TEC CORPORATION v. Nuclear Dynamics, Inc.
| Decision Date | 18 October 1974 |
| Docket Number | Civ. A. No. 1574. |
| Citation | 397 F. Supp. 702 |
| Parties | TEC CORPORATION, an Indiana Corporation, et al., Plaintiffs, v. NUCLEAR DYNAMICS, INC., an Arizona Corporation, Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
William G. Craig, Sandidge, Holbrook, Craig & Hager, Owensboro, Ky., for plaintiffs.
Joe F. Walton, Phoenix, Ariz., C. Kilmer Combs, Pikeville, Ky., for defendant.
The initial consideration of this case is reported at 364 F.Supp. 1165 (E.D.Ky.1973) in which cross-motions for summary judgments were denied and the sole fact question of defendant Nuclear Dynamics, Inc.'s good faith or bad faith was defined. Evidence has been presented on that question and the final brief was filed on September 4, 1974. Although the contextual facts are set forth in the earlier Memorandum Opinion, I will deal generally with the facts again because of the nature of the inquiry.
The plaintiff Thomas Egan is the President of TEC Corporation, an Indiana corporation. His brother, Louis Egan, and Robert Barbre are, by the Complaint, denominated joint venturers, but under the evidence would more correctly fall into the category of associated brokers. All plaintiffs will be referred to herein as TEC for convenience unless specific identification is necessary. The defendant Nuclear Dynamics, Inc. is an Arizona corporation and will be referred to hereinafter as Nuclear. The property involved is the actively mined coal leases of Hobert E. Potter and Walter P. Walters, Jr. situated in Floyd County, Kentucky. No particular description of the property is useful to a determination of the question involved and reference will be in general terms to the subject property.
The immediate question arises out of an executed letter agreement signed by the parties or their authorized representatives on September 3, 1971 under which the defendant Nuclear undertook to pay broker's commissions under specified conditions, to-wit:
The option of September 9, 1971 bearing the preamble date of August 11, 1971 is between Potter and Walters and Nuclear. It was executed by Nuclear's President, Joe F. Walton, on September 3, 1971 and by Hobert E. Potter and Walter P. Walters, Jr. on September 9, 1971. All parties have dealt with the document and no confusion is found to exist with respect to the document being the one referred to in the letter agreement of September 3, 1971. This option was never exercised. It called for payment of $3,200.00 by cashier's check not later than November 1, 1971. The primary term of the option was to midnight October 1, 1971, but upon "written notice prior to midnight October 1, 1971, that Optionee is in good faith contemplating the exercise of this Option and needs the additional time to make a judgment", the time would be extended to midnight of October 15, 1971.
I find that Nuclear did secure an extension of time, under the terms provided for such extension, in good faith. I find that Nuclear diligently attempted to secure financing for the purchase of the coal properties under this option. Mr. Thomas Egan was aware of the efforts and agrees that Nuclear tried to secure financing. (Egan Deposition, November 2, 1972, pages 58 and 59.)
There is no doubt that Nuclear had expended a substantial sum of money and the time of key personnel in attempting to acquire the coal properties before October 15, 1971. This is significant in reaching the evidentiary question of good or bad faith because of TEC's prior conduct. The evidence establishes that TEC made an initial contact with Iley B. Browning, Jr. prior to or in early February 1971 to assist in locating coal properties which resulted in the identification of the subject properties. I find that Browning advised the properties were for sale for $3,000,000 in cash. The evidence clearly establishes that on July 2, 1971 Louis Egan and Robert Barbre were advised by TEC Corporation that the terms of the sale were cash, but on July 21, 1971 Robert Barbre, signing for Louis Egan, notified Nuclear that the properties were available for $3,200,000 on terms of $1,000,000 in cash, the balance to be paid in three or four years as might be negotiated. I find that Nuclear learned of the misrepresented terms no earlier than August 30, 1971 and no later than September 2, 1971. At that time Nuclear had already spent a substantial sum in evaluating the properties and attempting to finance them.
The letter agreement of September 3, 1971 obviously was an effort of compromise. TEC had been pushing a coal deal for which they, in fact, had no option. Mr. Browning had acquired for no consideration an option in early February 1971 which expires on February 28, 1971. No other option was involved until August 11, 1971 when Browning took an option in his own name from Potter and Walters after learning of the involvement of Louis Egan and Robert Barbre and that the property had been offered on terms where his dealings with the owners had always been on the basis of cash.
I find that the parties were dealing strictly at arms' length in executing the letter agreement of September 3, 1971. I further find that on September 3, 1971 the original brokerage terms offered by TEC to Nuclear of an installment purchase were known to Nuclear to be inapplicable and that the sale would be on the basis of cash and in terms equivalent to that of the Browning option of August 11, 1971. When Nuclear was unable to secure financing and the option of September 9, 1971 expired, no effort was made by TEC to secure any further interest in the properties. TEC, in fact, did nothing. Nuclear, however, contacted the property owners in an attempt to obtain another extension of the option from the owners but were dissuaded by the asking price of $50,000 cash for the same, finding the possibility of obtaining the necessary financing to be too remote to justify the expenditure.
Another fact thread must be woven into the circumstances. Mr. Iley B. Browning, Jr., on January 20, 1971, wrote a letter to Mr. Thomas Egan, the date of which later, and for unclear reasons, was changed to February 12, 1971, in which Browning acknowledged that he and TEC would be equal partners in the option on the subject property. On the uncontradicted evidence of Mr. Browning, I find that he believed there existed an immediate purchaser for the property for cash. Mr. Browning learned of...
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