232 Pa. Super. 394 | Pa. Super. Ct. | 1975
Opinion by
This case, evolving from a complex history of facts, represents a suit by Amerofina, Inc. [hereinafter Amero-
USI does not deny the existence of the oral contract, but it asserts that under the terms of the contract Amero-fina was required to do more than locate and introduce suitable acquisition candidates. USI asserts that Amero-fina was required to act as a “broker”, an engagement which required active negotiation on behalf of USI. USI also asserts that irrespective of the semantic characterization of Amerofina’s contractual undertaking, it must prove as a condition precedent to recovery that it was the “efficient procuring cause” of the acquisition. The evidence produced, USI asserts, was insufficient to satisfy this burden.
The jury returned a verdict for Amerofina in the amount of $220,000. Post-trial motions were denied, and USI brings this appeal.
The factual background of this case is a difficult terrain to cross, but the journey is necessary for a proper resolution of the issues. During the time pertinent to this case USI was a large conglomerate composed of more than one hundred subsidiaries and divisions operating in various fields. Amerofina was engaged in the business of investment banking and stock brokerage, with principal offices in Pittsburgh, New York, Italy and Switzerland. In the summer of 1968 Herbert Kerr, a vice president of USI travelled to Pittsburgh to meet with Samuel Garvin, a vice president of Amerofina, who had been retained by a banking institution to find a purchaser for the bank. Kerr decided that the bank would not be a suitable acquisition for USI; however, he entered into an agreement with Garvin under which Amerofina would
Kerr acknowledged that the parties had discussed USI’s interest in acquisitions, that he had furnished Garvin with certain acquisition criteria, and that he had agreed that USI would pay a “reasonable fee” or a “mutually agreeable fee” in connection with acquisitions made by USI.
The first acquisition made by USI pursuant to this contract was a group of five affiliated corporations known as Berkeley Schools. Garvin introduced the parties, supplied USI with financial information, and helped to persuade one of the principal shareholders of Berkeley not to pull out of the deal because of a delay on the part of USI. Amerofina was paid $85,000 by USI which the Berkeley-USI acquisition agreement characterized as being “for its services to USI as finder in connection with the negotiation of this Agreement.” Plaintiff’s Exhibit 6.
The second matter for which Amerofina received a fee from USI involved USI’s acquisition of a group of west coast finance companies known as Universal Guardian Acceptance Corporations [hereinafter collectively referred to as Finance]. Finance had been organized by the principal shareholders of a group of “health spa” corporations which eventually were to become Health Industries, Inc. [hereinafter Health], a third USI acquisition which is the subject of the present lawsuit. Finance was organized to serve as a financing institution which would buy or discount membership contracts of the various health spas. In 1968 Raymond Wilson, a principal shareholder of Finance and owner of some 13 spas, asked his attorney to locate a company which would be interested in acquiring Finance and Wilson’s spas. The attorney, Lederer, contacted a broker, Dresner, who contacted Amerofina. Dresner furnished Amerofina, at its request,
Meanwhile, and prior to Kerr’s trips to the coast, Wilson, in search of expansion funds, had placed his spas into an inactive corporate shell traded on the Salt Lake City Stock Exchange, Kennebec Consolidated Mining Co. [hereinafter Kennebec] with thoughts toward a public offering. Another spa owner, Rice, who was also a Finance shareholder also transferred his spas into Kennebec, the name of which was later changed to Health.
Thus when Kerr and Garvin travelled to California in late 1968 and early 1969 Wilson was a major stockholder of both Finance and Kennebec. Garvin presented the interrelated Finance and Kennebec companies to USI as a two-step transaction, with USI first acquiring Finance which needed funds to continue purchasing the increasing amount of paper generated by Kennebec, and second with the possibility of USI acquiring the spas at a later time.
The Finance acquisition was formally closed in April of 1969. The Finance-USI acquisition agreement states: “USI warrants to the Shareholders that it has not employed any broker or finder in connection with this transaction other than Amerofina, Inc., and USI will pay the fee of such finder in accordance with its arrangements with it.” Amerofina was paid $115,000 for its services in connection with the Finance acquisition.
It appears that the second step of the acquisition was delayed because of a rather substantial difference in the price-earnings ratio between the USI stock and Kennebec
It is upon this factual background that the present issues must be resolved. As stated above, USI raises a two-pronged sufficiency of the evidence issue challenging first, that Amerofina failed to sustain its burden of proving that it was the “efficient procuring cause” of the Health acquisition; and second, that even if there was sufficient evidence of the causal link Amerofina’s evidence was insufficient to show that USI had agreed to pay Amerofina for the type of limited nonparticipating services performed in this case. We will address ourselves first to USI’s second contention.
