author: GLEN M. WILLIAMS, District Judge.

text:
    William D. WITTER and Charles R. Crofton, Plaintiffs, v. Thomas TORBETT, Karl Ketron, Americoal Corporation, Valmar Energy, Inc., Patrick Leuben and Incob Corporation, Defendants.
    Civ. A. No. 83-0130-B/A.
    United States District Court, W.D. Virginia, Abingdon Division.
    Dec. 28, 1984.

      James Schreiber, New York City, Carl A. Tibbetts, Roanoke, Va., for plaintiffs.
    David Bromberg, New York City, James S. McLellan, Kingsport, Tenn., Birg E. Sergent, Pennington Gap, Va., for Torbett, Ketron, Americoal and Valmar.
    Hugh P. Cline, Norton, Va., for Leuben and Incob.
   MEMORANDUM OPINION

GLEN M. WILLIAMS, District Judge.

INTRODUCTION

Plaintiffs, Witter and Crofton, are citizens of the State of New York and the defendants and counter-plaintiffs, Torbett and Ketron, are citizens of the State of Tennessee. Americoal Corporation (Americoal) is a corporation organized and existing under the laws of the Commonwealth of Virginia with its principal operating office in Lee County, Virginia. This court has jurisdiction over this matter as there exists diversity of citizenship among the parties and the amount in controversy exceeds $10,000. 28 U.S.C. § 1332. Lueben and Incob have been dismissed as parties to this suit, following the transfer from the Southern District of New York.

I. Factual Background

Americoal Corporation was incorporated under the laws of Virginia on or about March 18, 1981 by a West German named Lueben. Americoal was to be a shell corporation owned 100% by a second shell corporation, Incob, of which Lueben was the sole shareholder. However, in July of 1981, when the Americoal stock was issued, the 1000 shares issued were divided as follows: Incob 3331/:), Valmar Energy, Inc., 666%. Valmar is a Tennessee corporation which is owned equally by Torbett and his wife (50%), and Ketron and his wife (50%). Neither Incob nor Valmar had a monetary investment in Americoal.

On August 22, 1981, Torbett and Ketron created a limited partnership known as Americoal Corporation and Associates of Virginia, Ltd. (AMVA). The business of the partnership, as stated in the partnership agreement, is to: “buy, sell, lease, operate, manage and mortgage any legal or equitable interest ... in real property ... mine, ship, sell and broker coal ... and to sell, lease or otherwise dispose of, coal and coal lands.” (Plaintiffs’ Exhibit 3). AMVA was to be divided into 100 ownership units, each of which was to represent the right to 1% of the net profits of AMVA. The partnership agreement also named Americoal Corporation as the general partner, and gave Americoal: “... the full, exclusive and complete authority and discretion in the management and control of the business of the limited partnership for the purpose herein stated, and (Americoal) shall make all decisions affecting the business of the limited partnership.” (Plaintiffs’ Exhibit 3).

In early 1982 Torbett and Ketron decided to attempt to force Lueben to relinquish ownership of his 33373 Americoal shares. Lueben did in fact resign as a director of Americoal. The voluntary nature of Lueben’s resignation was an issue at trial, although a fascinating and intriguing story, it is of no consequence in this opinion. In an agreement dated March 9, 1982, Lueben, acting on behalf of Incob, agreed to assign his 33378 Americoal shares back to Americoal in exchange for 87s AMVA units, which represented 337s% of Americoal’s holdings in AMVA. The AMVA units (25 initially) were Americoal’s only asset. The Lueben-Incob-Americoal agreement noted that, by its terms, Lueben was to receive the equivalent of 873% of AMVA’s net profits, or a full one-third of Amerieoal’s projected income. (Plaintiffs’ Exhibit 4).

At nearly the .same time as Lueben was exchanging his Americoal shares for AMVA units, the initial contacts were occurring between Yale Mining Corporation and Americoal. Yale held valuable leases and mining permits to certain lands which were adjacent to property leased by Americoal. Yale was in financial trouble. Yale’s president, Richard Gilliam, approached Torbett in late February, 1982, to discuss a possible merger between Yale and Americoal. This initial meeting was unproductive. However, Gilliam and Ketron, still pursuing merger possibilities, traveled to New York in early July, 1982 and spoke with Crofton, who was the treasurer of Yale.

Subsequent to the meeting in New York, Crofton traveled to Tennessee where he met with Torbett and Ketron. It was this trip which Torbett described as leading “to negotiations and the formation of an alliance, and the takeover of Yale.” (Tr. 4-631). Witter, who owned 337s% interest in Yale, also became involved in the Yale-Americoal negotiations. Witter was unhappy with Yale’s then current management and saw a buy-out or merger as a way to gain a stronger voice in Yale’s management decisions. Witter first met Torbett and Ketron on July 14, 1982. It was at this meeting that the four principles (Witter, Crofton, Torbett and Ketron) decided on a course of action which was to merge Yale into Americoal.

The meeting of July 15, 1982 produced a letter, written on Witter’s letterhead, addressed to Torbett and signed by Crofton, as attorney-in-fact for Witter, which embodied the basic mechanics for the merger. This letter, known as the “July Option Letter” (Plaintiffs’ Exhibit 12), provided that Witter would assign to AMVA his interest in Yale in exchange for 5.24 AMVA units. Furthermore, Witter agreed to become a member of Americoal’s Board of Directors and, significantly, to assist Torbett in the acquisition of the remaining shares of the Yale stock. In exchange, Witter required Torbett to “... purchase the rights and interests of Incob Corporation if and when it is available, and to make available the opportunity to me to acquire the same____” (Plaintiffs’ Exhibit 12). Obviously, at the time of this agreement, Incob no longer owned any stock in Americoal.

Also included the July letter was Water’s agreement to accompany Torbett and Ketron to London in August to meet with representatives of Labout Investments. Labout Investments handled investments for a wealthy Saudi Arabian family named Kaaki. Although the Kaaki family already owned a significant number of AMVA limited partner units, which represented a large investment, the plan was to seek an additional $2,000,000 to be used in part to fund Americoal/AMVA in a buy-out of the remaining investors in Yale.

By agreement dated July 22, 1982, Torbett and Ketron secured an option from Lueben, on behalf of Incob, to purchase Incob’s 81/) AMVA units (which had been a part of Americoal’s original 25). This option was exercised August 6,1982, at which time Torbett and Ketron, in their individual capacities, purchased Lueben’s/Incob’s interests for approximately $98,000. This effectively gave Torbett and Ketron, individually, the right to 83/3% of Americoal’s income from its AMVA holdings.

