Gilchrist Tractor Co. v. Stribling

• Decision Date: 28 November 1966
• Docket Number: No. 44104,44104
• Citation: 192 So.2d 409
• Parties: GILCHRIST TRACTOR COMPANY, Inc. v. Roger W. STRIBLING.
• Court: Mississippi Supreme Court

Page 409

192 So.2d 409

GILCHRIST TRACTOR COMPANY, Inc. v. Roger W. STRIBLING.

No. 44104.

Supreme Court of Mississippi.

Nov. 28, 1966.

Suggestions of Error Overruled Jan. 16, 1967.

Brunini, Everett, Grantham & Quin, George P. Hewes, III, W. T. Jones, Jackson, for appellant.

Wells, Thomas & Wells, Erskine W. Wells, Jack W. Brand, Jackson, for appellee.

SMITH, Justice.

This is an appeal by Gilchrist Tractor Company, Inc., from a decree of the Chancery Court of the First Judicial District of Hinds County, awarding Roger W. Stribling, appellee and cross-appellant, a money judgment against it in the sum of $140,000, plus interest and $3500 as attorneys' fees, and declining to allow certain set-offs.

Suit was brought originally by Stribling against Gilchrist in the Circuit Court of Hinds County seeking to recover a principal balance of $140,000 on a promissory note, plus interest and attorneys' fees as provided in the note. Gilchrist answered and pleaded two set-offs totaling $76,289.84. The case was transferred to the Chancery Court of the First Judicial District of Hinds County where it was tried, and the decree appealed from was entered.

Stribling has cross-appealed, contending that the trial court allowed an inadequate attorneys' fee, and also was in error in excluding certain oral testimony relating to alleged conversations dealing with one of the amounts claimed as a set-off.

Since the entry of the judgment, the uncontested portion of indebtedness has been paid.

For eighteen years, Roger W. Stribling had been the exclusive franchise dealer for Caterpillar Tractor Company. His territory comprised the entire southern half of the State of Mississippi. He maintained offices in the cities of Jackson, Meridian, Gulfport, and Natchez. The Jackson, Gulfport and Natchez offices were operated through Stribling Brothers Machinery Company, a corporation wholly owned by Roger W. Stribling and his wife. The Meridian office was operated as Stribling Tractor Company, a separate corporation also owned by the Striblings.

In April 1962, Ben Puckett, an employee and officer of Stribling Brothers Machinery Company, asked Stribling if he would be interested in selling the business. Puckett informed Stribling that he was acquainted with a Mr. Gilchrist of Alabama who might be interested in joining Puckett in the purchase. Afterward, several conferences were held between Gilchrist, his two sons, and Puckett, on the one hand, and Stribling on the other, resulting in an offer of $1,815,090.40 for the purchase of the business, and this was accepted by Stribling.

A written agreement was entered into between the parties, date May 23, 1962, and styled, 'Contract for Purchase and Sale of Corporate Stock.' This agreement covered the basic aspects of the transaction and enumerated certain specific areas to be covered more in detail on a later date by further written contracts, the parties agreeing to work toward a final closing date of June 1, 1962.

Under the May 23rd agreement, Gilchrist, his two sons, and Puckett would acquire all of the stock in the two Stribling corporations for $1,815,090.40, each of them to acquire one-fourth of the stock.

The May 23rd agreement, among other things, stipulated that the purchasers assumed payment of an indebtedness of Stribling Brothers Machinery Company to Roger W. Stribling, individually, in the amount of $250,000, evidenced by a promissory note described in the agreement. Later on, by aggreement with Stribling, Gilchrist returned to Stribling a Beechcraft airplane, which he concluded he did not need, and obtained credit for it on this debt in the amount of $110,000, leaving an unpaid balance of $140,000. This balance is the subject of the present suit.

Notwithstanding the execution of the purchase and sale agreement of May 23rd, it was understood by the parties that a condition precedent to final consummation was the obtaining by Gilchrist of the Caterpillar Tractor Company's exclusive dealership franchise for southern Mississippi. This franchise was not an asset of the Stribling corporations, was not salable or transferable by Stribling, and might only be obtained by a grant from Caterpillar. Both parties recognized this fact, and that the business would be of little or no value without the franchise.

Under a policy of Caterpillar Tractor Company, Inc., before granting a franchise, that Company made an independent investigation and had to be satisfied of the worth, reputation and integrity of the proposed buyers. Also, Caterpillar had to be convinced that the terms of the transaction were sound from the buyer's standpoint, and that the buyer was receiving value for his money.

