Finley v. Chain, 2-476A141

• Decision Date: 03 April 1978
• Docket Number: No. 2-476A141,2-476A141
• Citation: 374 N.E.2d 67,176 Ind.App. 66
• Parties: Joan FINLEY, Appellant (Defendant), v. Muriel E. CHAIN, Appellee (Plaintiff). . 1
• Court: Indiana Appellate Court

Page 67

374 N.E.2d 67

176 Ind.App. 66

Joan FINLEY, Appellant (Defendant), v. Muriel E. CHAIN, Appellee (Plaintiff).

No. 2-476A141.

Court of Appeals of Indiana, First District. ¹

April 3, 1978.

Patrick N. Ryan, Ryan & Welchons, Marion, for appellant (defendant).

Richard L. Swartz, Reading & Swartz, Wabash, for appellee (plaintiff).

ROBERTSON, Judge.

CASE SUMMARY:

Appellant-defendant, Joan Finley appeals from the judgment of the trial court entered against her in the amount of $4,000.00 for damages for breach of contract, plus $900.00 for attorney fees.

We affirm in part and reverse in part.

FACTS:

On May 26, 1971, Chain contracted to sell to James and Joan Finley all of her interest in Tonopah, Inc., an Indiana Corporation. The corporation's assets consisted of a three-way liquor permit and the equipment in The Paddock, a tavern (with apartments upstairs) which Chain, the sole stockholder, had been operating. Pertinent parts of the contract read as follows:

THIS AGREEMENT, made and entered into this 26th day of May, 1971, by and between MURIEL E. CHAIN, hereinafter called 'SELLER', and JAMES E. FINLEY and JOAN FINLEY, husband and wife, hereinafter called 'BUYERS'; WITNESSETH:

For and in consideration of the promises, covenants and agreement set forth hereinbelow, Seller and Buyers do hereby agree as follows:

1. Seller does hereby agree to sell and convey and does by these presents hereby sell and convey to Buyers, all of her right, title and interest in and to a certain Indiana Corporation, known as Tonopah, Inc. Seller agrees to execute and to deliver to Buyers Forty-nine Percent (49%) of the outstanding common stock issued by Tonopah, Inc., and to execute and deliver to First National Bank in Wabash as Escrow Agent, a stock certificate for Fifty-one Percent (51%) of the common stock issued by Tonopah, Inc., which said stock certificate will be in the name of James E. Finley and is to be held by said escrow agent until Buyers have paid to Seller the total sum of Twelve Thousand Dollars ($12,000.00) plus interest at Seven Percent (7%) computed quarterly in the manner and form as set forth hereinbelow. Upon payment to Seller by Buyers of said sum plus interest, Escrow Agent is authorized to deliver said stock certificate to the said James E. Finley.

2. Buyers agree to pay to Seller for all of the outstanding shares of common stock issued by Tonopah, Inc., the sum of Twelve Thousand Dollars ($12,000.00), said sum to be paid as follows:

Two Thousand Dollars ($2,000.00) to be paid upon execution of this Agreement, the receipt of which hereby is acknowledged by Seller, and the remaining balance of Ten Thousand Dollars ($10,000.00) to be paid at the rate of Two Hundred Fifty Dollars ($250.00) per month, the first such monthly payment due and payable on July 1, 1971.

3. Seller agrees to pay all obligations of Tonopah, Inc. incurred prior to the transfer of possession of the physical assets of Tonopah, Inc., except for inventory purchased but not delivered prior to the date of such transfer, and Buyers assume and agree to pay all of the obligations of Tonopah, Inc. incurred for the purchase of inventory not delivered until after said date of transfer, and all other obligations of Tonopah, Inc. incurred thereafter. Seller further agrees to sell convey and transfer and by these presents, does sell, convey and transfer to Buyers all of her equity in a certain tract of real estate located in Wabash County, Indiana, and more specifically described as follows:

4. Buyers agree to pay to Seller for Seller's equity in the real estate described hereinabove in Paragraph 3, the sum of One Thousand Dollars ($1,000.00), and further agree to and do hereby assume to pay and to discharge the present mortgage on said real estate, which said mortgage was executed December 17, 1968, with the First National Bank in Wabash, as mortgagee, in the principal sum of Twelve-Thousand Dollars ($12,000.00) and has a current unpaid balance of Nine Thousand Eight Hundred Fifteen Dollars Ninety-eight Cents ($9,815.98), and is payable in monthly installments of One Hundred Thirty-nine Dollars Thirty-four Cents ($139.34), with the next payment due and payable June 17, 1971. In addition, Buyers do hereby agree to pay that portion of the 1971 taxes, due and payable in 1972, pro rated to the date of the transfer of the physical assets of Tonopah, Inc., and Seller does hereby agree to pay to Buyers upon the execution of this contract, the sum of $173.63 Dollars, as Seller's share of the 1971 taxes, due and payable in 1972, pro rated to the date of the transfer of the physical assets of Tonopah, Inc., based upon the 1970 tax rate, the receipt of which sum hereby is acknowledged by Buyers.