On August 9, 1982, in New York City, Crofton executed two notes, payable to the bearer, in the principal amount of $97,335 each and delivered the same to Torbett. In exchange, Crofton received a photocopy of an invalid Americoal stock certificate which purported to represent a transfer of 123.33 Americoal shares. Witter, on August 10, 1982, executed two similar notes, both for $97,335, payable to the bearer, which he likewise delivered to Torbett. He received from Torbett an IOU for 123.33 Americoal shares. Torbett signed this IOU as President of Valmar; however, he later, under oath, denied that he was then acting as president of Valmar.

Immediately following the exchange of these notes, the principals traveled to London in an effort to secure the $2,000,000 investment from the Kaaki family. The investment was not forthcoming. The principals’ relationship then took a turn for the worse and the merger was never finalized. Currently Yale and Americoal are in bankruptcy and the notes are unpaid except for a single “no prejudice” payment by Witter.

II. The Parties’ Contentions

Plaintiffs in this suit, Witter and Crofton, seek, inter alia, a declaratory judgment that the notes now held by Torbett and Ketron are void. Conversely, the defendants, Torbett and Ketron, assert a counterclaim which alleges that the plaintiffs have defaulted in payment of the notes. The defendants contend that the notes are negotiable, and valid in all respects. The defendants therefore seek judgment for the full amount of the notes with interest and costs. Both parties have also asked for compensatory and punitive damages on several theories.

Among the various grounds alleged by the plaintiffs as reasons that the notes should be held void are: (1) that the purchases of stock by Witter and Crofton were executory in nature and were never finalized because there were conditions precedent to the stock being issued and said conditions precedent have not occurred. Specifically, plaintiffs allege that the stock transaction was contingent upon the complete acquisition by Americoal/AMVA of Yale Mining Corporation, and furthermore, that the merger of Yale with Americoal was itself contingent upon Americoal receiving $2,000,000 from the Kaaki family; (2) that Torbett acted in his capacity as an attorney in his dealings with Witter and Crofton and in the course of said dealings violated the attorney-client relationship by unethical practices, concealment and by taking advantage of his position as an attorney for Witter and Crofton; (3) that Torbett and Ketron committed common law fraud in misleading Witter and Crofton; (4) that Torbett and Ketron were joint venturers with Witter and Crofton and that Torbett and Ketron violated the trust relationship which existed between joint venturers by not revealing all of the matters which were involved; (5) that Torbett and Ketron owed a duty of full disclosure to Witter and Crofton, pursuant to §§ 12(2) of the 1933 Securities Act.

III. Holding

During the trial of this case, the depiction of the events which resulted in Witter and Crofton bringing suit against Torbett and Ketron might best be described, although euphemistically, as capitalism at its darkest. Although they are not parties to this suit, it appears that the true loss, suffered innocently, was borne by the Kaaki family, the other limited partners of AMVA, and the limited partners of Yale.

The issue presently before this court, although complicated by counsel for both parties, is whether or not the obligations represented by Witter’s and Crofton’s notes are enforceable. Both counsel have put before the court numerous legal theories by which the court could either enforce the notes or declare them void. Some of these theories are meritorious; others are not. Yet, as with much “complex” litigation which carries the facts far beyond the bounds of true relevancy, this case has at its base a simple question of contractual validity. The parties’ agreement, as evidenced by their actions, to exchange notes for stock, constituted a contract. Thus the question before the court is whether or not the contracts which resulted in the exchange of notes for stock were valid.

In a case such as this one, in which jurisdiction is based on diversity of citizenship, a federal court sitting in Virginia must apply the substantive law of Virginia. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Included in the substantive law is Virginia’s choice of law rules. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The substantive law of Virginia directs that the validity of a contract is governed by the law of the place where the contract was made. Woodson v. Celina Mut. Ins. Co., 211 Va. 423, 426, 177 S.E.2d 610 (1970).

At issue are two distinct transactions. The first was made between Crofton and Torbett, in which Crofton executed and signed two promissory notes, in exchange for 123.33 shares of Americoal stock. The second was between Witter and Torbett, as President of Valmar, in which Witter executed his two notes and exchanged them for Torbett’s corporate IOU, which Torbett claims represented a personal obligation of himself. Counsel for both sides made much of the interpretations of these agreements insofar as whether they are to be considered finalized or executory in nature. The court need not pass on this question as its resolution would make no difference in the court’s holding.

New York was the forum in which these contracts were entered into and thus Klaxon and Woodson dictate that New York’s substantive law is to be applied to determine the contracts’ validity. New York law has long recognized that a party to a contract may have an affirmative duty to disclose facts, which the other party to the contract might consider material, even though such facts are not requested:

There are, of course, occasions upon which it becomes the legal duty of the individual to volunteer information unasked by another, occasions where a failure to state a fact is equivalent to a fraudulent concealment, and avoids a contract equally with an affirmative falsehood.

Rothmiller v. Stein, 143 N.Y. 581, 590-591, 38 N.E. 718, 720 (1894). One such “occasion” where the affirmative duty to disclose arises is when parties to a contract are bound, prior to the creation of the contract, by fiduciary duties! Id.

The court is of the opinion that the four principals, Witter, Crofton, Torbett and Ketron, were bound inter sese by the duties and obligations of persons who stand in fiduciary positions one to the other. The four principals assumed fiduciary status among themselves due to the fact that they were joint venturers. Whether the law of New York, the forum in which it is alleged the duties of joint venturers were breached by Torbett and Ketron, or the law of Virginia, the forum with the most significant interest in the joint venture, is applied, a joint venture is established, both de facto and de jure.

The law of New York looks for the following indicia to determine the existence of a joint venture: a pooling of efforts among the parties, a mutual input or control in regards to decisions made on behalf of the venture, a joining of interests, risks and skills, and an understanding to share the losses or profits. Wagner v. Derecktor, 306 N.Y. 386, 389, 118 N.E.2d 570, 572 (1954). The Virginia Supreme Court defines a joint venture as follows:

Although there is no generally accepted definition of joint venture, it is said to exist when two or more persons combine in a joint business enterprise for their mutual benefit, with an express or implied understanding or agreement that they are to share in the profits or losses of the enterprise, and that each is to have a voice in its control or management.

Wells v. Whitaker, 207 Va. 616, 625-626, 151 S.E.2d 422 (1966).

