Appeal from order of Court of Common Pleas of Montgomery County, No. 74-5828, in case of Howard Butcher, III, et al. v. United States Investment Corp.
Thomas M. Garrity, with him Michael J. Clement, and Wisler, Pearlstine, Talone, Craig & Garrity, for appellant.
Bernard Chanin, with him Leonard J. Bucki, Seymour Kurland, and Wolf, Block, Schorr and Solis-Cohen, for appellees.
Watkins, P. J., Jacobs, Hoffman, Cercone, Price, Van der Voort, and Spaeth, JJ. Opinion by Hoffman, J. Jacobs, J., concurs in the result.
This appeal is taken from an order dismissing appellant's counterclaim on the grounds that it was barred by the Statute of Frauds contained in Article 8 of the Uniform Commercial Code, dealing with investment securities.*fn1
The plaintiffs-appellees are two firms engaged, inter alia, in the business of underwriting the sale of securities;
[ 236 Pa. Super. Page 10]
the defendant-appellant is a Pennsylvania corporation. In 1972, the parties entered into negotiations regarding the underwriting of a proposed public offering of the company's common stock. On June 6, 1972, the parties signed a "letter of intent" under which the appellees agreed to act as co-managing underwriters of the proposed public offering and sale of the company's common stock. The contemplated issue consisted of 180,000 shares to be offered at $20.00 per share, with an underwriting discount of 7 1/2%. The letter of intent, however, is largely conditional:
"The feasibility of the financing and the estimated offering price set forth below will depend, of course, on our further investigation of the Company . . . the absence of any material adverse change in the Company's condition or prospects (financial or otherwise), and the continuing existence of favorable market conditions in general and our ability to obtain indications of interest from prospective dealers and customers. This letter summarizes and evidences our discussions to date, although our mutual rights and obligations remain to be defined in an underwriting agreement (the 'Underwriting Agreement') into which this letter and all prior discussions shall merge."
". . . This letter is intended to be only a summary of the proposed transaction contemplated hereby and the Underwriting Agreement and related documents and instruments which will be executed by parties will contain the usual warranties, representations, marketouts and indemnities. Accordingly, this letter shall be construed only as a letter of intent and shall not be legally binding upon the Company or us; provided, however, that you and we shall immediately be legally bound by paragraphs 3 and 4." (Emphasis added.)*fn2
[ 236 Pa. Super. Page 11]
On April 26, 1974, the underwriters filed a complaint alleging that after they had incurred expenses in the amount of $57,668.91 pursuant to Paragraphs 3 and 4 of the letter of intent, the company abandoned the proposed public offering. The answer filed by the company denied that it had abandoned the public offering, and counterclaimed for damages against the underwriters, alleging an ...