Alpen v. Chapman

• Decision Date: 02 September 1970
• Docket Number: No. 53899,53899
• Citation: 179 N.W.2d 585
• Parties: Ronald ALPEN, Appellee, v. Lyle A. CHAPMAN, Appellant.
• Court: Iowa Supreme Court

Page 585

179 N.W.2d 585

Ronald ALPEN, Appellee, v. Lyle A. CHAPMAN, Appellant.

No. 53899.

Supreme Court of Iowa.

Sept. 2, 1970.

David L. Scieszinski, Wilton Junction, for appellant.

Lewis & Stevens, Muscatine, for appellee.

BECKER, Justice.

Plaintiff brought suit at law for money had and received. The jury returned a verdict for plaintiff. Defendant appeals on several grounds. We affirm.

The controversy arises out of the sale, or attempted sale of the Iowa Industrial Supply Company, located at Durant, Iowa. The business consisted of a substantial inventory of various industrial supplies which were sold to manufacturers in an area comprised of eastern Iowa, western Illinois and as far north as southern Wisconsin. The assets were owned by a corporation of which defendant Lyle Chapman owned 199 shares and Myron Darling owned 100 shares. Chapman and Darling started the business and incorporated it in April 1965 under an agreement which contemplated that Chapman pay $4975 for 199 shares of stock and Darling pay $2500 for his 100 shares. Chapman also put $20,025 into the corporation for which he received a chattel mortgage on all assets of the corporation. Darling operated the business.

In November 1967 Darling left the company but retained his corporate stock. The corporation has a large inventory but had been losing money and owed defendant Chapman some $43,656.

At this time plaintiff Ronald Alpen had a trucking operation of his own. He was acquainted with defendant Chapman both as a neighbor and through mutual commercial contacts. The two began to discuss potential sale of part or all of the supply business to plaintiff. Plaintiff wanted to get out of trucking and defendant wanted to sell part or all of his interest in Iowa Industrial Supply Company.

Both parties agree defendant wanted to sell the supply company for $58,000 but beyond that there is little agreement.

Plaintiff's petition makes the following claims: (1) On December 9, 1967 plaintiff paid defendant $3000 to be applied against acquisition of an undetermined interest in the corporation; (2) the interest to be acquired and the terms of the sale were to be negotiated in the future and incorporated into a written agreement between the parties; (3) on January 6, 1968, plaintiff paid defendant another $10,000 under the same circumstances; (4) the extent and nature of the interest to be acquired or of the sale itself were never determined, agreed upon or reduced to writing; (5) the certificate of incorporation was cancelled by the Secretary of State on December 8, 1967 and this was not made known to plaintiff; (6) defendant was not the sole owner of the capital stock of the corporation prior to its cancellation; (7) the company was insolvent prior to corporate cancellation and this fact was not made known to plaintiff; (8) defendant knowingly and willfully misrepresented the value of the inventory; (9) plaintiff received no consideration for the $13,000 paid which was money had and received for use of plaintiff; (10) plaintiff has requested return of the money which request was refused.

Defendant admitted receipt of the $13,000, denied all else and for affirmative defense asserted: (1) defendant by oral contract sold all his right, title and interest in the Iowa Industrial Supply Company to plaintiff; (2) pursuant to the sale, plaintiff took possession, management and control of the business; (3) the terms of the sale were:

"Total Purchase Price $58,000.00

"Down Payment $13,000.00

'The unpaid balance to draw interest at the rate of 6% Per annum payable in installments as follows:

"(a) 1969 $ 5,000.00 plus accrued interest

"(b) 1970 $ 7,500.00 with accrued interest

"(c) 1971 $10,000.00 with accrued interest

"(d) 1972 $12,000.00 with accrued interest

"(e) 1973 $10,500.00 with accrued interest

'Seller to be liable for all accounts payable as of January 1, 1968 but that the Buyer agreed to apply the balance of accounts receivable as of January 1, 1968 to reduce any outstanding accounts payable as of January 1, 1968.'

The court's instructions were somewhat unusual in that the principal instruction did not attempt to outline the component parts of plaintiff's case and impose the burden of proof on plaintiff as to such propositions. Rather, the instruction told the jury plaintiff must prove the allegation of the petition by a preponderance of the evidence and then immediately recognized two vital issues in the case. Damages were not sought and not alluded to; the verdict was simply a finding for plaintiff. The $13,000 amount was, of course, predetermined. Defendant does not attack the manner of submission but attacks the instructions on other grounds hereafter to be considered.

