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KATZ v. ABRAMS

September 30, 1982

BERNARD KATZ
v.
ALFRED ABRAMS and HELEN ABRAMS



The opinion of the court was delivered by: BRODERICK

 BRODERICK, J.

 The plaintiff Bernard Katz ("Mr. Katz") seeks to recover damages, claiming that an alleged agreement between the plaintiff and the defendants, Alfred Abrams ("Mr. Abrams") and Helen Abrams, on March 11, 1979 was breached. The plaintiff also seeks specific performance of that agreement. Discovery having been completed, the defendants have filed a motion for summary judgment. The motion will be granted.

 Fed.R.Civ.P. 56(c) provides in part:

 
Summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

 See Hollinger v. Wagner Mining Equipment Co., 505 F. Supp. 894, 896-97 (E.D. Pa. 1981). Therefore, in examining the propriety of a motion for summary judgment, the court must first determine whether there is a genuine issue as to any material fact. If there is a genuine issue as to any material fact, the motion for summary judgment will not be granted. Ettinger v. Johnson, 556 F.2d 692, 696, (3d Cir. 1977), Fairbanks, Morse & Co. v. Consolidated Fisheries Co., 190 F.2d 817, 824 (3d Cir. 1951); Mazzare v. Burroughs Corp., 473 F. Supp. 234, 237 (E.D. Pa. 1979). In making this determination, the court will view the record in the light most favorable to the party opposing the motion. Mazzare v. Burroughs Corp., supra; Wood v. Precise Vac-U-Tronic, Inc., 192 F. Supp. 619, 620 (E.D. Pa. 1961). Although summary judgment is a drastic remedy and should be used sparingly, summary judgment will not be denied merely because the pleadings create the appearance of a dispute. Transamerica Insurance Co. v. Long, 318 F. Supp. 156, 158 (W.D. Pa. 1970). See Watson v. Southern Ry. Co., 420 F. Supp. 483, 485 (D. S.C.), aff'd, 542 F.2d 1170 (4th Cir. 1976). "It is not the office of the rule to preserve purely speculative issues of fact for trial."

 The defendants base their motion for summary judgment on the statute of frauds. A statute of frauds defense does not go to the underlying merits of the dispute -- if the defense fails, the plaintiff does not automatically win the case, but will be allowed to attempt to prove the contract and the breach. See Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472 (1959). Therefore, this examination of the depositions, affidavits and the pleadings produced thus far is limited to only two questions. First, whether the statute of frauds provision of the Pennsylvania Commercial Code, 12A P.S. § 8-319, applies to this case and, second, if so, whether the plaintiff is able to satisfy its requirements.

 With these points in mind, the undisputed facts considered in the light most favorable to the plaintiff are as follows. On March 8, 1979, Mr. Leonard Sobel ("Mr. Sobel"), Vice President of Crescent Lighting Corporation ("Crescent") telephoned Mr. Katz in Encino, California to determine whether he was interested in buying the stock of Crescent. Mr. Sobel was the authorized representative of Mr. Abrams, President of Crescent, for the purpose of soliciting Mr. Katz. The conversation culminated in a trip by Mr. Katz to Philadelphia to negotiate for the purchase of the stock. On March 10, 1979, Mr. Sobel met in Philadelphia with Mr. Katz at the home of Mr. Katz's brother, Mr. Alvin Katz, an independent sales representative of Crescent. The purpose of this meeting was to take Mr. Katz through an inspection of the Crescent plant in Pennsauken, New Jersey to see if he was still interested in discussing the purchase of the Crescent stock with Mr. Abrams. In addition to the plant tour, Mr. Katz was shown various financial documents pertaining to the Crescent business. After some discussion, Mr. Katz stated that he was interested in buying the Crescent stock. Mr. Sobel relayed this information to Mr. Abrams who then joined the meeting.

 During the remainder of the March 10 meeting, Mr. Katz and Mr. Abrams conducted serious negotiations concerning the sale. Discussed at length during these negotiations were: a $50,000 per year consulting fee for Mr. Abrams; an immediate capital infusion into Crescent by Mr. Katz; personal guarantees by Mr. Katz; and a pay-out program for Mr. Abrams based on achievement of certain profit levels. A second meeting was held on March 11, 1979 the purpose of which was to finalize the points that had been discussed at the previous meeting. Present at this meeting were Mr. Abrams, his attorney, Mr. Casnoff ("attorney"), his accountant, Mr. Simonson, and Mr. Sobel. The attorney took notes during this meeting. At the meeting, various terms were discussed and agreements were reached as to each term. The parties agreed to meet the next morning (March 12, 1979) at Philadelphia National Bank, Crescent's primary lender, to introduce Mr. Katz to the bank. However, at the March 12, 1979 meeting at the bank, contrary to Mr. Katz's understanding, the attorney told Mr. Katz, "we have no deal" (Casnoff deposition at p. 192) and Mr. Katz was never introduced to the bank personnel. On March 29, 1979, the plaintiff filed a complaint in this court demanding that the defendants perform their obligation under the alleged March 11, 1979 agreement by transferring one hundred percent of the outstanding stock of Crescent to Mr. Katz. Mr. Katz also claims damages in excess of $10,000.00.

 Mr. Katz is a citizen of California; Mr. Abrams is a citizen of Pennsylvania; defendant Helen Abrams is a citizen of Florida. Jurisdiction is established pursuant to 28 U.S.C. § 1332.

 In a diversity action, a federal district court must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). This being a diversity action, the court agrees with the parties that Pennsylvania law is applicable. See Melville v. American Home Assurance Co., 584 F.2d 1306 (3d Cir. 1978); Jewelcor, Inc. v. St. Paul Fire & Marine Insurance Co., 499 F. Supp. 39 (M.D. Pa. 1980); Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964).

 Initially, on this motion for summary judgment, plaintiff contends that summary judgment cannot be granted because there is a disputed issue of fact as to whether the Pennsylvania Commercial Code's statute of frauds applies in the instant case. He contends that the stock of Crescent is not a "security" within the meaning of the Pennsylvania Code's statute of frauds applies in the instant case. He contends that the stock of Crescent is not a "security" within the meaning of the Pennsylvania Code's definition since the stock is closely held. The Pennsylvania Code, 12A P.S. § 8-102, provides in pertinent part:

 
(a) A "security" is an instrument which
 
(i) is issued in bearer or registered ...

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