Appeals, Nos. 254, 255 and 268, Jan.T., 1953, from judgment of Court of Common Pleas of Lancaster County, July T., 1950, No. 15, in case of Barium Steel Corporation v. Glen M. Wiley et ux. Judgment reversed and verdict reinstated; reargument refused November 5, 1954. Assumpsit and counterclaim by defendant G. Wiley. Before SCHAEFFER, P.J. Verdict for plaintiff for $23,876.01; judgment entered for plaintiff for $35,898.90 and judgment entered for defendant G. Wiley for $4500 on counterclaim. Plaintiff and defendants, respectively, appealed.
Paul A. Mueller, with him Ralph M. Barley, for plaintiff.
Arthur Littleton, with him John W. Beyer, J. Wesley Oler, Arnold, Bricker & Beyer and Morgan, Lewis & Bockius, for defendants.
Before Stern, C.j., Stearne, Jones, Bell, Chidsey and Arnold, JJ.
OPINION BY MR. JUSTICE BELL
Barium Steel Corporation, plaintiff in this case, is a Delaware Corporation which will be hereinafter referred to as "Barium". The defendants, Glen M. Wiley and (his wife) Effie K. Wiley, together owned 50% of the stock of Wiley Equipment Company, a Pennsylvania corporation, hereinafter referred to as the "Equipment Company". Of this 50% Mrs. Wiley owned only 2 shares. The other 50% of the stock was owned by a man named B. F. Diamond.
After several months' negotiations Barium and the defendants executed a written agreement dated July 3, 1946, in which the defendants agreed to sell to Barium, inter alia, all of their stock in the Equipment Company, as well as certain additional assets which are not here in issue. The purchase price was $225,000.,*fn1 payable $50,000. in cash at the date of closing and $175,000. in shares of common stock of Barium at the closing price of the stock on the day preceding the date of the closing. The agreement contained, inter alia, the following material warranties by the defendants, each of which was untrue:
"2. Sellers represent and warrant that
"(d) The Balance Sheets, dated December 31, 1945, of Wiley Equipment Company ... are in all respects true and correct and together with the notes thereto reflect all of the debts, obligations and liabilities of such companies,*fn2 fixed, contingent or otherwise as of that date ....
"(h) There are no actions, suits or proceedings of any kind pending or to their knowledge threatened against or affecting Wiley Equipment Company ... or any of their properties, before any federal, state or other group or governmental commission, board, bureau or agency, other than as disclosed as in the attached Balance Sheets as of December 31, 1945.
"(j) There are no unpaid taxes due and payable by Wiley Equipment Company ... in excess of reserves or accruals therefor [namely, $17,021.51] except income
and excess profits tax deficiencies not yet proposed or assessed for 1945; ..."
We construe this agreement of purchase and the purchase price stipulated therein to have been made and based upon the balance sheets of the Equipment Company as of December 31, 1945, and upon the amount of reserves therein set forth, namely, $17,021.51.
The agreement of July 3, 1946 further provided that if, prior to the closing date, the defendants had not or could not comply with all of their obligations, Barium at its option could terminate the agreement and be relieved from all obligations thereunder. Barium therefore had the right, up to closing, (a) to terminate the contract for breach by the defendants, or (b) to purchase and settle for the stock and thereafter hold the defendants for breach of any of their warranties: The Sales Act of May 19, 1915, P.L. 543, § 69, 69 PS, § 314. Barium chose the latter course.
When the parties met to conclude settlement on July 31, 1946, it appeared likely that Barium would terminate the agreement of July 3rd. in order to avoid this, the defendants signed the following letter dated July 31, 1946, addressed to Barium and prepared by Barium's attorney*fn3 :
Barium Steel Corporation,
Referring to my representation and warranty made in paragraph 2(j) of the Purchase Agreement, dated July 31, 1946, between us, I hereby reiterate that there are no unpaid taxes or taxes due and payable by Wiley Equipment Company ... in excess of reserves or accruals
therefor for the year 1944 and in the event that any shall be assessed on either of such companies, I agree, in consideration of your waiving certain obstacles to the Closing, as provided in such Agreement, to guarantee, in the case of ... full payment, and in the case of Wiley Equipment Company not less than fifty per cent (50%) of all amounts assessed or declared deficient.
This letter is the origin and cause of almost all of the confusion, differences and difficulties in this case. The parties agree that the date of the purchase agreement referred to in this letter, viz., July 31, was erroneous; but they differ radically on what was meant by the defendants' guarantee "to pay not less than 50% of all amounts assessed or declared deficient". It is admitted or conceded that plaintiff performed all the terms and obligations imposed upon it by the agreements of July 3 and July 31, 1946.
Barium sued the defendants in assumpsit for breach of their warranties under th July 3rd agreement, claiming to be paid for all the tax deficiencies (above the reserves) for 1943 and 1944. The trial Court submitted the entire matter to the jury for determination, including the interpretation of the two agreements. The jury found for the plaintiff in the sum of $23,876.01 - exactly one-half of the amount of its total claim (with interest), namely, one-half of $58,607.51 or $29,303.75, less the counterclaim of Glen M. Wiley for salary, namely, $5427.75, which it allowed as a credit against plaintiff's claim. Thereafter the Court below, in ...