The joint venture between the four principals had as its aim the merger of Yale with Americoal/AMVA. It appears to the court that a merger of Yale with Americoal/AMVA was a prudent business strategy, although the facts reveal that the true motivating force was the individual gain to be afforded the four principals. Witter and Crofton were assured that they could pay the notes- out of directors’ fees to be received from Americoal, and the obligations were described as “slow notes.” Torbett and Ketron were secretly making a huge stock profit from their partners.

Crofton testified that Yale was locked by a fifty-fifty split between its directors, with one side led by Gilliam representing the actual management and day-to-day operators, and the other headed by Witter and Crofton representing the investors. Witter stated that Yale had significant potential, yet he felt “frustrated” in his attempts to implement his suggestions as to the direction Yale should take.

The acquisition of Yale interested Torbett and Ketron for a number of reasons. They realized the value of Yale’s leaseholds and mining permits and recognized the natural complement Yale provided for the mining and selling capacities of Americoal. Crofton saw Americoal/AMVA’s interest in Yale as: “... that while they (AMVA) had one small producing mine, they (AMVA) had shipping capacity far in excess of that. They saw our (Yale’s) property as a natural complement to theirs ...” (Tr. 2-26, 27). Furthermore, Torbett and Ketron were most interested in aligning themselves with Witter and Crofton, both of whom are recognized figures in the Wall Street financial community. The inclusion of Witter also meant that Torbett and Ketron could reapproach the Kaaki family for an additional investment in AMVA and use Witter, and his family name and reputation, as a means of lending credibility to AMVA. (Witter is the son of Dean Witter).

The July Option Letter embodies crucial elements of the joint venture. Witter was to trade his interest in Yale for 5.24 AMVA units (which he in turn assigned to Torbett in blank). Crofton, acting as an escrow agent, was to hold and vote Witter’s Yale shares pending the closing date of the purchase.

Thus, the object of the joint venture was to merge Yale with Americoal/AMVA so that their respective complimentary features could be united in one productive capacity. The method is also clear in hindsight: Torbett and Ketron had gained sole control of Americoal and the undisputed evidence shows that they operated Americoal without regard to corporate formalities in whatever fashion best suited their ends. With control of Americoal, they were free to invest the money of the limited partnership as they saw fit. Feeling they had the necessary “inside” help in Yale, in the persons of Witter and Crofton, Torbett and Ketron felt the opportunity for a merger was ripe. Likewise, Witter and Crofton saw Torbett and Ketron, with their control of the Kaakis’ Americoal/AMVA money, as the perfect source of funds to effect a buy-out of Yale, thus releasing Witter and Crofton from the constraints of Gilliam and other Yale stockholders.

Torbett, in his testimony, described the situation as follows:

We had formed an alliance with Mr. Crofton and Mr. Witter. We were going to do this transaction, whether or not Kaaki did anything. We were going to fight the battle, and dissolve this deadlock with Yale. They were going to help us find another investor____ We had (formed an alliance), we were in bed together, and we were going to pull this thing out, one way or the other ... So, we were willing to join hands with them and solve their problems.- They were going to help us solve ours, which was undercapitalization____ [0]ur job was to clean up this mess down here in Southwest Virginia, and his (Witter’s) job was to open the doors to the investments. It was a joint effort.

(Tr. 4-645, 646).

The joint venture was well underway when the principals met in New York on August 9 and 10, 1982. In fact, the meeting was on the eve of the trip to London, where Torbett and Ketron, with the added presence of Witter and Crofton, hoped to entice the Kaakis to purchase more AMVA units. Crofton was the first to execute his two notes in the principal amount of $97,-335 each and exchange them with Torbett for a photocopy of an Americoal stock certificate. The photocopy which Crofton received was invalid as it lacked the corporate seal and the signature of the corporate secretary, as required by Virginia Code § 13.1-20. Witter, upon learning of this “incentive” offered to Crofton, demanded a similar arrangement. Torbett agreed and received two notes from Witter in exchange for the IOU Torbett signed as President of Valmar.

The purported transfer of Americoal stock, which occurred on or about August 9 and 10, 1982, is representative of the manner in which Torbett and Ketron disregarded corporate procedure in their operations of Americoal and Valmar. The 123.33 Americoal shares which Torbett agreed to exchange with Crofton were to come from the 333V3 Americoal shares which were reacquired by Americoal from Lueben/Incob. Torbett testified that these 333V3 shares were “retired”, and held as treasury stock by Americoal. However, there is no indication that at the time Torbett pledged the 123.33 shares to Crofton, Torbett was acting with any type of corporate approval by Americoal. In fact, Torbett admitted that the Americoal books were not adjusted to show the stock transfer until September of 1983, at which time minutes were prepared of meetings which never occurred.

Although Torbett admitted that Americoal issued and sold the shares to Crofton, the consideration given for the shares, the two notes, did not become corporate property of Americoal. Instead, the notes were to go to Valmar, which in reality meant to Torbett and Ketron. As Torbett stated: “... [W]e have a company that we control, and we can allocate these assets [the consideration for the stock issue] as we see fit.” (Tr. 4-784).

The transaction between Witter and Torbett, in which Witter was to receive 123.33 Americoal shares for his two notes, involved the IOU signed by the President of Valmar. Witter’s shares were to come from shares owned by Valmar. Torbett filed an affidavit in the United States District Court for the Southern District of New York, in what was a successful attempt to have this case transferred to this court, in which he swore that the IOU was a personal obligation of his, and that he was not acting as president of Valmar. Torbett’s testimony before this court revealed a series of back-dated, fictitious meetings of Valmar, the falsified “minutes” of which purport to show Torbett’s removal as an officer of Valmar in July of 1982. Furthermore, minutes of fictitious Valmar corporate meetings were created in September of 1983, in an effort to leave a paper trail showing a transfer by Valmar to Torbett of 123.33 Americoal shares, which Torbett had pledged to Witter.

Torbett’s actions not only represent serious breaches of corporate procedure, both as regards Americoal and Valmar, but they also evidence a level of behavior which is far below that which a joint venturer owes to co-venturers. Torbett’s back-dating of corporate transactions, falsification of minutes of fictitious meetings, and the general abuse of the corporate structure, given Torbett’s position as an “insider” in both corporations, seriously endangered the value of the consideration, i.e., the Americoal stock, which Witter and Crofton were to receive. Perhaps the most serious breach was his failure to timely execute valid stock certificates to reflect Witter’s and Crofton’s ownership. Yet this behavior on Torbett’s part is overshadowed when the issue of the price per share, which Torbett and Ketron extracted from Witter and Crofton, is examined.