6. In the event the Indiana Alcoholic Beverage Commission should refuse to renew the Alcoholic Beverage Permits presently held by Tonopah, Inc., on the next application of Tonopah, Inc., for such renewal, buyers may elect within thirty (30) days from such denial to rescind this contract and agreement, and upon such election, the parties hereto agree to return all consideration received by them under the terms of this Agreement, provided that in the event such denial is the result of any fault or neglect of Buyers, or Buyers' failure to qualify for said permits, Seller may retain as liquidated damages one-half (1/2) of all consideration received by Seller prior to receipt of notice of Buyers' election to rescind this Agreement and Contract.

7. In the event of failure of Buyers to make any of the payments, or any part thereof, or perform any of the covenants hereby made and entered into, or to keep and observe all of the conditions, covenants, and restrictions set forth herein, this contract shall, at the option of Seller, be forfeited and terminated, and Buyers shall forfeit all payments made on this contract, including without limitation, all payments made to The First National Bank in Wabash, on the mortgage on the real estate described hereinabove in Paragraph 3, and such payments may, with or without notice or demand of any kind, be retained by Seller, provided Buyers shall have a grace period of thirty (30) days, in which to cure any default in failing to make any of the payments required by this Agreement to be made to Seller. In the event Seller's damages shall exceed the payments as made by Buyers, Seller may elect to maintain against Buyers the appropriate legal action to recover the excess in damages, and Buyers agree to pay to Seller in addition to Seller's actual damages all costs, attorney fees and other expenses proximately resulting therefrom, all without relief from valuation or appraisement laws.

The last payment Chain received under the contract was the April 1, 1972, payment. In May 1972, the Alcoholic Beverage Commission refused to renew the tavern's liquor permits. In June, Chain learned that the insurance on the building had lapsed and that the business had been abandoned. On June 6, 1972, Chain changed the lock, entered and repossessed the tavern premises. Chain had no communication with James Finley in April 1972, or at any time thereafter, and only one encounter with Joan Finley, in July or August, 1972. At that time she asked Mrs. Finley to explain why so many bills had been unpaid. Mrs. Finley was unable to give her an answer.

Chain filed suit against the Finleys for damages under paragraph seven of the agreement, claiming an amount of damages which included: (a) compensation for payment of unpaid bills, (b) expenses incurred in reapplying for renewal of the liquor permits and loss of profits during that delay, and (c) the cost of lost or damaged property. Because James Finley was not reached for service of process, Joan Finley was the sole defendant. Finley's allegations of error present the following issues for our consideration:

I. Was there sufficient evidence for the trial court to find that Chain transferred stock to Joan Finley in accordance with the terms of the contract?

II. Was there sufficient evidence for the trial court to find that a default had occurred which would bring into effect the remedial provisions of paragraph seven of the contract?

III. Was the trial court's decision granting damages to Chain contrary to law because the damages were too remote?

I.

Finley contends that she cannot be found liable under the contract. She argues that Chain breached the stock transfer provision of the contract and thus rescinded the contract as to her. ²

The record discloses that Chain repeatedly testified that she signed stock transfers for 49% Of the stock to James and Joan Finley. However, on cross examination, she was shown to have executed an affidavit in which she stated that she had been the record owner of all 1,000 shares of Tonopah, Inc. and that she had transferred 998 of the shares to James E. Finley and two shares to a Michael Baker. Mr. Finley had told her that two shares of the corporation stock must be owned by a six-month resident of the county where the tavern is located when a liquor permit renewal is requested, and neither he nor his wife so qualified. Both parties denied making the decision as to who was to receive the stock, and neither knew who did make the decision. Joan Finley testified that no stock of Tonopah, Inc. was ever transferred to her, and she never saw her husband receive any of the stock.

The question before this court is not whether Chain's failure to transfer the Tonopah, Inc. stock to Finley caused a rescission of the contract and a severance of Finley's liability under the contract. ³ The question is whether there is sufficient evidence to support a finding that the stock was transferred as required by the contract. The latter finding would preclude an argument that Finley was not a party to the contract at the time of the purchasers' breach, and would support the trial court's judgment of liability against Finley.

In determining whether the trial court's decision is supported...