Facit-Addo, Inc. v. Davis Financial Corp.

• Decision Date: 04 May 1982
• Docket Number: No. 1,FACIT-ADD,INC,CA-CIV,1
• Citation: 653 P.2d 356,134 Ariz. 6
• Parties: , a New York corporation, Plaintiff-Appellee, v. DAVIS FINANCIAL CORPORATION, an Arizona corporation, Defendant-Appellant. 5410.
• Court: Arizona Court of Appeals

Page 356

653 P.2d 356

134 Ariz. 6

FACIT-ADDO, INC., a New York corporation, Plaintiff-Appellee, v. DAVIS FINANCIAL CORPORATION, an Arizona corporation, Defendant-Appellant.

No. 1 CA-CIV 5410.

Court of Appeals of Arizona Division 1, Department B.

May 4, 1982.

Donald W. Lindholm, Phoenix, for plaintiff-appellee.

Brown & Bain by Michael C. Jones, Richard Calvin Cooledge, Phoenix, for defendant-appellant.

OPINION

Richard M. DAVIS, Judge, Pro Tem.

The appellee Facit-Addo, Inc. commenced this action against the appellant Davis Financial Corporation and another corporation, Business Communications Equipment, Inc., to recover the price of 93 business machines shipped to an alleged partnership consisting of the two defendants. Appellee moved for summary judgment contending, inter alia, that appellant was liable as a "partner by estoppel" pursuant to the common-law rule embodied in A.R.S. § 29-216. The trial judge agreed with this theory and rendered a summary judgment for appellee which included a determination of finality pursuant to Civil Rule 54(b). We conclude upon review that there are genuine issues of material fact which preclude summary judgment, and we accordingly reverse.

FACTS

The appellee Facit-Addo is a national distributor of business machines. It characteristically sells its machines to either "exclusive" or "non-exclusive" dealers who in turn sell the machines at retail. An "exclusive" dealer is such to the extent that it is the only seller of a certain Facit product line or lines in a given geographical area; a "non-exclusive" dealer is one of two or more dealers in a given area to which Facit-Addo sells its lines for resale at retail. The Phoenix area was within the sphere of Facit-Addo's Mountain States marketing region. Larry Richard Bartlett was the regional manager of sales to dealers and dealer activities in the area.

The important events in this litigation occurred in the early part of 1978. Appellant's co-defendant, Business Communication Equipment Inc. (hereinafter BCE), was based in Phoenix and had been a non-exclusive dealer for three of Facit-Addo's major lines (typewriters, calculators and invoicing machines) since 1976. BCE was a family-oriented corporation in which Ken Malone, its president in early 1978, and his in-laws were interested. Malone was in the process of dissolving his marriage in early 1978, and as time went on he felt increasing pressure from his in-laws to resign as president because of the pending dissolution.

The appellant Davis Financial Corporation is a Phoenix-based entity which frequently functions as a factor, purchasing its clients' accounts receivable. It also acts as a management consultant. Davis Financial had been acting as a factor for BCE since July 1, 1977. It held as collateral for its factoring operations with BCE a security interest in all of BCE's inventory, as well as in its accounts receivable. Bertram J. Trobman ran the Phoenix office as Davis Financial. The dealings between Davis Financial and BCE were based upon the personal relationship of Trobman and Ken Malone.

In January, 1978, BCE had a relatively large and long-standing debt to Facit-Addo approximating $15,000. Prior to mid-January, Malone and Bartlett had discussed the possibility of BCE becoming the exclusive Phoenix dealer for certain major Facit-Addo product lines. During these discussions, according to Bartlett, Malone had indicated the possibility of BCE affiliating in some manner with a financially stronger second party.

On January 16, 1978, Bartlett wrote to Malone stating that certain desirable product lines would be available to BCE on an exclusive basis. The letter detailed sales quotas for the various lines offered on an exclusive basis which would have to be met by BCE in order to remain an exclusive dealer. There was an indication that another Phoenix dealer in some of the lines, Walsh Brothers, would be phased out as a dealer. There was no reference in the letter to appellant or to any specific proposed partner or backer. The letter closed with the request: "Please advise me if this is acceptable and I will arrange for the proper paper work."

On March 7, 1978, Bartlett addressed another letter to BCE, stating saliently that he and Facit's credit manager were "excited" about the possibilities for an exclusive arrangement with increased capital but that BCE would first have to bring its account current, "immediately." There is a reference in the letter to a potential 100 machine order at prices favorable to BCE. Although Bartlett testified at his deposition that he had spoken over the telephone with Trobman about the project and had taken Davis Financial credit information from him, there is again no reference in the letter to either Davis Financial or Trobman.