Witter’s and Crofton’s inducement to enter the contract, which was to ripen into their contractual consideration, was the transfer to both of 123.33 shares of Americoal stock. For the 123.33 Americoal shares, each man signed two notes which were worth in total $194,670. This made the per share price approximately $1,578.

The per share price which Witter and Crofton agreed to becomes significant in light of the August 6, 1982 transaction between Torbett and Ketron and Lueben. In this transaction, Torbett and Ketron, as individuals, purchased Lueben’s interest for $98,000. This amounts to a per share price of $294. This differential in the price paid per share ($1,578 versus $294) was never disclosed to Witter or Crofton. It is significant that the figure paid to Lueben was much closer to the true book value of the Americoal stock. As Torbett testified when asked if he told Crofton that Crofton would be paying five times the book value:

No, sir, I did not____ He had access to these financial pro formas, and this, and that, and the other; I assume that he knows how to read. I didn’t tell him anything.

(Tr. 4-779).

Ketron and Torbett not only failed to tell Witter and Crofton the price paid to Lueben, or the stock’s book value, but they also failed to reveal that in their transaction with Lueben they had purchased the right to 33Vs% of Americoal’s expected income, inasmuch as the profits of the 25 AMVA units were to comprise Americoal’s sole earnings. Thus, whereas Witter and Crofton believed that they were each purchasing the right to a 12.3% distributive share of 25 AMVA units, they were in fact receiving the right to 12.3% of the income from 16.7 AMVA units. Torbett admitted at trial that although the “equities” of the situation required that the reacquired Lueben interest be “merged” with the interest sold to Witter and Torbett, and that this merger would require the appropriate paper transaction (which has never occurred) legally the Lueben interest still remains in Torbett’s and Ketron’s hands.

Torbett and Ketron each had an affirmative duty, created by their status as joint venturers, to make disclosures to Witter and Crofton, regardless of whether the latter inquired, on points which were material to the contract. This duty was established early in New York law:

Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duties of finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of honor the most sensitive, is then the standard of behavior.

Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 546 (1928) (C.J. Cardozo). In Virginia, the duty owed from one joint venturer to another is defined in terms of the “standards of good conduct and square dealing as are required between partners.” Horne v. Holley, 167 Va. 234, 239, 188 S.E. 169 (1936).

The materiality of the issues not disclosed can hardly be challenged. Both Witter and Crofton testified at trial that had they known of the undisclosed facts, neither would have agreed to the note-stock exchange. Although such testimony is self-serving and can be accorded little weight, Ketron and Torbett offered no contradictory testimony. Furthermore, the court is of the opinion that a four-day difference in a per share price of approximately $1,284, and the difference between an expectation of 12.3% of the proceeds of 16.7 AMVA shares, as opposed to 12.3% of 25 AMVA shares, are both material facts. Both New York law (See Adams v. Gillig, 199 N.Y. 314, 92 N.E. 670 (1910)) and Virginia law (See Rison v. Newberry, 90 Va. 513, 18 S.E. 916 (1894)) have long held that a concealment, or misrepresentation, of a material fact is grounds for invalidating a contract.

Although it appears that Witter is now a limited partner in AMVA, and assuming arguendo that Witter and Crofton were at some time shareholders of Americoal, the court is of the opinion that the matter at hand is governed by the rules of law relating to joint venture, regardless of the presence of the limited partnership and/or the corporation. This court need not address the issue posed by Weisman v. Awnair Corp. of America, 3 N.Y.2d 444, 165 N.Y.S.2d 745, 144 N.E.2d 415 (1957), which held that parties may not seek relief based on the joint venture if the individuals in the joint venture have entered into the corporate form, because at issue in this case is the validity of the contract which led to the corporate form, and not an act of the resulting corporation which aggrieved a joint venturer. Furthermore, as the present case is solely among the joint venturers and involves no third parties, this court would follow the reasoning in Arditi v. Dubitzky, 354 F.2d 483 (2d Cir.1965), which allows suit based on the duties of a joint venturer, although the parties are linked in a corporate structure, as long as the rights of third parties are not involved.

IV. Remedy

This court must also look to the choice of law rules of Virginia to determine the appropriate remedy. Virginia law holds that although the substantive law is that of the place of the transaction, “matters of remedy ... are governed by the law of the place where the action is brought.” Willard v. Aetna Casualty and Surety Company, 213 Va. 481, 193 S.E.2d 776 (1973).

It is well settled in Virginia law that rescission is a favored remedy in cases in which misrepresentation is proven in the inducement of a contract. Millboro Lumber Co. v. Augusta Wood Products Corp., 140 Va. 409, 125 S.E. 306 (1924); Wilson v. Hundley, 96 Va. 96, 30 S.E. 492 (1898). Rescission of the contracts presently before the court is a particularly appropriate remedy as the defendants have the stock certificates which were to be given as consideration on their part, and the only payment on any of the notes was a “no prejudice” payment by Witter.

Accordingly, the court directs that the slow notes issued by Witter and Crofton be returned to them, the stock certificates for the Americoal stock be retained by Americoal, and the amount of Witter’s “no prejudice” payment be returned to him. The parties will bear their own costs. The court declines to award either compensatory or punitive damages.

The Clerk is directed to send certified copies of this Memorandum Opinion to counsel of record.

      . Virginia has the most significant interest in the joint venture because the object of the joint venture, the merger of Yale with Americoal/AMVA, involved Virginia corporations which held significant property and economic rights in Virginia.

      . Again, the question of Lueben’s interest was a much debated question at trial. Lueben had exchanged his 333 A shares of Americoal for 33 A% of Americoal’s AMVA holdings, or 8 A AMVA limited units. However, for the purposes of valuation, assume that the interest purchased from Lueben by Torbett and Ketron amounted to an interest identical to 333 A Americoal shares. Given that assumption, the per share price paid to Lueben four days before Witter and Crofton bought their shares was $294.

      . Torbett testified that he told the Kaaki family, at the London meeting, that he was selling the Lueben interest to Witter and Crofton at a profit. Torbett agreed that the motivation for this disclosure was that he felt he and Ketron owed a fiduciary duty to the Kaakis. Torbett also admitted that a partnership existed with Crofton and Witter, yet stated that he refused to tell Witter and Crofton about the price differential, or the profit he and Ketron were making. (Tr. 4-756-757).

      . The court believes that the correct interpretation of the July Option Letter is that Torbett was to acquire, for Americoal, Lueben’s interest so that Americoal would own 25 AMVA units.

