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Warner-Lambert Pharmaceutical Co. v. Sylk

decided: November 17, 1972.

WARNER-LAMBERT PHARMACEUTICAL CO., APPELLEE,
v.
WILLIAM SYLK, APPELLANT



Seitz, Chief Judge, and Forman and Gibbons, Circuit Judges.

Author: Forman

Opinion OF THE COURT

FORMAN, Circuit Judge.

Warner-Lambert Pharmaceutical Co., (herein called Warner-Lambert) appellee, a corporation of Delaware, doing business in Morris Plains, New Jersey, pursuant to authority granted by that State, delivered to Collins Wholesale Drug Company, Inc. (Collins), a Pennsylvania corporation, merchandise to an amount of about $20,000.00, for which Collins failed to pay. Thereupon Warner-Lambert sought its remedy in a suit in the Superior Court of New Jersey, Chancery Division, Camden County, for an injunction restraining Collins from any activity and for a receiver. A temporary restraining order was issued on August 4, 1969, and a hearing was set for August 15.

On August 14 at a last minute settlement of the New Jersey litigation, in which William Sylk, appellant, a resident of Pennsylvania, engaged, Collins executed and delivered to Warner-Lambert a series of thirteen promissory notes to it or its order, in the aggregate sum of $19,567.07.*fn1 Each note was payable at the office of Berenson, McLaughlin and Kohn, 744 Broad Street, Newark, New Jersey, and bore the provision: "that upon the default in the payment of any of the notes, the remaining notes shall become due and payable without notice together with attys. fees."

Each note contained the following endorsement on its reverse side:

"For value received the undersigned and each of them hereby forever waives presentment, demand, protest, notice of protest and notice of dishonor of the within note and the undersigned and each of them guarantees the payment of said note with interest at maturity or any time thereafter and consents without notice to any and all extensions of time or terms of payment made by holder of said note.

"Name WILLIAM SYLK

"Address 400 Bryn Mawr Ave.

Bryn Mawr, Pa. 19010"

The payment of Collins's indebtedness as represented by the notes was protected by a security agreement executed by Collins covering a schedule of its goods described therein. It provided for a cash payment of $1,070.98 upon its execution. Also, Collins and Mr. William Sylk (said to be the principal stockholder in New Sun Ray Drug Company) each executed a bond and warrant on August 15, 1969, to confess judgment in favor of Warner-Lambert for $20,640.05.

The foregoing recital is gleaned from the pleadings in this suit filed by Warner-Lambert in the United States District Court for the Eastern District of Pennsylvania on November 18, 1969, (Civil Action No. 69-2730) against Mr. William Sylk, which followed the alleged default by Collins and him to pay the third note due October 31, 1969, for $5,000.00. Warner-Lambert alleged the default under the terms of the accelerated payment provision on all of the notes and demanded judgment for $14,469.07 plus $5,000.00 for attorney's fees, or an aggregate of $19,569.07 (sic).

Mr. Sylk filed an answer and cross-claim*fn2 in which he resisted Warner-Lambert's complaint on the grounds that he owed Warner-Lambert nothing for the following reasons:

(1) Because an arrangement was orally made between Mr. Thomas Sylk, son of Mr. William Sylk, and Secretary*fn3 of Collins and the attorney of Warner-Lambert, which provided for a change in the original agreement under which the third note for $5,000.00 due October 31, 1969, was to be liquidated by two payments of $1,000.00 each and an additional payment of $2,500.00 on or before December 31, 1969; the next installment of $1,000.00 was to be deferred until March 1, 1970, and the other payments of $1,000.00 and the balance each were to be made monthly thereafter.

(2) After payments of $9,500.00 and credits given for $488.47, Collins would owe only $9,134.14 less the value of returned merchandise, leaving the court without jurisdiction.

(3) Briefly stated, the so-called cross-claim alleged that Collins was without funds to meet its indebtedness to Warner-Lambert and offered its bond and promissory notes, but Warner-Lambert advised Mr. William Sylk, principal stockholder of New Sun Ray Drug Company, that it would accept them only if he endorsed the notes. At the time of this demand Warner-Lambert and Mr. William Sylk, as he alleged, believed that the receivership proceedings, in the light of the understanding in the drug industry that there was an "affinity" between Collins and New Sun Ray, would be considered as a proceeding against New Sun Ray and threatened to cause serious financial damage to New Sun Ray by inducing its creditors to initiate a "collective adversary proceeding against it." This was claimed to constitute duress on the part of Warner-Lambert against Mr. William Sylk. The dismissal of the claim was requested and restoration of sums paid by Mr. William Sylk.

Warner-Lambert, after filing a reply to Mr. Sylk's "cross-claim," noticed a motion for summary judgment pursuant to Rule 56 F.R.Civ.P., which District Judge Hannum considered on the pleadings, documents and affidavits filed by the parties. In a Memorandum and Order*fn4 he rejected Mr. William Sylk's argument that the oral agreement modified the original written agreement with respect to the time for and amount of payments to be made, as not presenting a genuine issue of fact preventing relief under Rule 56.*fn5

Another argument was presented by Mr. Sylk, predicated on the allegations in his "cross-claim" that he had been forced to endorse and guarantee the payment of the promissory notes under circumstances of economic duress and, therefore, his participation ...


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