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WCC FUNDING LTD. v. GAN INTL.

December 19, 1994

WCC FUNDING LIMITED, Plaintiff,
v.
GAN INTERNATIONAL, Defendant/Third-Party Plaintiff, v. DARRELL BLAESS and RICHARD FANSLOW, Third-Party Defendants. DARRELL BLAESS, Third-Party Counterclaimant, v. GAN INTERNATIONAL, Defendant to Third-Party Counterclaim.



The opinion of the court was delivered by: CHARLES RONALD NORGLE

 CHARLES R. NORGLE, SR., District Judge:

 Before the court are the cross motions of defendant GAN International ("GAN") and of plaintiff WCC Funding Limited ("WCC") for summary judgment on counts I and II of the complaint. For the following reasons, GAN's motion is granted and WCC's motion is denied.

 FACTS1

 On April 15, 1992, WCC and GAN entered into a fully integrated written Stock Purchase Agreement ("Agreement"). *fn2" WCC, as the prospective buyer, and GAN, as the prospective seller, entered into the Agreement for the purpose of buying and selling all of the outstanding HNL capital stock. On April 23, 1992, eight days after the execution of the Agreement, WCC paid $ 50,000 for the right to conduct the due diligence investigation for a period of thirty days until May 15, 1992. On May 15, 1992, WCC sent a letter identified in WCC's motion as a "notice of breach" which stated that *fn3"

 
As you may be aware, after our discussion yesterday I sent you a letter agreement for purposes of extending the date by which action would have been required to be taken by WCC Funding Limited under Section 2.03 of the Stock Purchase Agreement between WCC Funding Limited and GAN International relating to the sale and purchase of the stock of [HNL]. When I called this morning to find out the status of the letter agreement, I was advised that you are out today, and therefore thought that in light of our discussions, it would be appropriate for me to write to you.
 
I am sure you can appreciate that because GAN International has still not provided WCC Funding with the terms under which GAN or its affiliates will continue to provide reinsurance to [HNL], an important element of the completion of WCC Funding's due diligence review is missing. As a result, we expect that the extension agreement will be entered into and the missing information promptly provided to assure that WCC Funding can complete its due diligence review with the benefit of all information which your client agreed to provide under the Stock Purchase Agreement before it is required to pay an additional $ 100,000 to extend the due diligence period. . . .

 (WCC's Ex. 20.) The alleged "notice of breach" only discussed the insufficiency of § 5.04 (a) compliance. No other violations were mentioned or referred to in the "notice of breach." After receiving the "notice of breach," GAN allegedly did not cure the § 5.04 (a) violation within fourteen days. Therefore, according to WCC, the Agreement terminated on May 30, 1992, pursuant to the operation of § 8.01(3). Despite WCC's position that the Agreement terminated on May 30, 1992, WCC paid $ 100,000 on May 15, 1992, to extend the thirty-day period to perform due diligence investigation for an additional thirty days, until June 15, 1992.

 On June 11, 1992, in a telephone conversation, WCC and GAN agreed to extend the due diligence period from June 15, 1992, to June 26, 1992. Following the conference, WCC sent a letter to GAN which memorialized the discussion. The letter stated in relevant part that:

 (WCC's Ex. 17.) In response to the written communication, GAN replied with its own letter on June 15, 1992, which in relevant portion said the following:

 
Further, since you indicated your serious interest to continue a dialogue regarding the purchase of Hawkeye, we hereby agree to grant you an extension of time to June 26, 1992 in which to complete your due diligence review pursuant to Section 2.03 of the Stock Purchase Agreement dated April 15, 1992 without additional payment from you with respect to this extension. . . .

 (GAN's Ex. R.) In extending the due diligence period from June 15, 1992, to June 26, 1992, WCC did not provide additional monetary consideration to GAN. See (Agreement P 8.03.) *fn4" On June 16, 1992, WCC replied to GAN's June 15, 1992 letter and stated the following:

 
Thank you for your June 15, 1992 letter. While we are not in accord with all of the statements made, we too look forward to meeting with you on June 18 and June 19 in Chicago.
 
Pursuant to your request, we will have our consulting actuaries available for the meeting on June 18 with you, Steve Griffith and Darrell Blaess and our counsel will be available for the meeting on June 19 with you, Peter Williams and Paul Meyer. In addition, Richard Fanslow and I believe that a meeting between principals (without counsel) as was planned in Paris for June 12 would help us resolve our differences and, in combination, allow us to craft a mutually beneficial solution. Please advise me if your schedule would accommodate meeting at your hotel for breakfast on Thursday.

 (WCC's Ex. 31.) As scheduled, the parties met, but failed to reach a resolution as to the Agreement. Subsequently, more written communication was exchanged between WCC and GAN.

 On June 25, 1992, WCC wrote a letter on the assumption that GAN had granted WCC a second extension of the due diligence period from June 26, 1992, to July 10, 1992:

 
Thank you for taking the time to speak with me and Mr. Fanslow this morning. As you are aware, we have agreed to a standstill under our agreements relating to WCC Funding Limited's acquisition of Hawkeye National Life Insurance Company from GAN International until June 26, 1992. As a follow up to our conversation, this letter will confirm our agreement to extend such standstill for an additional ten ...

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