The opinion of the court was delivered by: SHADUR
MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE
In accordance with Fed. R. Civ. P. ("Rule") 52(a), this Court finds the facts specially as set forth in the following Findings of Fact ("Findings") and states the following Conclusions of Law ("Conclusions"). To the extent if any the Findings as stated reflect legal conclusions, they shall be deemed Conclusions; to the extent if any the Conclusions as stated reflect factual findings, they shall be deemed Findings.
1. These are the parties to this action:
(a) Plaintiff and Counterdefendant CNC Service Center, Inc. ("CNC-Wisconsin") is a Wisconsin corporation with its principal place of business in Milwaukee, Wisconsin.
(b) Defendant and Counterplaintiff Ben Evenson ("Evenson") was the sole shareholder at the time of the December 8, 1987 dissolution of CNC Service Center, Inc., an Illinois corporation ("CNC-Illinois"). Evenson is the successor in interest to CNC-Illinois.
(c) Third-Party Defendant Precision Machine Alignment, Inc. ("PMA") is a Wisconsin corporation originally incorporated as CH, Inc. with its principal place of business in Milwaukee, Wisconsin.
(d) Third-Party Defendant Jacques Hopkins ("Hopkins") was at all times relevant to this litigation President of CNC-Wisconsin and PMA and a shareholder and director of both corporations.
(e) Third-Party Defendant James Cote ("Cote") was at all times relevant to this litigation a shareholder and director of CNC-Wisconsin and PMA.
(f) Third-Party Defendant Mergers, Inc. ("Mergers") is an Illinois corporation with its principal place of business in this state.
2. Hopkins is a graduate accountant who holds certification as a "chartered accountant," the British equivalent of a certified public accountant. Hopkins has extensive financial management experience and expertise and also has extensive experience and expertise both as a business broker and in the area of due diligence investigation, which he has performed in connection with his own business acquisitions and in connection with the transactions of numerous brokerage clients. Cote is a graduate accountant with extensive national and international financial and banking experience, together with substantial experience in developing and marketing real estate securities programs.
3. During January 1987
Cote met with Hopkins in Lake Forest, Illinois and laid out his objective to purchase and run a company, telling Hopkins he had $ 150,000 to invest. Because Cote had known Hopkins since 1981 and knew that he was a business broker, Cote asked Hopkins for assistance with his objective. Hopkins responded that he would look out for business opportunities for Cote. When fees for that service were discussed, Hopkins told Cote that his fees would be paid by the seller. Also in January 1987, on or about the date of Hopkins' meeting with Cote, Hopkins formed Mergers as a business brokerage firm.
4. It was Cote's understanding with Hopkins that so long as they were working together Hopkins would have an interest in whatever Cote did. Before their association Cote had never been involved in the management or ownership of his own business (though he had some prior experience in management), nor had Hopkins (though he had previously owned and managed two other business brokerage firms).
6. In February 1987 Hopkins caused Mergers to send out a mailing to several businesses, including CNC-Illinois, in the capacity of a business broker seeking prospective sellers.
Shortly thereafter (about March 1987) Hopkins first made contact with Joseph Ettlie ("Ettlie"
) of Precision Machine Alignment, Inc. ("PMA-E"
) by means of an ad placed in the Wall Street Journal.
7. On March 25 Hopkins as President of Mergers gave assurances to Cote that if the latter signed a letter of intent for the acquisition of PMA-E even though the primary purpose was not Cote's sole personal acquisition of that company, Cote would have the absolute right to assign the letter of intent to Mergers "after it becomes a binding agreement by signature of the Seller." Then on April 8 Hopkins submitted a letter of intent to PMA-E and Precision Machine Service, Inc. ("PMS") in which Hopkins represented himself to be the purchaser and Mergers to be the broker for an acquisition at a proposed purchase price of $ 977,000. That letter of intent provided:
(a) for a highly leveraged acquisition by Hopkins without personal guaranties;
(b) for a brokers fee to be paid in part to Mergers in the amount of $ 109,240; and
(c) that if the due diligence review by Hopkins were to disclose that the purchase price should be reduced below $ 950,000 under the terms set out in the letter of intent, Ettlies (in lieu of accepting the lower purchase price) could rescind the proposed transaction upon payment of $ 15,000 to Hopkins.
