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CHUDNOFF v. IPCO HOSPITAL SUPPLY CORPORATION ET AL. (01/19/73)

decided: January 19, 1973.

CHUDNOFF
v.
IPCO HOSPITAL SUPPLY CORPORATION ET AL., APPELLANTS



Appeals from decree of Court of Common Pleas, Trial Division, of Philadelphia, May T., 1971, No. 1451, in re Gussie Chudnoff, executrix of estate of Victor Chudnoff, deceased v. Ipco Hospital Supply Corporation, Vitaloy Processing & Products, Inc., and Sun Life Assurance Co. of Canada.

COUNSEL

F. Hastings Griffin, Jr., with him A. C. F. Finkbiner, III, and Dechert, Price & Rhoads, for appellants.

Joseph Matusow, for appellee.

Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice O'Brien. Mr. Justice Pomeroy dissents. Mr. Chief Justice Jones took no part in the consideration or decision of this case.

Author: O'brien

[ 450 Pa. Page 268]

This action in equity was instituted by appellee as widow of Victor Chudnoff, deceased, and as executrix

[ 450 Pa. Page 269]

    of his estate. The action sought to restrain Vitaloy Processing & Products, Inc., the beneficiary of two insurance policies on the life of Victor Chudnoff, from making claim for the proceeds, and to direct payment to appellee of the proceeds of the policies, less the cash surrender value of said policies, to which another appellant, Ipco Hospital Supply Corporation, is legally entitled.

On May 22, 1956, the shareholders of Vitaloy had entered into an agreement for the purchase of life insurance policies in the sum of $20,000 each on the lives of its shareholders in order to create a fund which would enable the corporation to purchase the interest of a deceased shareholder and which provided that in the event the corporation was terminated, each stockholder could purchase the policy on his own life.*fn1 Subsequently, additional policies on the lives of the shareholders were purchased in the sum of $10,000 each.

On February 17, 1971, Ipco entered into a written agreement to purchase all the stock of Vitaloy from its two shareholders, Victor Chudnoff and one Louis Persichetti. The cash surrender value of the policies was included in the list of assets of Vitaloy which were acquired by this purchase, and which were listed in a balance sheet dated November 30, 1970. In paragraphs 3.6 and 3.19 of the agreement, the sellers warranted that the balance sheet was correct as a fair representation of the financial condition of Vitaloy, its net worth and net income.

Under a supplemental letter agreement dated the same day as the contract and identified as "part and parcel" of that agreement, the selling shareholders were given the right to purchase the policies on their lives

[ 450 Pa. Page 270]

    by paying Ipco the cash value of these policies. In that same letter, Chudnoff was given the right to receive an employment contract if he could, before April 1, 1971, satisfy a ...


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