Karns Prime & Fancy Food, Ltd. - Page 23

                                       - 23 -                                         
               ment * * * and as a result of such default, amounts due                
               under the Note would immediately become due and pay-                   
               able.  [Reproduced literally.]                                         
               We turn first to petitioner’s related arguments (1) that the           
          $1.5 million advance by Super Rite to petitioner created an                 
          unconditional obligation on the part of petitioner to repay those           
          funds and (2) that only a condition subsequent (i.e., compliance            
          by petitioner with the April 16, 1999 supply agreement) gave rise           
          to the forgiveness of the annual payment set forth in the April             
          15, 1999 note.  In advancing those arguments, petitioner relies             
          on Erickson Post Acquisition, Inc. v. Commissioner, T.C. Memo.              
          2003-218, and on the following language in the April 15, 1999               
                    The principal balance of this Note shall be repaid                
               in six (6) annual payments of $250,000.00 each, com-                   
               mencing on April 16, 2000, and continuing on the third                 
               Friday of each April thereafter through and including                  
               April 16, 2005; provided however, that the payment of                  
               the annual payment shall be forgiven by the Lender                     
               [Super Rite] if the Lender determines that the Borrower                
               [petitioner] is in compliance with, and shall not have                 
               materially breached or then be in uncured default                      
               under, that certain Supply and Requirements Agreement                  
               [April 16, 1999 supply agreement] of even date herewith                
               among the Borrower and Lender. * * *                                   
               If the form of the April 15, 1999 note were to control, such           
          form would appear to support petitioner’s arguments.  However, we           
          are not bound by the form of the April 15, 1999 note.  See                  
          Knetsch v. United States, supra.  The substance of the bargain              
          between petitioner and Super Rite at the time the $1.5 million at           

Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011