      . It is clear that the entire joint venture fell apart when Witter learned that he had been misled regarding the acquisition of the "Lueben interest." Torbett sent Lueben, accompanied by Ketron, to New York to lie about the amount he was to be paid for his shares. However, when Lueben told the truth as to what he had received, the whole transaction fell apart.


source: Caselaw Access Project

author: BARBOUR, District Judge.

license: Public Domain

text:
    DeSOTO MEDICAL CENTER, INC., et al., Plaintiffs, v. METHODIST HOSPITALS OF MEMPHIS, et al., Defendants.
    Civ. A. No. J83-0858(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    Jan. 3, 1985.

      Samuel H. Wilkins, Wilkins, Ellington & James, Jackson, Miss., John K. Train, III, Frank G. Smith, III, Alston & Bird, H. Stephen Harris, Jr., pro hac vice, Atlanta, Ga., for plaintiffs.
    Alex Alston, Jackson, Miss., for Methodist Hospitals of Memphis, DeSoto Methodist Hosp., Meth. Health Systems, American Medical Management & Meth. Hospital South.
    Alvin M. Binder, Lisa Milner, Jackson, Miss., for Miss. Health Systems Agency.
    Lester F. Smith, Jackson, Miss., for Southern Health Services of Ky.
    Robert E. Sanders, W.D. Coleman, Jackson, Miss., for Miss. Health Care Comn.
   MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

This cause came before this Court on the Motion of the Mississippi Health Systems Agency, Inc. and the Mississippi Health Care Commission to dismiss, or in the alternative for summary judgment.

The Motion of Mississippi Health Systems Agency, Inc. (MHSA) is based on sovereign immunity in that it claims to be a federally funded instrumentality, its sole function being the planning, regulation and administration of health care within the State of Mississippi. MHSA acts in an advisory capacity to the Mississippi Health Care Commission (MHCC).

The Motion to Dismiss made by MHCC is based on the Eleventh Amendment in that MHCC is an agency of the State of Mississippi acting for the state and is in actuality the alter ego of the state. Any judgment for monetary damages would be paid from state funds.

Because this is a motion to dismiss, the Plaintiffs allegations will be construed in a light most favorable to the Plaintiff and accepted as true. Because affidavits and other material have been submitted in support and in opposition to this Motion it is in actuality a request by the two Defendants for entry of summary judgment, the Defendants asserting that there are no genuine issues of material fact and that the Defendants are entitled to judgment as a matter of law.

The Plaintiffs filed this action subsequent to their attempts to obtain approval from the MHCC for the construction of a hospital in DeSoto County, Mississippi. The Plaintiffs allege various acts on the part of officials of both the MHSA and the MHCC which they claim violated the rules and procedures of those agencies. For the purposes of this Motion it is not necessary to detail all of the events constituting the alleged antitrust violation. It is sufficient that the Plaintiffs have alleged that the Defendants conspired to prevent Plaintiffs’ construction of a hospital in DeSoto County for the purpose of allowing some of the Defendants to place a hospital there instead. This market allocation is allegedly the result of the conspiracy between the Methodist Hospitals of Memphis, DeSoto Methodist Hospital, Inc., Southern Health Services of Kentucky, Inc., d/b/a Senatobia Community Hospital, Methodist Health Systems, Inc., American Medical Management, Inc., Methodist Hospital, d/b/a Methodist Hospital South, Mississippi Health Care Commission, and the Mississippi Health Systems Agency, Inc. The two moving parties are the Mississippi Health Care Commission and the Mississippi Health Systems Agency, Inc. The other Defendants, with the exception of Southern Health Services of Kentucky, Inc., d/b/a Senatobia Community Hospital, are allegedly aligned as owners and operators of hospitals with which Plaintiffs’ proposed facility would compete. The DeSoto Methodist Hospital, Inc. is actually a corporation organized for the purpose of constructing a hospital within DeSoto County. The Defendant Southern Health Services of Kentucky, Inc., d/b/a Senatobia Community Hospital (Senatobia Community) is the operator of a hospital in Tate County, Mississippi. Senatobia Community is alleged to compete for the provision of medical services to the residents of DeSoto County and is located approximately 30 miles from the site of the Plaintiffs’ proposed hospital.

In essence, the Plaintiffs complain that the Methodist Defendants and Senatobia Community acted in concert with officials in the two defendant agencies to prevent approval of the construction of the hospital proposed by the Plaintiffs. There are allegations that the officials of the agencies acted in bad faith and in contravention of their own regulations and guidelines.

The Motion to Dismiss filed by the MHSA is answered by reference to the statutory scheme governing the organization and operation of Health Systems Agencies. This statutory scheme includes a specific provision relative to the liability of the agencies for damages. The statute states:

A health systems agency shall not, by reason of the performance of any duty, function, or activity, required of, or authorized to be undertaken by, the agency, be liable for the payment of damages under any law of the United States or any State (or political subdivision thereof) if the member of the governing body of the agency or employee of the agency who acted on behalf of the agency in the performance of such duty, function, or activity acted within the scope of his duty, function, or activity as such a member or employee, exercised due care, and acted without malice toward any person affected by it____

42 U.S.C. § 300Z-l(b)(4)(A)(i).

The legislative history of the National Health Planning and Resources Development Act of 1974, 42 U.S.C. Section 300k, et seq. mentions the exemption from liability only briefly and does so with reference to the liability of individuals who are members or employees of the health systems agency. 1974 U.S.Code Cong. & Admin. News 7842, 7919 & 7979. The exemption from liability is mentioned in the legislative history of one of the amendments to the Health Planning and Resources Development Act. 1979 US. Code Cong. & Admin. News, 1306, 1404. Again, this passing reference relates only to the broadening of the protection against personal liability as to individuals associated with health systems agencies.

The reason that no further inquiry is necessary for this Court at this preliminary stage is that the statute by its own terms even as it relates to the imposition of liability on individuals associated with the health systems agencies is couched in such terms which exclude any exemption for liability where the individuals or officials of the agency acted beyond the scope of their duties as officials or employees of the agency or in bad faith as to the individuals affected by their actions. The allegations of the Plaintiffs in this lawsuit include alleged misconduct by officials outside the scope of their duties as officials and employees of the agencies and with bad faith toward the Plaintiffs. This takes the Defendant MHSA outside of the exemption expressly provided by Congress in the statutory scheme and requires them to defend this lawsuit as they have failed to show that there is no genuine issue of material fact relative to the allegation of bad faith and actions outside the scope of their duties as officials of the MHSA.