The two issues submitted were:

'1. Whether or not, on December 9, 1967, it was the intention of the plaintiff and the defendant that their negotiations for an agreement for the sale of the Iowa Industrial Supply Company were to be reduced to writing and signed by the parties before they would become a contract; and

'2. Whether or not, on December 9, 1967, plaintiff and defendant entered into an oral contract for the sale of the Iowa Industrial Supply Company.'

I. We first consider defendant's various attacks on the instructions. The legal theories upon which the case was tried and submitted are thereby brought into immediate focus.

Action for money had and received is not often used as a theory of recovery in Iowa. The theory and broad applicable principles are succinctly stated in In Re Estate of Stratman, 231 Iowa 480, 488, 1 N.W.2d 636, 642:

'Appellant, under the liberal rules of pleading in probate, fairly stated a claim for money had and received. It is elementary that to establish such a claim, it is essential merely to prove that a defendant has received money which in equity and good conscience belongs to plaintiff. It is not necessary to prove a promise to pay. Although this form of action is ordinarily one at law, it is governed by equitable principles and is favored by courts. (Cases cited).' Cf. Barker v. Wardens & Vestrymen of St. Barnabas Ch., (1961) 171 Neb. 574, 106 N.W.2d 858.

McClean v. Stansberry, 151 Iowa 312, 314, 315, 131 N.W. 15, was a case where plaintiff paid the clerk of a public sale the sum of $60 for a mare that proved to be unsound. Plaintiff returned the mare to its owner but the defendant-clerk refused to return the $60. Except for the interposition of a stakeholder, the case has some striking similarities to the case at bar:

'* * * It (plaintiff's petition for money had and received) is not a demand based on the purchase of the mare. It is a demand for money paid or delivered to the defendant for the consummation of a contract for a purchase from Paul, which was never fully accomplished. In legal contemplation, the money in the defendant's hands never became the money of Paul, and when the sale was rescinded defendant held such money, not for Paul, but for the plaintiff, and it was his duty to pay it over to him when called for. Whether under the ancient practice the appropriate form of action for its recovery would be in trover for its tortious conversion, as plaintiff seems to think, or in assumpsit for money had and received, is not a matter of material inquiry. * * *.

'* * * 'It is not essential to the maintenance of this action that there should be any express promise to pay, for the law implies a promise where justice imposes a duty. No privity is necessary; the plaintiff may waive all tort, trespass, and damages, and claim only the money defendant has actually received.' In another case the same court has stated the rule thus: 'There need be no privity of contract alleged or proved, other than such as arises out of the fact that the defendant has received the plaintiff's money, which in equity and good conscience he ought not to retain.' (Cases cited).' (Emphasis supplied).

Defendant's answer is to plead a contract. It is true, money had and received is not a proper action for breach of a contract which has not been rescinded. 1 Am.Jur.2d, Actions, § 14, p. 554. If plaintiff and defendant actually entered into a contract, plaintiff must fail under his theory and manner of presentation of his case. Stated otherwise, if there was a manifestation of mutual assent and a contract was made, plaintiff would have to seek rescission and all the issues would be changed.

The trial court recognized plaintiff's theory and defendant's response. It instructed the jury that in order to find for plaintiff they must find there was no contract. If it was intended there be no contract until the terms thereof were reduced to writing or if there was a material misrepresentation by defendant that prevented a mutual assent there would be no contract. In either event, plaintiff would be entitled to recover, otherwise not.

II. As to the first issue, the court told the jury that if they found the parties orally agreed to enter into a written contract and that the contract was not to become effective until it was reduced to writing and signed by the parties, they need go no further as their verdict would have to be for plaintiff.

The instruction properly covered the law of oral contracts which may be made prior to a written contract. Marti v. Ludeking, 193 Iowa 500, 503, 185 N.W. 476:

'* * * The law is well settled in this state that, where the terms of an agreement are definitely fixed, so that nothing remains except to reduce them to writing, the oral contract will be upheld, unless it was understood by the parties that it was not to become effective until reduced to writing. Alexandria Billiard Co. v. Miloslowsky, 167 Iowa 395, 149 N.W. 504.'

However, the terms of the contract must be fully and definitely settled in the preliminary agreement or no such oral contract will be recognized. Snater v. Walters, 250 Iowa 1189, 1197, 98 N.W.2d 302; Brandt v. Schucha, 250 Iowa 679, 691, 96 N.W.2d 179. It is well to recognize we have no problem of ...