Herzog Contracting Corporation v. Mcgowen Corporation

976 F.2d 1062 (7th Cir. 1992)

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Nature of the Case

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Facts

P bought the assets of Tru-Flex Metal Hose Corporation from D. P formed a subsidiary of P to hold the assets. P assigned the asset purchase agreement to the now Tru-Flex subsidiary. Tru-Flex was to make annual payments to D of $500,000 for five years. The two promissory notes, both demand notes, were issued by D to Tru-Flex in 1989. P claims that it loaned D $400,000 and the notes are D's promises to repay the loan. D denies that the $400,000 was a loan. D claims that it was partial prepayment of the next year's installment in an attempt to postpone the realization of taxable income to the following year by making the $400,000 payment look like a loan. P refused to make further payments. D sued P in an Indiana state court for breach of contract, and that action remains pending. Tru-Flex assigned D's promissory notes to P, which sued to enforce them. The case was decided on summary judgment, and there has been no determination of the truth of D's claim that the promissory notes were never intended to be presented for payment. The district judge held, held that the notes are 'clear and unambiguous,' and they are enforceable regardless of what the parties actually intended. D appealed.