The Motion by the MHCC to Dismiss based upon the Eleventh Amendment is also before this Court. No case has been cited to the court nor has its own independent inquiry revealed a case directly answering the question presented to this Court. That question simply stated is whether the Eleventh Amendment bars a suit against a state or agency of. the state when brought pursuant to the antitrust laws. The Defendant MHCC in its brief has stated that the only basis for the Motion to Dismiss is the Eleventh Amendment immunity and does not base its Motion to Dismiss on the other possible grounds which have been raised in its amended answer and in the arguments of the Plaintiff in opposition to the Motion to Dismiss. This Court has examined not only the Eleventh Amendment immunity but also the other defenses which are inextricably related to the immunity defense. It is clear that a state may be a plaintiff in an antitrust action, e.g. Georgia v. Evans, 316 U.S. 159, 62 S.Ct. 972, 86 L.Ed. 1346 (1942). Likewise, it is clear that a political subdivision of a state may be sued pursuant to the antitrust laws. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). The traditional analysis in antitrust suits against state agencies originated with the Supreme Court’s decision in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). In Parker v. Brown the “state action” immunity to the antitrust laws was delineated. The limits of the immunity for state action were set forth in the United States Supreme Court’s decision in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975).

In Parker v. Brown, the legislature of the State of California set up a system whereby the price of raisins could be protected from damaging market conditions. California at that time produced most of the raisins consumed in the United States. The effect was to allow California to control the production and price of raisins. The California law was found to be consistent with the national policy expressed in the Agricultural Adjustment Act and not violative of the antitrust laws.

The parameters of the “state action” immunity were expressed in Goldfarb where a fee schedule was set by a local bar association. The United States Supreme Court held that the bar association was not immune from the antitrust laws prohibiting such price fixing by virtue of the state action immunity doctrine. In Goldfarb the Supreme Court stated that the “threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the State acting as sovereign.” Goldfarb 421 U.S. at 790, 95 S.Ct. at 2015.

The cases reviewed usually analyze the immunity question on the basis of the “state action” immunity. There are several cases which have expressly mentioned the Eleventh Amendment immunity defense in relation to antitrust suits against a state. In Goldfarb v. Virginia State Bar, 421 U.S. 773, 792 n. 22, 95 S.Ct. 2004, 2015 n. 22, 44 L.Ed.2d 572 (1975) the Supreme Court noted that the issue was raised but did not decide it. Likewise, in Miller v. Oregon Liquor Control Commission, 688 F.2d 1222, 1227 n. 4 (9th Cir.1982) the court of appeals noted that the issue had been raised on a petition for rehearing. In that case the district court had not reached the issue because of the dismissal on other grounds. The court of appeals followed the course of the Supreme Court in Goldfarb leaving the issue to the district court on remand. One case has been found that directly rules that the Eleventh Amendment bars a lawsuit against the state for money damages. Jefferson County Pharmaceutical Association, Inc. v. Abbott Laboratories, 656 F.2d 92, 99 (5th Cir.1981), rev’d 460 U.S. 150, 103 S.Ct. 1011, 74 L.Ed.2d 882 (1983). The Fifth Circuit adopted the district court's opinion in its entirety reprinting it in lieu of writing an opinion of its own. It is in the opinion of the district court that the question of the Eleventh Amendment immunity was reached. The United States Supreme Court reversed the decision of the Fifth Circuit without ever mentioning immunity from antitrust suits of states under the Eleventh Amendment. However, the holding of the United States Supreme Court in Jefferson County Pharmaceutical Association v. Abbott Laboratories is clear in that a state may be a defendant in an action pursuant to the antitrust laws. While that case arose under the RobinsonPatman Act, the court relied on cases arising out of the Clayton Act and expressly relied on its decision in City of Lafayette v. Louisiana Power & Light Company, 435 U.S. 389, 395, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978).

In light of the position of this question in the appellate courts and the silence of the United States Supreme Court in reversing a decision of a court of appeals with reference to the Eleventh Amendment, this Court decides that the defense is not well taken and the Motion to Dismiss on this basis is denied.

In accordance with the above the Motion of MHSA and MHCC to Dismiss are denied.

It is further ordered that the parties are to complete discovery in this cause by February 15, 1985. All amendments to the pleadings or joinders of additional parties are to be accomplished by March 1, 1985. All dispositive motions must be filed no later than March 1, 1985.

ORDER

This cause is before this Court on the Motion of the Mississippi Health Care Commission requesting this Court to reconsider its previous decision denying their Motion to Dismiss or for Summary Judgment. The Mississippi Health Care Commission (MHCC) requests in the alternative that this Court certify this question for an interlocutory appeal. 28 U.S.C. Section 1292(b).

The MCHH has in large part simply restated those positions which it argued initially to this Court. The only significant argument not contained in their previous briefs is based on the recent Supreme Court decision of Hoover v. Ronwin, — U.S. - 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984). This Court’s reading of the Ron-win decision confirms the previous decision of this Court. Essentially, the Supreme Court in Ronwin held that Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943) provides anti-trust immunity for state action. In Ronwin, state action was found in that the denial of admission of an applicant to the state bar was pursuant to the direct command of the Supreme Court of the State of Arizona. The functions of testing, grading and subsequent recommendation for admission or denial of admission was vested in a committee set up for that purpose and such functions were subject to unrestricted review by the Supreme Court of the State of Arizona. In Ronwin, the Supreme Court of the State of Arizona did in fact review and affirm the recommendation of the Committee to deny admission to the Petitioner. Certainly, there is no question that this was state action under the Supreme Court’s decision in Parker v. Brown and its progeny.

The factual scenario in Ronwin is distinguished from that which is before this Court in that there are substantiated allegations of actions by the MHCC which go far beyond the legislative grant of authority, indeed, including violations of the commission’s own rules and regulations. Additionally, the petitioner supports allegations that the Commission thwarted by improper means the attempt of the Plaintiff to have the decision of the Commission reviewed. There are certainly questions of fact which preclude the granting by this Court of a motion to dismiss or for summary judgment in that the state action immunity from the anti-trust laws protects only those actions required by the sovereign. MHCC has directed this Court to no legislative or other license from the sovereign authorizing it to engage in the activities which the Plaintiff has alleged and supported.

The remaining contentions of the MHCC on this Motion to Reconsider will not be addressed by this Court as they have been fully addressed in the previous Order entered.

The Motion of MHCC to Certify this question for an interlocutory appeal is denied as there are a myriad of fact questions necessary to a resolution of this issue; to certify an appeal would promote piecemeal litigation contrary to the spirit and intent of Section 1292(b); such would not advance the litigation; and, in balancing the equities this Court finds that such a certification would unduly burden the Plaintiffs and delay this litigation.

