ICN Medical Laboratories, Inc. Employees' Profit Sharing Plan v. ICN Medical Laboratories, Inc.

ICN Medical Laboratories, Inc. and ICN Pharmaceuticals, Inc. (the LABS) appeal from a district court judgment awarding ICN Medical Laboratories, Inc. Employees Profit Sharing Plan (the Plan) $2.9 million as the balance due on a $3.2 million property sale agreement between the parties. The LABS also appeal the court’s award to the Plan of $826,734.00 in rent payments for leases between the LABS and the Plan for the period 1968-1973.

BACKGROUND

In 1961, United Medical Laboratories, Inc. (UML) created the employee profit sharing plan. UML funded this Plan with cash payments and by transferring some of its real property to the Plan. UML also sold certain land and buildings to the Plan which the Plan, in turn, leased back to UML. The Plan utilized a formula for periodically adjusting the rents on leased-back property according to a percentage of the Plan’s aggregate costs in the property. The rents were also, escalated proportionally with a Portland, Oregon cost of living index.

In 1972, ICN Medical Laboratories, Inc., a wholly-owned subsidiary of ICN Pharmaceuticals, Inc., purchased UML. It assumed UML’s obligations under the leases and continued to conduct its operations as a…

concurring in part and dissenting in part:

I concur in part I of the majority opinion because the evidence in support of the Labs’ claim of mutual mistake is not clear and unequivocal so as to justify reformation of the Agreement.

I dissent, however, from part II in the belief that the magistrate erred in concluding that the Plan could sue to enforce Part B of the Agreement while repudiating Part A and then invoking the underlying claim for rents. In my view, the Agreement is governed solely by the severability clause *1331 which clearly and unequivocally expresses the parties’ intent that the Agreement is to be implemented in its entirety and is to be divisible only if one or more of its provisions “cannot be implemented.” Paragraph 5 of Part A, upon which the majority relies, is not probative, let alone controlling, on the question of the parties’ intent in this regard.

As noted by the majority, Part A was designed to settle the Plan’s claim for rents owed by the Labs. Paragraph 5 of Part A is concerned with the time when the claim will be considered released. Specifically, it provides that the underlying claim is to be released only upon performance by the Labs of its…