In pursuance of that policy, in May 1962, auditors of the Caterpillar Tractor Company came to Jackson for the purpose of making their investigation. Both Stribling and the Gilchrists were interested in obtaining the approval of Caterpillar. To that end, it was desirable that the books of the Stribling corporations reflect the best possible financial picture.

Sometime between the years 1955 and 1957, W. G. Cook, acting for Cook Construction Company, one of the customers of Stribling Brothers Machinery Company, made a deal with the latter company, whereby certain of Cook's used equipment was taken in by Stribling with the understanding that Cook would be allowed credit for the equipment in the amount of $175,000, which he might use, from time to time, and proportionately, when and as he should purchase new Caterpillar equipment, to the value of $1,000,000. Stated differently, under the agreement with Stribling, Cook was entitled to credit upon future purchases of Caterpillar equipment at the rate of 17 1/2% of the purchase price of equipment purchased, until the entire sum of the $175,000 credit was consumed.

In mid 1957, Cook bought new equipment from Stribling which consumed about 60% of the credit, and, in the ensuing years, as the result of transactions involving the purchase by Cook of equipment from Stribling, as well as the sale by Cook of portions of the credit to others who used it in the purchase of equipment, the amount of this credit which remained unused had been reduced from $175,000 to $60,986.66 at the time Gilchrist purchased the business from Stribling.

It was this credit balance, referred to in the record and briefs as the 'Cook credit', which Gilchrist pleaded as one of two set-offs against the indebtedness sued upon.

Pursuant to the original contract of May 23, 1962, six supplemental contracts were prepared and executed by the parties as of June 1, 1962. These were the contracts expressly contemplated under the terms of the original agreement of May 23rd.

Paragraph 5 of the original agreement of May 23rd was as follows:

'Sellers agree to execute documents in satisfactory form agreeing to indemnify and hold harmless the Purchaser from any liabilities for federal and state income taxes accruing or for activities conducted prior to the transfer of stock as provided for herein, except that the Purchaser shall be liable for the state and federal income tax liabilities as disclosed by the tax returns, as approved by sellers or their representative, that have not been filed as of the date of such transfer, and also agreeing to indemnify and hold harmless Purchaser from liabilities that are not reflected by the books of the company or are not normal and usual in the conduct of the business of such company. By way of illustration but not limitation, Purchaser would be responsible for service fees, warranties, and items of that nature, whereas the indemnity agreement would cover tort claims that are not covered by insurance, obligations on any contracts that are not reflected in the files or records of the company, any penalties or liabilities for violating any law, and matters of that nature.'

Among the June 1, 1962, documents was one styled, 'Agreement', which contains this language in Paragraph 1:

'Roger W. Stribling does hereby agree to indemnify and hold harmless Gilchrist Tractor Company, Inc. from any liabilities for federal and state income taxes accruing or for activities conducted prior to midnight, May 31, 1962, except that Gilchrist Tractor Company, Inc. shall be liable for the state and federal income tax liabilities as disclosed by the tax returns, as approved by Roger W. Stribling, or his representative, that have not been filed as of such date, and with the further exception of any tax liability resulting from re-appraisal of inventory, expendible supplies, prepaid items and small tools and also the write-off of accounts receivable and notes receivable. Roger W. Stribling further agrees to indemnify and hold harmless Gilchrist Tractor Company, Inc. from any liabilities that are not reflected by the books of Stribling Bros. Machinery Co. Inc. and/or Stribling Tractor Co. or are not normal and usual in the conduct of the business heretofore conducted by the said Stribling Bros. Machinery Co., Inc. and/or Stribling Tractor Co. By way of illustration, but not limitation, Gilchrist Tractor Company, Inc. is to be responsible for service fees, warranties and items of that nature, whereas this indemnity agreement of Roger W. Stribling would cover tort claims that are not covered by insurance, obligations on any contracts that are not reflected in the files or records of the company or known by officials of Gilchrist Tractor Company, Inc. as of the date hereof, any penalties or liabilities for violating any law, and matters of that nature.'

Another of the June 1st agreements, entitled, 'Non-Competition Agreement' prohibits Stribling, either directly or indirectly, from entering into competition with Gilchrist's business of selling or renting machinery furnished by Caterpillar Tractor Company within the State of Mississippi for a period of five years. This document contains only a single exception, which is stated in the following definitive language:

'It is understood that Roger W....