Cockrum v. Pattillo

• Decision Date: 07 April 1969
• Docket Number: No. 5--4682,5--4682
• Citation: 439 S.W.2d 632,246 Ark. 594
• Parties: Noel COCKRUM, Appellant, v. Charles PATTILLO, Appellee.
• Court: Arkansas Supreme Court

Page 632

439 S.W.2d 632

246 Ark. 594

Noel COCKRUM, Appellant, v. Charles PATTILLO, Appellee.

No. 5--4682.

Supreme Court of Arkansas.

April 7, 1969.

Rehearing Denied May 12, 1969.

Spitzberg, Mitchell & Hays, Little Rock, for appellant.

Virgil Moncrief, Stuttgart, and John Harris Jones, Pine Bluff, for appellee.

BYRD, Justice.

The action was commenced in the trial court by appellant Noel Cockrum to recover the balance due on a contract for the sale of used cars, furniture, fixtures, office equipment, parts, and signs, comprising Cockrum Motor Company, together with $235 rent per month accruing on a building. Appellee Charles Pattillo answered admitting the contract. He counterclaimed alleging that Cockrum fraudulently misrepresented the past income of the business and the value of the used cars, equipment, etc., resulting in overpayment and losses for which Pattillo was entitled to recover from Cockrum. The trial court found for Pattillo and awarded him judgment against Cockrum for $20,603.24. For reversal Cockrum relies upon the following four points:

1. The court erred in finding that the transaction was tainted with fraud and in failing to award the appellant a judgment on the contract.

2. The court erred in failing to hold that the appellee had waived the alleged fraud and ratified the contract.

3. The court erred in cancelling the rental portion of the contract between appellant and appellee by reason of fraud.

4. The court erred in awarding damages to the appellee upon the evidence introduced by the appellee.

The facts shown in the record and the issues raised here are set forth in an opinion filed by the trial court. The trial court's opinion is as follows:

'The pleadings consist of a complaint by Noel Cockrum, hereafter referred to as plaintiff, with an attached contract and supplemental sales contract signed by plaintiff and defendant, Charles Pattillo, hereafter referred to as defendant, an amendment to the contract signed by plaintiff and defendant, the date of which is not shown a receipt dated May 6th for $2,661.50 paid by defendant to plaintiff and a receipt dated May 18, 1964 for $2,317.93 paid by defendant; and answer and cross-complaint was filed by defendant in due time. A motion to strike answer and cross-complaint was filed by the plaintiff to which defendant filed a response. Plaintiff filed his answer to cross- complaint in which plaintiff admitted he agreed to charge defendant one half of the cost of office fixtures and equipment, denied the other allegations, pleaded that there was an account stated between the parties and that the defendant was barred by laches from alleging fraud. The defendant filed an amendment to the answer and cross-complaint and likewise amendment was filed to the complaint reducing the amount due under the contract from $12,713.64 to $10,000. That a motion to require production of records was necessary to be heard and plaintiff required to submit to the defendant the said record. A second amendment to answer and cross-complaint was filed by the defendant. Likewise amendment to the motion to require production of certain documents was filed by defendant. The plaintiff propounded 27 interrogatories to defendant which were duly answered. John Harris Jones, one of the attorneys for the defendant filed an affidavit for the production of certain records prior to trial which had been ordered by the court at a pre-trial hearing.

'The contract in question was drawn personally by the defendant. Exhibits upon which the contract was based, i.e., inventory of furniture and fixtures, shop equipment and automobiles were prepared by the plaintiff or at his direction. Contract as signed called for the payment of $30,000 at the time of the execution but was amended apparently on the same day by the parties and $20,000 was paid by defendant to plaintiff and an agreement to pay the balance as set forth in the amendment to the contract. Defendant was obligated to pay for second-hand cars and to rent from the plaintiff the building and grounds for the sum of $235 monthly for a period of five years with certain options in the contract. Defendant paid $2,661.50 on May 6, 1964 and May 18, 1964, $2,317.93.

'PARTIES

'The parties later agreed that the inventory of used cars supplied by the plaintiff to the defendant were overpriced and jointly agreed to a reduction of $4,928.78. The parties were negotiating for a settlement of other features of the contract which the defendant claimed was improper when negotiations were broken off and this action was filed. Plaintiff Noel Cockrum sued for the amount due under the contract as amended and for the rent on the building that had accrued.