I
Assuming for the moment the existence of the necessary causal relationship, it is USI’s contention that Amerofina was engaged as a “broker” and not as a “finder.” Such distinction as exists between these two terms is more a matter of trade usage than legal definition. In general, a finder is an independent actor whose role is that of a middleman who introduces the parties, supplies information to one or both about the other and is required to do little else, whereas a broker “negotiates on behalf of one of the parties or performs or is required
In applying the rather tenuous distinction between these terms to the facts of this case we must, of course, view the evidence in the light most favorable to the plaintiff and give it the benefit of all reasonable inferences deducible therefrom. E.g., Herron v. Silbaugh, 436 Pa. 339, 260 A.2d 755 (1970), Eldridge v. Melcher, 226 Pa. Superior Ct. 381, 313 A.2d 750 (1973); Rumsey v. The Great Atlantic & Pacific Tea Co., 408 F.2d 89 (3d
I — I HH
The questions remaining go to the extent of the services required to be performed by a finder before he is entitled to his fee and whether Amerofina performed such services in this case.
“It is generally held, in the absence of an inconsistent contractual mandate, that a finder who is employed to find a buyer or seller of a business has performed all services necessary to entitle him to a commission if
(2) The transaction directly results from the introduction.” Fox & Fox, supra at §80.04 [1]. See Tyrone v. Kelley, supra.
Thus one who merely introduces the parties and supplies information is a finder. Ames v. Ideal Cement Co., supra. This can, of course, be accomplished with minimal active performance. “It is possible for a finder to accomplish his service by making only two phone calls and, if the parties later conclude a deal, he is entitled to his commission.” Minichiello v. Royal Business Funds Corp., 18 N.Y.2d 521, 527, 223 N.E.2d 793, 796, 277 N.Y.S. 2d 268, 272 (Ct. App. 1966), cert. denied, 389 U.S. 820 (1967). In Freeman v. Jergins, 125 Cal. App. 2d 536, 271 P.2d 210 (1954) the finder completed his services when he introduced the parties. The court held in Bittner v. American-Marietta Co., 162 F. Supp. 486, 488 (E.D. Ill. 1958) that “[a] 11 the ‘finder’ is required to do is to bring' the seller to the attention of the purchaser.”
There must be, however, a causal connection between the activities of the finder and the resultant acquisition or merger. It is generally said that the middleman must be the efficient procuring cause of the transaction. This rule, generally stated in brokerage cases, see, e.g., Lipper v. Tubis, 422 Pa. 245, 220 A.2d 875 (1966) (real estate broker) ; Helmig v. Rockwell Mfg. Co., 380 Pa. 305, 111 A.2d 118 (1955) (industrial materials broker), has in at least one instance been applied to the business opportunities or finders transaction. Modern Tackle Co. v. Bradley Indus., Inc., 11 Ill. App..3d 502, 297 N.E.2d 688 (1973). However, “it is clear that a finder’s fee is not dependent upon the finder’s participation in negotiations, and that it may become payable even though a third
The court in the case before us charged the jury in terms of “direct and efficient cause” and “immediate, efficient, and procuring cause.” The judge stated:
“[i]f a finder introduces a prospective buyer and seller who enter upon merger negotiations which are suspended and later resumed, the finder is still entitled to a fee if the renewed negotiations . . . directly result from the original introduction. If the original introduction continues to be the direct and efficient cause of what happened.
“. . . a finder may recover a fee or commission even if the buyer or seller he introduces to his principal is not interested in completing the transaction on the principal’s terms at the time of introduction, when such an interest subsequently develops. . . . otherwise, however, if during that time lapse an intervening force comes into the picture and it is this intervening force which brings about the ultimate result.
*404 “The term ‘procuring cause’ . . . means more than a mere ‘but for’ causation. It refers to a cause originating a series of events which without break in their continuity result in an accomplishment of the objective of arriving at an agreement concerning the acquisition between the acquiring and the selling company.”
We are convinced that guided by the charge and the evidence the jury could find that Amerofina was the “procuring cause” of the Health acquisition. Its conclusion in tracing a continuing connection between Amerofina’s preliminary ground work and the final acquisition cannot be said to be without basis. Garvin testified that the original proposition was presented as a dual acquisition; that after the Finance closing he spoke with Kerr “quite often” (Record at 135a) ; that he made a June, 1969, trip to California “to move the [Health acquisition] forward” (id.) ; that after the trip he reported to Kerr who responded, “good, Sam, because we’re still very interested in Health Industries” (Record at 143a) ; and that he continued to discuss it with Kerr (Record at 144a). These activities show more than “remote, unrelated and noncontributory” efforts, Pass v. Industrial Asphalt of Cal., Inc., 239 Cal. App. 2d 776, 49 Cal. Rptr. 190 (1966), and would permit a jury to find a “continuing connection.” Simon v. Electrospace Corp., supra.
In addition the parties to the merger by their acts acknowledged Amerofina’s role in the Health acquisition. Wilson, a principal shareholder in Health, took the precaution of having Garvin sign a letter intending to release Health from any liability for a finder’s fee and stating that Garvin represented only USI. More importantly there is evidence in addition to and quite apart from Garvin’s testimony from which it may be inferred that Kerr himself thought that Garvin was entitled to be paid. As stated before, subsequent conduct of the parties is relevant in determining their original intent.
Judgment affirmed.