Logue v. Allen Laundry, Inc.

• Court: Pennsylvania Commonwealth Court
• Writing for the Court: WIEAND, J.
• Citation: Logue v. Allen Laundry, Inc., 3 Pa. D. & C.3d 94 (Pa. Commw. Ct. 1977)
• Decision Date: 29 June 1977
• Docket Number: 10
• Parties: Logue v. The Allen Laundry, Inc

3 Pa. D. & C.3d 94

Logue v. The Allen Laundry, Inc

No. 10

Common Pleas Court of Lehigh County, Pennsylvania

June 29, 1977

September term, 1972.

William P. Hogan and Hogan and Scott, for plaintiffs.

Rudolph Zieger, Jr., for defendant.

OPINION

Trial without jury.

WIEAND, J.

This action was commenced as an action in assumpsit to recover installment payments due and to become due under the terms of two stock purchase agreements. Following a pre-trial conference it became apparent and counsel agreed that the only issue requiring determination pertained to the meaning of the term " accounts receivable" as used in the purchase agreements. If the court resolved this dispute, it was agreed the parties themselves could apply the formula provided by the agreements in order to determine the amounts of future payments. The action, therefore, proceeded as a petition for declaratory judgment and was heard by the court without a jury.

Mildred R. Logue and Priscilla Malone, plaintiffs, had been stockholders, who together with John Logue, Jr., owned the controlling stock interests in Homecrest Laundries, Inc. As early as September, 1970, and continuing through December, 1970, John Logue, Jr. had been engaged in discussions with representatives of The Allen Laundry, Inc. concerning a possible purchase by Allen of the Homecrest corporations. On December 29, 1970, before any agreement had been reached, a serious fire occurred which destroyed the business records of the Homecrest corporations and caused serious damage to equipment owned by the corporations, as well as to real estate owned by John Logue, Jr.

In January, 1971, terms were agreed upon for Allen to purchase the shares of stock owned by Mildred Logue, Priscilla Malone, Harold Miller and John Logue, Jr. in the Homecrest corporations. Written agreements were prepared by Allen's lawyer and reviewed by William Joachim, Esq., an attorney engaged by John Logue, Jr. to represent the interests of the sellers. Accountants for the parties were also consulted, but the destruction of the records of the Homecrest corporations made it impossible to calculate accurately their accounts receivable and accounts payable. Lengthy discussions among the parties and their attorneys on January 19 and 20, 1971, resulted in written stock purchase agreements by which Allen agreed to buy the shares of stock owned by plaintiffs, Harold Miller and John Logue, Jr., who agreed to sell the same to Allen.

The agreement for the purchase of stock in Homecrest Linen Supply Co., Inc. provided, inter alia, as follows:

" 1.03. The aggregate purchase price shall be reduced, before or after Closing, to the extent indicated below:

" ...

" (b) The aggregate purchase price shall be reduced by the amount, if any, by which Allen determines that the aggregate liabilities of Homecrest as of Closing, after subtracting cash and accounts receivable of Homecrest, exceed $ 26,000, provided, however, that to the extent that Allen determines that the aggregate liabilities of Laundries, after subtracting cash and accounts receivable of Laundries, are less than $ 19,000, no reduction in the purchase price shall be made pursuant to this subsection (b)."

A corresponding provision was contained in the agreement for the sale of stock in Homecrest Laundries, Inc. The purpose of these provisions was to give to Allen a reduction in the total purchase price paid if the liabilities for both corporations, but reduced by " cash and accounts receivable," exceeded $ 45,000.

It was subsequently determined that the excess of accounts payable over cash and accounts receivable was $ 71,319.76. Plaintiffs contend, however, that this amount must be reduced by the sum of $ 26,320 subsequently paid to Allen pursuant to policies of fire insurance in effect and owned by the Homecrest corporations at the time of the fire on December 29, 1970. Defendant denies this, contending that the term " accounts receivable" in paragraph 1.03 was intended to mean trade or customer accounts receivable and did not include a then unliquidated insurance claim for fire loss.

Neither counsels' research nor our own has disclosed a decision of the appellate courts of Pennsylvania which attempts to construe the term " accounts receivable." The general rule, however, can be discerned from an annotation appearing at 41 A.L.R.2d 1395. It is there concluded as follows: " Although there is a paucity of authority dealing with the construction of the term 'accounts receivable,' the cases wherein such question has arisen have construed the term according to the usual rules for the construction of contracts, taking into account extrinsic circumstances. Each case, therefore, must stand upon its own facts." See also: Hammond v. Caton, 121 Colo. 7, 212 P.2d 845 (1949); ^[1] Sadler v. Pure Oil Co., 172 S.C. 220, 173 S.E. 640 (1934); ^[2] Guaranty Trust Co. of N.Y. v. Williamsport Wire Rope Co., 222 F.2d 416 (3rd Cir. 1955); Nell v. McCrea, 16 D. & C.2d 555 (1958); Moore v. Freeman, 58 N.M. 139, 266 P.2d 674, 41 A.L.R. 2d 1388 (1954).

Pennsylvania decisions are clear that when the terms of a contract are susceptible of more than one interpretation, or an ambiguity arises, parol evidence...