'Defendant in his answer and cross-complaint alleged fraud in the execution of the contract and concealment of the facts and prayed for a judgment in damages of $78,577.57, for the cancellation of the lease agreement. The claimed damages consisted of the following items, to-wit: The repayment of $8,877.57 alleged overpayment and for damages $39,800 actual loss and $30,000 loss of profits.

'The proof was intricate and voluminous. By stipulation in open court at the conclusion of the testimony a transcript of the evidence was to be made by the court reporter and a copy furnished to each side and the expense thereof to be charged equally, provided in the event of an appeal by either side the amount so paid the reporter would be credited upon the appellant's cost.

'Excellent briefs have been filed by both sides.

'There is no dispute about the execution of the sale contract or the adjustment that was agreed upon by the parties and the amount due thereunder if there be no fraud.

'Defendant claims that he was fraudulently induced to sign the contract through misrepresentation of some facts and concealment of other facts.

'Plaintiff denies fraud. 342 pages were required to record the testimony taken at the trial. During the trial when it developed that the many secondhand cars which were sold, resold, repossessed, 'traded down' etc., produced a volume of detail that was more than should be heard by a court with a full docket without benefit of a master, the court offered, if agreeable to both counsel to appoint a master and let him pursue all of the involved and intricate matters and make a record of his investigations, submit the same to the court along with his recommendation. This offer was refused and the court did the best possible under the circumstances to get at the facts involved in this intricate transaction in the time available.

'It appears that plaintiff was a second hand car dealer for a few years and then secured the franchise for the sale of Ramblers and other cars made by the American Motor Company. The Rambler operation was not successful for the first couple of years. Then for two years the income returns of the corporation showed a substantial profit.

'The plaintiff owns extensive farming interests from which at times he received excellent returns. The income tax records of the farms as well as the motor company are in this record. They show that the first years when the Cockrum Motor Company, hereafter referred to as the motor company, lost money, the farm income was quite substantial and in the two years that the motor company paid tax upon its profits the farm income was markedly reduced. The tax return for the final year of the motor company which was filed after the sale was consummated showed a loss of $26,519.50. The plaintiff's counsel explained in the brief that this loss was a result of inflation of the value of the assets at the time the corporation was formed and could not be considered in determining whether or not the corporation was operating profitably.

'The plaintiff decided to dispose of the motor business and negotiated with several people, one of whom testified--Mr. Ray Crosby of Stuttgart.

'Defendant testified that the plaintiff told him the business was making from 10,000 to $15,000 per year. The plaintiff admitted on the stand that he had told defendant that the business would make a thousand dollars per month.

'The defendant testified that the plaintiff knew the defendant was ignorant of the automobile business and told the defendant that the plaintiff had a sufficiently well trained organization to permit the business to operate itself with but little supervision. Plaintiff testified that he never told anyone that an unsupervised business would run itself.

'This and other testimony about negotiations and so forth prior to the signing of the contract by both parties was admitted under the rule laid down in Arkansas Amusement Corporation v. Kempner, 182 Ark. 897, 33 S.W.2d 42 (1930), where it was held,

"It is the settled rule in this state that parol evidence of conversations and negotiations leading up to the execution of a contract, as well as the relation of the parties thereto and the attendant circumstances to explain and aid in the interpretation of uncertainties and ambiguities contained in writing, may be admitted.'

'This rule was discussed and approved in the recent case of Jefferson Square (Inc.) v. Hart Shoes, Inc., 239 Ark. 129, 388 S.W.2d 902 (1965), where it was said,

"In reaching the result * * * that where there is any doubt or ambiguity about the meaning of a contract it will be resolved against the party who prepared it--and it is conceded that appellant prepared the lease contract here under consideration. However the rule just mentioned is not to be applied until and unless a 'doubt' exists after the court has given consideration to the parol evidence referred to in the Kempner case, supra.'

'CAN DEFENDANT RECOVER DAMAGES?

'Where fraud or deceit exists in a transaction the one who is deceived must act promptly to have the contract set aside or he will have waived his right. The defendant did not act promptly in this transaction after he discovered the fraud so the original contract cannot at this time be revoked.

'Does that mean that the...