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B-M-G INV. CO. v. CONTINENTAL/MOSS-GORDIN

December 18, 1969

B-M-G INVESTMENT COMPANY and Duncan Boeckman, Trustee,
v.
CONTINENTAL/MOSS-GORDIN, INC., Fulton Industries, Inc. and Allied Products Corporation



The opinion of the court was delivered by: TAYLOR, JR.

MEMORANDUM OPINION

This case is before the Court on Plaintiffs' Motion for Summary Judgment.

 In 1964 Plaintiff BMG Investment Company entered into a Purchase Agreement with Continental/Moss-Gordin, Inc., pursuant to which BMG sold substantially all its assets to Continental. Among other considerations the Purchase Agreement provided for payment to BMG of the sum of $ 2,291,334 according to a formula based upon the earnings of Continental during a period from 1964 to expire at the close of Continental's 1976 fiscal year. Continental guaranteed that payments received by BMG pursuant to the formula based on Continental's earnings would aggregate not less than $ 80,000 a year and would aggregate at least one million dollars by 1976.

 Performance of Continental's obligations under the Purchase Agreement was guaranteed by the Defendant, Fulton Industries, Inc., the parent of Continental.

 The Purchase Agreement defined certain events of default upon the occurrence of which Plaintiff, BMG, might accelerate and declare due the unpaid balance of the guaranteed portion of the receivable due BMG under the Purchase Agreement. Dissolution of either Continental or Fulton or the adoption by either of them of a Plan of Complete Liquidation was defined as such an event of default. *fn1"

 In February 1968 the Defendant Allied Products, Inc. entered into an agreement with Fulton providing for the purchase by Allied of substantially all the assets of Fulton and the assumption by Allied of substantially all of its liabilities (including its liability under the 1964 Purchase Agreement). On April 26, 1968 the stockholders of Fulton approved the transaction and adopted a Plan of Complete Liquidation. Within a few days thereafter Plaintiff BMG gave written notice of its election to accelerate maturity of the guaranteed portion of the indebtedness, specifying, as its reason, the adoption by Fulton of its Plan of Complete Liquidation. The Allied-Fulton transaction was consummated on April 30, 1968. On May 1st the directors of Fulton met and determined to distribute substantially all of the proceeds of the sale of its assets to its stockholders in redemption of its stock.

 At the time this suit was instituted on June 5, 1968 there remained unpaid in respect of the receivable created by the 1964 Purchase Agreement a balance of $ 1,686,305 of which $ 680,000 was guaranteed and $ 1,006,305 was contingent on earnings.

 Plaintiffs seek acceleration of the guaranteed portion and judgment for that amount for the accelerated balance. The Defendants contend (i) that Fulton's adoption of a Plan of Complete Liquidation and payment of a liquidating dividend did not constitute an act of default within the meaning of the Purchase Agreement, (ii) that Plaintiffs had waived the default or were estopped to assert it, (iii) that the dissolution of Fulton and the assumption of its liabilities by Allied did not injure Plaintiffs but rather enhanced their position by reason by which acceleration should be denied.

 The Purchase Agreement provides that its construction shall be governed by the laws of the State of New York. Plaintiffs have pled this provision and asked this court to take judicial notice of the laws of the State of New York which the court has done.

 Defendants' first point is without merit. It is undisputed that Fulton adopted a Plan of Complete Liquidation and distributed its assets to its stockholders in liquidation. Defendants argue that they should be permitted to offer evidence to show that adoption by Fulton of a Plan of Complete Liquidation was not intended to be a default under the terms of the Purchase Agreement. This can serve no purpose. The language of the Purchase Agreement defining events of default and the consequences thereof is clear and unambiguous. Where the language of a contract is unambiguous and the words are plain and clear, conveying a distinct idea, there is no occasion to resort to other means of interpretation, for effect must be given to the intent as indicated by the language itself. Brainard v. N.Y. Central, 242 N.Y. 125, 151 N.E. 152, 45 A.L.R. 751; 10 N.Y.Jur. (Contracts) Sec. 191, p. 95. Where the contract is unambiguous evidence of the intention of the parties play no part in the decision of the case. The intention of the parties is found in the language used to express their intention. Plain unambiguous words leave no question of construction except for the court. Western Union v. American Communications Association, 299 N.Y. 177, 86 N.E.2d 162.

 Defendants base their claim of waiver and estoppel on certain alleged acts and omissions to act on the part of Mr. John T. Gordin. Mr. Gordin, a director of Fulton, attended the meeting of the Board of Directors of Fulton at which the Allied-Fulton transaction was considered. At that meeting Mr. Gordin voted in favor of the Allied-Fulton transaction. He attended the May 1, 1968 meeting of the Fulton directors and voted in favor of distribution of the proceeds of the sale among the stockholders of Fulton. Defendants contend that Mr. Gordin was acting for the Plaintiff, BMG, and that by voting in support of the Allied-Fulton transaction and not uttering a forewarning of the possibility of a declaration of default, Mr. Gordin waived, on behalf of Plaintiff, BMG, its right to insist upon the default and that his conduct estopped BMG from asserting the default.


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