Bertram Trobman testified that at various times between January and March 6, 1978, he and Ken Malone held discussions concerning a possible venture to exploit an exclusive Facit dealership. The concept which evolved, according to Trobman, was a corporation in which Malone would own two-thirds and Davis Financial one-third of the stock. Davis Financial or its principals would guarantee a loan to the corporation in return for which Malone would pledge one-half of his shares to Davis Financial until the loan was paid off. ¹ Trobman denied that Davis Financial was ever to be an equity capital investor. At some time in March Trobman and Malone agreed that the proposed venture would be called "American Typewriters."

Bartlett testified in deposition that he talked to Trobman on the telephone in early 1978 and that at one point Trobman gave him certain credit information on Davis Financial. Trobman denied ever talking to Bartlett prior to their face-to-face meeting on March 16. A Facit employee in charge of customer credit applications testified that she received Davis Financial credit information in March. No basis for the furnishing of this information apart from the proposed "American Typewriters" venture appears in the present record.

On March 16, 1978, Bartlett met with Trobman and Ken Malone in the offices of Davis Financial in Phoenix. Bartlett's version of this meeting and Trobman's version differ sharply. Bartlett's testimony suggests a virtually certain and imminently operational marketing partnership between BCE and Davis Financial. It is also undisputed that during this meeting, Trobman wrote a check in behalf of Davis Financial to Facit in the amount of $15,821.24 to eliminate the existing balance owed to Facit by BCE.

Trobman's testimony, however, gave a markedly different context to the meeting. At his deposition Trobman testified in part as follows:

Q. [By appellee's counsel]: To your knowledge, was Facit aware of the proposed corporate structure between yourself and Malone for the distributorship of Facit products?

A. To my knowledge, no.

Q. You had never spoken to anyone at Facit about that?

A. No.

Q. Malone had never told you that Facit was going to go along with him now that he had your financing?

A. I had no direct conversations with regard to the structure. Dick Bartlett visited Phoenix and my office with Ken Malone. But there was no discussion of the structure of the company or anything of that nature. There was discussion of Ken's getting the exclusive rights and how they were going to deal with that.

Q. Had you ever met Dick Bartlett prior to that meeting?

A. No.

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Q. Would you relate for me the conversation that you and Mr. Bartlett and Mr. Malone had at that meeting.

A. A lot of the conversations dealt with how Ken and his sales manager were going to operate with regard to the sale of Facit Typewriters.

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So it's not untypical for me to have a meeting with a client when they are negotiating things or lining up credit. So I got in that meeting. And it was essentially a discussion of the expansion of Business Communications.

The areas that were covered were their method of selling as to whether they would go door to door or do it out of the store. The question of the name came up. Several names were offered. My recollection is that Dick Bartlett indicated that it could not use the name Facit in their name.

At the last part of the meeting, or as the meeting was over, Dick indicated a concern for paying the payment of their most recent statement or bill or delinquency. Business Communications was behind by approximately $15,000. I asked Ken if he wanted us to advance the funds and at the time I asked him to sign a copy of the voucher to indicate that it was under advance under BCE's loan agreement and gave Dick a check, Davis Financial Corporation check, approximately $15,000.

There was no discussion, to my recollection, with regard to the structure of the company or participation in the company. It was more of a management discussion on the operation of a business.

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Q. Why did you have the meeting with Bartlett on that day?

A. Ken set up the meeting to discuss the proposal of Facit to give him an exclusive right in the city or state of Arizona for a Facit line.

Q. Well, why was that done in your office, if you know?

A. Oh, a combination of reasons. (A) we will frequently do things like that in our office with clients and (B) there was the possibility or even probability that we would be involved, based on what I told you of our meeting of March 6th, with the company.

Q. In other words, as of the time of the meeting in your office on the 16th with both Bartlett and Malone, it was the intention insofar as you know of both yourself and Malone to still form a corporation between Davis and Malone, correct?

A. That is correct.

Q. And yet none of that was indicated to the Facit representative during that meeting, as you recall?

A. That is correct. (Emphasis added.)

Shortly after the March 16, meeting, Trobman presented a $50,000 loan application in behalf of "American Typewriters" to a branch of First Interstate Bank. At approximately the same...