In fact the contingency described in Finding 7(c) occurred, at which point Ettlies elected to rescind and Hopkins received the $ 15,000.
8. On April 13 Hopkins wrote to CNC-Illinois to reassert his interest in representing CNC-Illinois in the sale of its business and to advise CNC-Illinois that "we have a client currently completing the acquisition of two companies in your industry." That "client" was Cote, and the "two companies" were PMA-E and PMS.
9. On April 30, after Ettlies' rescission referred to at the end of Finding 7, Hopkins succeeded in obtaining Ettlies' agreement to a consultancy contract with Mergers, which provided that:
(a) Hopkins would work to re-establish a selling price of $ 977,000 for PMA-E and PMS within four to six months.
(b) Mergers would receive a commission on any sale of the businesses within six months on an exclusive basis.
(c) Hopkins, as buyer under the original April 8 letter of intent, would have a right of first refusal to match any acceptable offer for the business made by any third party.
11. In May 1987 Hopkins established personal contact with Evenson for the purpose of discussing his representation of CNC-Illinois as its business broker. In June 1987 Hopkins informed Ettlies of his intention to include Cote in the purchase of PMA-E and PMS. During that same time frame, approximately four or five weeks after the beginning contact with PMA-E, Hopkins brought the possible purchase of CNC-Illinois to Cote's attention.
12. On June 16 Hopkins made his first visit to the CNC-Illinois offices at Elmhurst, Illinois. At that time he asked for copies of the tax returns of CNC-Illinois, which were promised to be provided and were then mailed to him. No financial information that Hopkins requested was refused to him either during that visit or during any later visit or meeting by Hopkins as to the CNC-Illinois acquisition. During that visit Hopkins learned of CNC-Illinois' negotiations with Machinery Systems International, Ltd. ("MSI") and offered to assist CNC-Illinois in those negotiations. Hopkins told Evenson that he was employed by Mergers and was in the process of consulting with PMA-E to make PMA-E salable. Hopkins also advised Evenson that he was acting as broker for the PMA-E acquisition, but he did not disclose who the purchasers of PMA-E might be.
13. About July 17 Hopkins prepared and submitted to the State Bank of Hales Corners, Wisconsin a "Business Plan" for the acquisition of PMA-E and PMS. Under the headings "Business Development" and "Acquisitions," the Business Plan stated that "consideration is currently being given to the acquisition of a CNC company out of Chicago, Illinois."
14. At about the same time (specifically on July 17), having received the requested CNC-Illinois tax returns, Hopkins again met with Evenson at CNC-Illinois. During that meeting Hopkins (in his role as CNC-Illinois' broker) was once again permitted full and complete access to whatever he might request as to CNC-Illinois' financial records and other information about the corporation. Like the June 16 meeting, the July 17 meeting took more than two hours.
15. During the July 17 meeting Hopkins told Evenson that he had a "problem" with Evenson's tax return information as to inventory valuation. Evenson then placed Hopkins in touch with CNC-Illinois' accountant by telephone. Hopkins was satisfied with the information that he obtained from the accountant, and although he was never at any time prohibited by Evenson from communicating with the accountant again, Hopkins never again sought to speak with the accountant about CNC-Illinois' financial matters.
16. All the representations that were made at the July 17 meeting as to CNC-Illinois' "fit" with PMA-E and as to the suitability of the CNC-Illinois acquisition for that purpose were made by Hopkins and not by Evenson (who had no prior knowledge of PMA-E). Hopkins also told Evenson at the meeting that Cote would be the purchaser from CNC-Illinois. Hopkins and Evenson also discussed CNC-Illinois' bank loans and lines of credit with the Bank of Elmhurst. Evenson told Hopkins that there were two lines of credit. One of those had been drawn down (with the loan being secured by Evenson's home), and the loan proceeds were in the company.
