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Koch v. Sky Tech Inc.

November 16, 1972

KOCH, APPELLANT,
v.
SKY TECH, INC. ET AL, RESPONDENTS. NEWMAN ET AL, APPELLANTS, V. SKY TECH, INC. ET AL, RESPONDENTS



Appeal from Circuit Court, Clackamas County. Howard J. Blanding, Judge.

Paul R. Meyer, Portland, argued the cause for appellants. With him on the briefs were John Spencer Stewart, and Kobin & Meyer, Portland.

John Henry Hingson III, Oregon City, argued the cause for respondents. With him on the brief was Donald B. Bowerman, Oregon City.

In Banc. Bryson, J.

Bryson

Plaintiff Koch entered into a contract with the defendant Sky Tech, Inc., to purchase a Piper Cherokee airplane with a concurrent lease-back agreement. Approximately three months later Mr. Koch and his son-in-law, plaintiff Newman, jointly executed similar

agreements with defendant Sky Tech to purchase and lease back a more sophisticated twin-motored Piper Comanche airplane. Plaintiffs became dissatisfied and filed separate suits in equity seeking rescission of the contracts, alleging material misrepresentations and substantial breach of contract. The cases were consolidated for trial. The plaintiffs appeal from separate decrees in favor of defendants.

Defendant Sky Tech sells and rents airplanes. Defendant Clarke is president of and salesman for Sky Tech. Plaintiff Koch is a general contractor and home builder. Plaintiff Newman is an electrical contractor. Mr. Koch's son, an airplane pilot, was employed by Sky Tech.

In the summer of 1970 the son suggested to his father, plaintiff Koch, that he meet with defendant Clarke to discuss the purchase and lease-back of a Piper Cherokee airplane. Mr. Koch, his son, and Mr. Clarke attended the meeting. Mr. Clarke proposed that Sky Tech would sell the airplane to Koch and lease it back for use in its rental and flight instruction business. The proposal was to have certain investment, depreciation, and tax benefits to the purchaser and purchaser was to have the use of the airplane at a reduced rate by notifying Sky Tech one week in advance of this intention, specifying the date, time, and period involved.

Clarke presented a "purchase agreement," "rental agreement," and "aircraft schedule" for Koch's consideration. The purchase agreement described the airplane and equipment and set forth the purchase price and down payment. The rental agreement provided: the terms by which Sky Tech rented the plane

from plaintiff Koch, including the hourly rate; payment by Sky Tech for all fuel, washing, waxing, tie down, landing and hangar fees; payment of insurance by owner Koch and schedule of rental when used by Koch. It further provided that "either party may terminate this agreement by giving notice to the other." The aircraft schedule showed a breakdown cost for operating the airplane of $7.15 per hour based on 1,000 flight hours per year and a "monthly outlook" of expenses and income based on 80 flight hours per month, showing a monthly average net income of $124. Koch and Sky Tech executed the purchase money agreement on August 24, 1970, and the rental agreement on August 30, 1970. Mr. Koch's son went to the factory in Florida and picked up the airplane.

Plaintiff Newman learned of his father-in-law's purchase and lease-back of an airplane. On Newman's inquiry, Clarke presented similar purchase and rental agreements and an aircraft schedule to Mr. Newman on a more sophisticated twin-motored Piper Comanche airplane. Newman was unable to interest his corporate business associates in the advantages of buying an airplane for their company under a purchase-lease-back plan. However, his father-in-law, plaintiff Koch, joined with him in the purchase and lease-back of the twin Piper Comanche airplane. Clarke, Newman, and Koch met on November 10, 1970, to discuss the proposal regarding the Comanche airplane. This "aircraft schedule" presented by Clarke showed a cost for operating the Comanche airplane of $14.90 per hour based on 600 flight hours per year, and the "monthly outlook" of expenses and income based on 50 flight hours per month showed a monthly loss of $37.44. This rental agreement provided that either party could terminate

the agreement by giving one year's notice to ...


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