In accordance with the above this-Court denies the Motions of the MHCC to reconsider its previous decision and for an interlocutory appeal of the issue presented.


author: DITTER, District Judge.

text:
    Irwin BROWNSTEIN v. ARCO PETROLEUM PRODUCTS COMPANY.
    Civ. A. No. 84-4282.
    United States District Court, E.D. Pennsylvania.
    Jan. 3, 1985.
    Gary A. DeVito, Norman P. Zarwin, Zarwin, Baum, Resnick & Cohen, Philadelphia, Pa., for plaintiff.
    Richard Gaines, Sara A. Augenbraun, Legal Dept., Atlantic Richfield Company, Philadelphia, Pa., for defendant.
   MEMORANDUM

DITTER, District Judge.

On October 18, 1984, I granted plaintiff Irwin Brownstein’s motion for a preliminary injunction pursuant to section 105 of the Petroleum Marketing Practices Act, 15 U.S.C. § 2805 (1982), against defendant Arco Petroleum Products Co. (Arco). I now supplement the findings and conclusions I then made as the bases for that relief.

The operative facts are mostly undisputed. On September 23, 1981, the parties entered into a franchise arrangement consisting of a lease and an allied products-marketing contract covering a service station at Roosevelt Boulevard and Rhawn Street, Philadelphia. Under the terms of these agreements, the franchise relationship was to run until November 1, 1984.

By letter dated March 29, 1984, Arco advised Brownstein that it had determined to sell the premises and that the lease and allied marketing agreement would not be renewed. Thereafter, on June 4, 1984, Arco offered to sell the premises to plaintiff for $290,000. Upon receipt of Arco’s offer, Brownstein contacted Louis Iatarola, a designated, independent MAI real estate appraiser, and asked him to appraise the premises.

Iatarola used two methods of appraisal: the market approach and the cost approach. Under the former, he compared the premises to eight service stations in Northeast Philadelphia that had been sold in the preceding 19 months. Using the sales prices of these comparable properties as a benchmark, Iatarola made adjustments to reflect dissimilarities among the comparable properties and the subject property. In this way, he estimated the fair market value of the property to be $190,000.

Under the cost approach, Iatarola first estimated the value of the land by comparing it to five unimproved parcels that had been sold in the preceding 19 months. He determined the land to have a fair market value of $140,000. To this figure, Iatarola added the depreciated reproduction costs of the building, equipment, and site improvements, concluding the total fair market value of the property to be $192,000.

Based on Iatarola’s appraisal, Brown-stein’s attorney wrote to Arco and rejected the $290,000 offer, urging that it was too far in excess of fair market value.

In arriving at its offering price of $290,-000, Arco had engaged the services of Felice A. Rocca, Jr., a designated, independent MAI real estate appraiser. Using only the market approach, Rocca compared the subject property to five comparable properties that had been sold in the recent past, and set the value of the property at $250,000.

Arco’s Philadelphia area commercial properties representative, Kinsley E. Shannon, prepared an internal sales proposal, noting the $250,000 appraisal and requesting his superiors to approve a $290,000 offering price. In a portion of the proposal labeled, “Negotiating history and recommendations,” Shannon indicated that because Brownstein was being divorced, a sale would probably not be consummated through negotiation. Shannon further stated that although the location is a good one, the volume of business transacted there was low and would probably not substantiate the market value.

An Arco internal worksheet, dated May 3, 1984, noted the property is highly visible and worth the $290,000 price. However, ironically, the worksheet recognizes that the asking price is well over fair market value.

On May 3, 1984, Richard E. Erdlitz, Arco’s commercial properties manager for the eastern area, sent Shannon an authorization for commitment to sell the property to Brownstein for $290,000. This document also noted that although the location of the property is good, the asking price is well over market value.

On July 1, 1984, in response to the letter of Brownstein’s attorney rejecting the $290,000 offer, Erdlitz sent Shannon an internal memorandum which stated that the premises is “good property;” if exposed to the outside market would generate substantial interest; there was nothing in Arco’s policy that would require it to offer the property at fair market value; and the Petroleum Marketing Practices Act does not require the price to be a specific amount. On cross examination, Erdlitz stressed that Arco believes it is in no way bound to sell property subject to the strictures of the Act at fair market value.

The Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801 et seq. (1982), was enacted to combat the severe imbalance in bargaining power that existed between petroleum franchisors and franchisees. See S.Rep. No. 95-731, 95th Cong., 2d Sess. 17-18, reprinted in 1978 U.S.Code Cong. & Ad.News 873, 875-76. Prior to passage of the PMPA, a leading franchise commentator observed:

In the Nation’s second largest industry, the major oil firms have the gasoline dealers in virtual bondage, hinged on the constant threat that their short-term contracts will not be renewed unless they submit to burdensome franchisor-imposed practices.

Brown, Franchising — A Fiduciary Relationship, 49 Tex.L.Rev. 650, 655-57 (1971). See also Comment, Retail Gasoline Franchise Terminations and Nonrenewals under Title I of the Petroleum Marketing Practices Act, 1980 Duke L.J. 522, 524-25.

The PMPA attempts to alter this imbalance by regulating the grounds and conditions for which a franchisor may terminate or not renew a franchise. 15 U.S.C. § 2802 (1982); Roberts v. Amoco Oil Co., 740 F.2d 602 (8th Cir.1984). The Act gives the franchisee a cause of action against the franchisor for violations of the Act’s provisions, including the right to seek a preliminary injunction prior to the expiration of the franchise. 15 U.S.C. § 2805 (1982).

One of the permissible grounds for a franchisor’s decision not to renew the franchise is that it, in good faith and in the ordinary course of business, has decided to sell the leased premises. Id. § 2802(b)(3)(D). To avail itself of that ground for nonrenewal, however, the franchisor must also, within 90 days of sending notice of nonrenewal, tender to the franchisee a bona fide offer to sell the leased premises. Id. § 2802(b)(3)(D)(iii).

The PMPA’s enforcement provisions are set forth at 15 U.S.C. § 2805 (1982). The standard for granting a preliminary injunction is not the usual, two-part requirement of probability of success on the merits and irreparable harm. Rather the PMPA sets forth a preliminary injunction standard that is significantly more lenient than the general equity standards. See Gilderhus v. Amoco Oil Co., 470 F.Supp. 1302, 1303 (D.Minn.1979). A court need merely find that plaintiffs’ allegations raise “serious questions going to the merits which provide a fair ground for litigation,” and that “on balance, the hardships imposed upon the franchisor by the issuance of [the] preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted.” 15 U.S.C. § 2805(b)(2) (1982).

