The opinion of the court was delivered by: WEBER
This civil action for damages is based on a contract entered into in 1966 by plaintiffs and Joseph M. Lasher with a wholly-owned subsidiary of the defendant named Chemlime Corporation (Chemlime).
Plaintiffs are four brothers, all citizens of the State of Ohio. The defendant is incorporated in the State of Delaware and maintains its principal place of business in Illinois. The amount in controversy exceeds $10,000 and the court has jurisdiction under 28 U.S.C. § 1332.
A non-jury trial has been held in the matter, the parties have submitted a pretrial stipulation, trial and post-trial briefs and proposed findings. The stipulated facts include the following which are relevant to our determination of this matter.
Plaintiffs, together with a now deceased brother and Joseph M. Lasher, owned all of the shares of Ohio Industrial Wastes (OIW). OIW had been formed in 1963 to engage in the business of neutralizing and disposing of industrial waste in the area owned around Lisbon, Ohio. Prior to its 1966 agreement with Chemlime, OIW had not engaged in or transacted such business but it had procured from an agency of the State of Ohio a permit authorizing it to discharge industrial wastes into a drainage basin near Lisbon, Ohio.
Defendant Cenco Instruments Corporation (Cenco) together with its subsidiaries engages in business in several areas, one of which is "pollution abatement." In September 1965 Cenco entered into a merger with another corporation. As a result of this merger Cenco, the surviving company, acquired Chemlime as its wholly-owned subsidiary corporation. At the time of the merger Chemlime manufactured and sold lime in various sections of the United States and operated a plant for the neutralization of industrial wastes in Reading, Pennsylvania.
In the spring of 1966 Plaintiffs and Mr. Lasher began to negotiate with Chemlime Corporation for the sale of its OIW stock and facilities. During the negotiations Chemlime was represented by its Vice-President and General Manager, James J. Fitzpatrick. The negotiations ultimately resulted in three agreements, two of which were dated August 11, 1966 and one of which was dated August 12, 1966. Pursuant to the stock sale agreement of August 11, Chemlime became the owner of all the OIW stock. Under the property sale agreement of August 11, Chemlime purchased the OIW facilities comprising about 226 acres of Lisbon area land including certain disposal pits or "cuts". Under the August 12, 1966 contract Chemlime agreed to pay to plaintiffs a royalty on each gallon of waste material disposed of by Chemlime within a 200 mile radius of Lisbon, Ohio. The royalty contract provided that such payments were to continue until either (1) the "cuts" on the 226 acre tract were filled or (2) ten years time had elapsed, whichever was later. Within the 200 mile radius only two specifically stated areas, both sites of previously existing Chemlime facilities, were exempted from the operation of the royalty payment provisions.
All three agreements were executed on behalf of Chemlime by Ralph C. Read, its President and Chairman of its Board of Directors. During the negotiations and at the time of the execution of the agreements, Read was also President and a Director of Cenco. Fitzpatrick was not at such times an officer, director or employee of Cenco.
Subsequent to the execution of the three agreements but prior to the institution of this suit, Mr. Lasher's interest in the royalty agreement was purchased by plaintiff Chris Chengelis and James P. Chengelis.
On February 28, 1969 Cenco acquired the assets of Industrial Wastes, Inc. (Industrial) and Limco, Inc. (Limco), two Beaver County, Pennsylvania corporations, by means of an exchange of stock and a corporate reorganization.
Prior to the acquisition by Cenco, Industrial was engaged in the neutralization and disposal of industrial wastes and Limco was engaged in the sale of lime. Industrial had property including dumping pits in Beaver County and Washington County, Pennsylvania. Limco had handling and storage facilities in Beaver County. Since the acquisition the Industrial and Limco facilities have been operated as a division of Cenco. This division has engaged in the disposal of industrial wastes within the proscribed 200 miles of Lisbon but neither Chemlime nor Cenco has paid any royalties to plaintiff on such wastes. There is no dispute that the time recited in the royalty agreement has not yet passed, that the "cuts" in the Ohio property are not yet full, and that the Industrial and Limco facilities do not lie in either of the two locales specially exempted in the royalty agreement.
We find from the evidence the following facts:
While Chemlime had for over twenty years engaged in the industrial waste business throughout the United States, it had no waste facilities in Western Pennsylvania or Ohio prior to its acquisition of the OIW facilities in 1966.
Prior to 1969 Cenco was not engaged in the business of neutralization or disposal of industrial wastes, except ...