17. On July 22, before he had submitted any letter of intent to Evenson for the purchase from CNC-Illinois, Hopkins wrote to the State Bank of Hales Corners, Wisconsin and updated pages 4 and 5 of the Business Plan that he had previously submitted to that bank. That July 22 "update" letter stated in part that "terms were agreed in principle yesterday for the acquisition of CNC . . . Service Center, Inc., Elmhurst, IL."
19. On July 31 a handwritten "memo of intent" was initialed by Ettlies and Hopkins providing for the sale of PMA-E and PMS. Then on August 2 Hopkins wrote to attorney Robert Acri ("Acri") transmitting the July 31 "memo of intent" and telling Acri that he would be engaged to "[act] as counsel for Jim [Cote] and I [sic] in our joint endeavors." Hopkins also transmitted to Acri a memorandum as to the acquisition of PMA-E/PMS/CNC-Illinois. That memorandum, reflecting Hopkins' understanding of the points covered on the previous Friday (July 29), addressed the acquisition from CNC-Illinois as well as PMA-E and PMS by Hopkins and Cote and set out that Hopkins would contribute no cash to the venture but would capitalize his CNC-Illinois commission of $ 50,000 and would "create" $ 105,000 of "equity" by acquiring PMA-E real estate personally and then immediately selling it back to the venture at a price $ 105,000 greater than his actual purchase price. It was contemplated that the total cash investment to be made by all parties in the proposed PMA-E/PMS/CNC-Illinois acquisitions was $ 200,000, comprising Cote's total commitment of $ 160,000 to the venture and $ 40,000 to be paid by PMA-E employee John Steker ("Steker"). Steker was, at all times before the sale of PMA-E/PMS, its general manager.
20. Still another letter of intent directed to Evenson was prepared by Hopkins dated August 17, disclosing for the first time that Hopkins and Cote would be the purchasers from CNC-Illinois. At no time before August 17 was Evenson ever informed that Hopkins was acting in any capacity other than a broker for CNC-Illinois. When it was thus disclosed that Hopkins would be a purchaser, Evenson objected to the payment of a brokerage fee to Hopkins, and Hopkins and Cote then shifted the liability for the fee to the buying entity.
21. Although it was not disclosed to Evenson until August 17 that Hopkins intended to assume any other role with CNC-Illinois other than his fiduciary relationship as its broker, Hopkins had all along contemplated being on the buyer's side of the CNC-Illinois acquisition -- thus dealing with Evenson in an adversary capacity (see Findings 13, 17, 19).
22. Like the two July letters of intent, the August 17 letter of intent was not executed by Evenson. It was followed by another letter of intent on August 20, which in turn was replaced by an August 21 letter of intent. That last document was executed by Evenson and became the "final" letter of intent for the purchase of the assets of CNC-Illinois (as Finding 26 reflects, the final purchase document was an Asset Purchase Agreement dated October 1). Hopkins and Cote executed the August 21 letter of intent to purchase assets from CNC-Illinois as promoters of CH Holdings Inc., but that corporation was never formed. Instead Hopkins and Cote formed a Wisconsin corporation known as CNC Service Center, Inc. ("CNC-Wisconsin") on October 15 (its Articles of Incorporation bore a September 30 execution date) to consummate the purchase of the assets of CNC-Illinois.
23. On August 25 Hopkins, Cote and Steker formed a Wisconsin corporation known as CH, Inc. to acquire the assets of PMA-E and PMS. On August 31 CH, Inc. acquired those assets. Then on September 10 CH, Inc. amended its Articles of Incorporation to change its name to PMA. For all purposes of this litigation CH, Inc. and PMA shall be considered and are one and the same.