Legislative history to the PMPA makes clear the proper assignment of the parties’ burdens under section 2805. The franchisee has the burden of demonstrating: (1) the existence of a franchise relationship; (2) his status as a franchisee; and (3) the nonrenewal of the franchise relationship by the franchisor. See H.R.Rep. No. 95-297, supra, at 41, 1978 U.S.Code Cong. & Ad.News at 899. Thereafter, the burden shifts to the franchisor to show that there was a permissible ground for nonrenewal pursuant to section 2802(b). See id.

In this ease, Arco has conceded that, on balance, the hardships it would suffer if the preliminary injunction were issued are clearly outweighed by the hardships that Brownstein would suffer if the preliminary injunction were denied. Furthermore, plaintiff has established, and defendant does not controvert, that there existed a franchise relationship between the parties, plaintiff was the franchisee, and the franchise relationship was not renewed by the defendant.

The remaining question is whether defendant has demonstrated a permissible ground for nonrenewal under section 2802(b). In order to prevail, Arco must have established that there are no “serious questions going to the merits” on two issues: (1) whether Arco made a good faith determination in the ordinary course of business to sell the subject property; and (2) whether Arco made a bona fide offer to sell the subject property to Brownstein.

Plaintiff has not contested Arco’s assertion that it made a good faith determination in the ordinary course of business to sell the subject premises. Rather, plaintiff attacks the bona fides of Arco’s $290,000 offer.

The term “bona fide offer” is neither defined in the PMPA nor discussed in the Act’s legislative history. It has been generally defined to mean “In or with good faith; honestly, openly, and sincerely; without deceit or fraud____ Real, actual, genuine, and not feigned.” Black’s Law Dictionary 160 (5th ed. 1979) (emphasis added).

Defendant has taken the position that it may offer a parcel of property subject to the Act to the franchisee at any price so long as that offer is made without malice. It argues that for a court to inquire into the actual market value of the property would be to open a floodgate of litigation in which the federal courts would become the arbiters of disputes between appraisers arguing conflicting market values.

I believe defendant’s contention goes too far.

First, I believe that for a court to conclude an offer is bona fide or actual, especially when viewed against the PMPA’s concern about pretextual nonrenewals, the defendant must demonstrate at the very least that the offer was made in conformity with the offeror’s general practice for selling property. However, Arco has not even satisfied that burden. It has demonstrated the mechanics of how its chain-of-command processes a proposed offer for sale. It has also shown by way of the affidavit of Kinsley Shannon that it rejected the price per square foot set by its appraiser. However, Arco has not demonstrated how or why it adjusted the figures developed by its appraiser, or how such an adjustment was consistent with a general practice of Arco. Without such information I simply cannot conclude that the offer was bona fide and not merely pretextual.

Moreover, even had Arco demonstrated that the procedures by which it arrived at the offering price were- consistent with those utilized in non-PMPA-restricted cases, I am not convinced that it would have satisfied the strictures of the Act. In light of the generally slim profit margins available to petroleum franchisees, see Brown, supra, at 657, and Congress’ desire to avoid pretextual terminations or nonrenewals, a proper reading of the Act compels the conclusion that for an offer to be bona fide — that is actual —it must meet or very nearly approach what the offeror believes to be the fair market value of the property. Any increase over fair market value could clearly make a difference in the ability of the franchisee to accept the offer. I cannot believe Congress intended that the elaborate mechanism which it set up in the PMPA could be by-passed by a franchisor’s simply setting a price substantially in excess of what it believes to be the fair market value, whether or not it is beyond the franchisee’s ability to pay.

Consequently, I cannot accept Arco’s assertion that it has made a “true” offer to sell when it has raised the offering price by $40,000 (16%) over that estimated by its appraiser. Arco argues that Mr. Rocca’s estimate did not take into consideration the value of underground tanks and the pumps installed on the premises. I am unconvinced that this accounts for the increase. First, the letter of April 12, 1984, from Shannon to Rocea does not instruct the appraiser to ignore this equipment. Second, Rocca’s appraisal report does not specifically exclude the equipment. Third, there has been no evidence of a practice among appraisers to eliminate such equipment from their reports. It may well be that if the property was being appraised for a non-gas station use, tanks and pumps should not be appraised. That, of course, is not the case here. Finally, even if the appraisal did not include the value of the equipment, I cannot say that this omission accounts for the $40,000 discrepancy. Appended to Shannon’s affidavit is a worksheet which sets forth the figures Shannon utilized in arriving at an offering price. According to this sheet, Shannon based the $290,000 price on the sum of two figures. The first is a dollar-per-square-foot amount, netting a total of $273,933. To this figure, Shannon added $17,000 for “Equipment.” Presumably this $17,000 allocation is for the same equipment which was allegedly omitted from Rocca’s estimate. It appears that the very agent of Arco who proposed the $290,000 offer only viewed the equipment to be worth $17,000.

Arco has simply not articulated to my satisfaction why it chose to increase the price from that suggested by its appraiser. There indeed may be instances in which an appraiser has failed to take into account certain considerations that would justify increasing the offering price over fair market value, but Arco has failed to make that showing here. Similarly, there may be instances in which the offeror’s appraiser has set a price in excess of what would be included in a bona fide offer. However, at this point I need hot consider this situation.

      . This conclusion is questionable in light of Mr. Shannon’s observation that the volume of business transacted at the station was low and the finding of both Mr. Iatarola and Mr. Rocca that the highest and best use of the property was as a service station. See Affidavit of Felice A. Rocca, Jr., Exhibit 3, at 2; Appraisal Report of Louis A. Iatarola at 7.

      . Mr. Erdlitz further testified that "fair market value,” as he used the term, referred to that value placed on the property by Arco’s outside appraiser.

      . Fair market value generally has been defined to mean:
      The amount at which a property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. By fair market value is meant the price in cash, or its equivalent, that the property would have brought at the time of the taking, considering its highest and most profitable use if then offered for sale in the open market, in competition with other similar properties at or near the location of the property taken, with a reasonable time allowed to find a purchaser.

        Black's Law Dictionary 537 (5th ed. 1979) (citations omitted). In a case such as this where no price has been agreed upon, a fair market value can be established by reference to an appraised "highest use" value. This was the approach taken by both appraisers.