Payer v. The SGL Carbon, LLC

Transition Metals Technology, Inc. (TMT), and incorporator Edward Payer (plaintiffs) sued the SGL Carbon, LLC (SGL) (defendant) seeking specific performance of a contract to buy industrial property that Payer signed before incorporating TMT. Payer initially negotiated the agreement individually, meaning the contract would list him as the buyer. At some point Payer told SGL to change the buyer to “Transition Metals Technology, Inc., a New Jersey corporation.” Payer signed the contract and a promissory note as “CEO” of TMT and signed an amendment to the contract as its “President.” However, Payer did not incorporate TMT until about 18 months after signing the contract and over a month after suing SGL. The parties had to satisfy numerous contingencies before closing. SGL claimed it satisfied all its contingency obligations and repeatedly attempted to close, while Payer and TMT countered SGL had not completed its contingency obligations and breached the contract. Eventually SGL said it had canceled the agreement and found another buyer, but notices of pendency filed with the complaint prevented the new purchase from closing. SGL requested summary judgment dismissing the specific-performance claims and removing the notices of pendency, arguing that TMT could not enter a valid contract before it incorporated. However, SGL’s president said he would have done nothing differently in negotiating and forming the contract had either TMT or Payer individually been the buyer, other than clarifying for legal documentation purposes.