only one subsection of the statute to rebut the defendants' argument that the oral contract alleged by the plaintiffs is unenforceable. Section 408.319(4) provides:

A contract for the sale of securities is not enforceable by way of action or defense unless:

(4) The party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract was made for sale of a stated quantity of described securities at a defined or stated price. 1

In their brief, the plaintiffs present seven statements which they argue are party admissions of a contract. We agree with the plaintiffs that an admission under section 408.319(4) need not expressly acknowledge the existence of a contract, nor need it describe all of its terms. Dangerfield v. Markel,222 N.W.2d 373 (N.D.1974) (applying the statute of frauds for sales of goods, section 2-201(3)(b) of the UCC). The admission need only describe conduct or circumstances from which the trier of fact can infer a contract. Packwood Elevator Co. v. Heisdorffer, 260 N.W.2d 543, 546 (Iowa 1977). 2 Whether the defendants' statements admit the existence of a contract is a question of fact. Quad County Grain, Inc. v. Poe, 202 N.W.2d 118, 120 (Iowa 1972). Thus, summary judgment should not be granted if there is a genuine issue whether the statements admit the existence of a contract. See Spiering v. Fairmont Foods Inc., 424 F.2d 337, 340 (7th Cir. 1970).

The source of all but one of the statements relied on by the plaintiffs is a 193 page deposition of the defendant Hersch. Biller was never deposed, and the only statement actually made by Biller during this litigation appears in an affidavit in which he denies ever having made a contract with the plaintiffs. The plaintiffs have proceeded against Biller on the theory that Hersch is Biller's agent, and his admissions bind Biller for purposes of the statute of frauds. The independent evidence of this agency relationship is scanty, but for purposes of this discussion we shall assume, without deciding, that Hersch's statements bind Biller as well.

Three of the statements cited by the plaintiffs as admissions are so vague that it is difficult to attach any significance to them at all. The plaintiffs' brief offers little explanation of how a contract might be inferred from them, and we decline to speculate about their meaning. 3 Cf. Alter & Sons, Inc. v. United Engineers & Constructors, Inc., 366 F.Supp. 959 (S.D.Ill.1973) (applying 2-201) (defendant admitted that they considered the transaction at issue a binding purchase order until he was ordered to cancel by third party; the plaintiff knew nothing about control of third party, however); Kohlmeyer & Co. v. Bowen, 126 Ga.App. 700, 192 S.E.2d 400 (1972) (applying 8-319) (defendant's answer admitted oral agreement to purchase $80,000 face amount of described bonds for a yield of 7.15% "when, as, and if issued").

The other statements cited as admissions of a contract lead instead to the conclusion that the sellers manifestly did not intend to be bound until negotiations were complete and the documents signed. One of the statements relied on is Hersch's description of the meeting in early May during which Evans and Peyser allege the agreement to sell was reached:

Q Was there some discussion at the time about the fact that Gruen was about to bring their Attorneys Cahill, Gordon & Reindel into the matter?

A Mr. Peyser said to me, "Before we bring any professionals on the scene let's be sure that there is some basic philosophy that we can agree to" or words to that effect.

"Because the meter starts running when the lawyers step in." That's pretty much what he said.

Q And what was your response?

A My response was that if the professionals could put together a satisfactory deal to all parties we would be very interested.

Instead of admitting a contract, this statement sets forth briefly Hersch's and Biller's theory of defense that they did not intend to be bound until all negotiations were complete. Furthermore, we do not consider Hersch's statement that Evans' memorandum sets forth the "basic philosophy" of what they discussed at the early May meeting as creating a genuine issue of fact as to the existence of an admission. It is unrealistic to assert that complex 4 preliminary negotiations would take place without some general notion of the form of the transaction. Being "interested" falls far short of any expression of a statutorily-required admission "that a contract was made for sale of a stated quantity of described securities at a defined or stated price." The crucial showing that Hersch Bound himself during this meeting, in sum, is not made by this statement.

The plaintiffs also argue that statements of Hersch and of his attorney describe certain conduct sufficient to show agreement, and thus admit a contract. See Wis.Stat. § 402.204 (quoted in n. 2 Supra ). Hersch's statement admits to advancing $2,000 on behalf of the plaintiffs to secure financing,...

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