Herrick v. Robinson

Decision Date28 January 1980
Docket NumberNo. 79-272,79-272
Citation595 S.W.2d 637,267 Ark. 576
Parties, 29 UCC Rep.Serv. 549 Carl HERRICK, Appellant, v. Donald G. ROBINSON, Appellee.
CourtArkansas Supreme Court

J. Harrod Berry, North Little Rock, for appellant.

W. Christopher Barrier, Little Rock, for appellee.

FOGLEMAN, Chief Justice.

Appellee Donald G. Robinson brought this action against appellant Carl Herrick and Herrick's son and daughter-in-law, David and Beverly, seeking to recover $9,200, as the balance he alleged to be due him on the purchase price for the inventory and business name of Park Hill Custom Framing and Molding Company, which he had operated in North Little Rock. Appellant and the other defendants defended on the ground that their agreement to purchase was tentative and conditional, and that they had been induced to enter into the agreement by material misrepresentations and concealment of facts by Robinson. They alleged that they had rescinded the contract. Carl Herrick also counterclaimed seeking to recover the amounts he had paid to Robinson on the purchase price, and money he had put into the business operation, the dismissal of Robinson's complaint and "all other equitable relief." The allegations pertaining to the fraudulent representations were that Robinson had falsely represented that the business was in good financial condition, that not much was owed on it and the business obligations could and would easily be taken care of from the net proceeds of a pending sale of his home, that the average gross monthly income of the business was $3,500 to $4,000, that the stock and equipment were in good condition and saleable, that large orders could be expected, and that all accounts receivable were good. Appellant alleged that his defenses were equitable and that the case should be transferred to equity. The counterclaim contained allegations that, as an inducement to the Herricks to purchase the business, its assets, good will and trade name, Robinson misrepresented and exaggerated the amount and condition of the assets, sales volume, earning ability and financial condition of the business and concealed the actual condition of the business as to accounts payable, lienable obligations and certain accounts receivable. Appellant alleged that these misrepresentations and concealments were made with the intent that they be relied upon by the Herricks, and that they did so, to their detriment and damage. Appellant again alleged that he had no full, plain, adequate and complete remedy at law and that, his remedies being equitable, the case should be transferred to equity. Appellee denied appellant's right to rescission and pleaded estoppel and laches as defenses to the counterclaim.

After having denied appellant's motion to transfer the case to equity on September 25, 1978, the case was tried to the court without a jury and the circuit judge, after hearing the evidence, rendered a written opinion on December 7, 1978. In it he made many findings of fact, among which the following are significant on this appeal:

The Herricks and Robinson met on a Sunday afternoon at the place of business involved, discussed a purchase price of $35,000, and agreed upon a negotiated price of $25,000 and the purchaser, through David and Beverly Herrick, took possession on the following day, Monday, November 2, 1976.

Carl Herrick notified Robinson that the transaction was being terminated by a letter dated March 14, 1977.

The amount of the balance for which Robinson sued was arrived at by giving the Herricks credit for $3,500 Carl Herrick paid him and $12,452.69, as the net proceeds from the sale of the assets of the business at an auction.

In spite of alleged misrepresentations, the Herricks took an inventory and any shortcomings were readily available to the defendants.

Any and all liens, even if not disclosed to the defendants before the purchase, were known to appellant before the defendants quit the business and were in fact satisfied in either December 1976 or January, 1977, and, as additional security to purchaser, Robinson caused a receiver to be appointed, whose duty it was to receive the balance of $21,500 on the purchase price from the defendants and immediately satisfy claims of creditors which would affect the business.

Appellant became discouraged and even frustrated, because of the inability of David and Beverly to settle differences with Robinson on such matters as the amount of the purchase price, and because of the belated feeling that the family business venture was not so good and a costly mistake had been made.

The case could have very easily been transferred to chancery court, but appellant's motion to transfer was denied without objection, once it was agreed trial would be without a jury, the attorneys for both parties realizing that some equitable principles would necessarily be applied.

There was justification for allowing appellant an additional credit of $2,000 for bills paid, accounts receivable and personal property not in working order. After allowing this credit, Robinson was entitled to judgment for $7,113, but no interest, because the parties failed to fix a day certain for payment of the balance of the purchase price.

Before judgment was entered, appellant filed a motion for a new trial, on the ground that the judgment was not sustained by sufficient evidence and was contrary to the law and the evidence. Appellant pointed out the following examples:

1. The finding that any and all liens were satisfied by January, 1977, was erroneous because a valid lien of Twin City Bank, based upon a security agreement covering all the assets sold, was not satisfied until a balance of $10,500 was paid from the proceeds of an auction sale in a chancery court receivership held on August 10, 1977, after the Herricks had surrendered possession of the business.

2. Tax liens, especially one in favor of the federal internal revenue service, were still unpaid at the time of the trial and appellant did not know of the internal revenue service lien until long after the down payment on the purchase price was made and possession of the business taken.

3. The $21,500 balance on the purchase price would not have been sufficient to satisfy all business debts and liens.

Appellant also stated that both the above liens constituted a breach of the seller's warranty under Ark.Stat.Ann. § 85-2-312 (Add. 1961) and constituted a ground for cancellation of the contract.

The judgment entered contained additional findings of fact. Among them were these:

1. The contract was between Robinson and appellant Carl Herrick and, in certain respects, David and Beverly acted in behalf of Carl.

2. The balance of the purchase price, remaining after down payments totalling $3,500 were made, was to be paid within a reasonable time.

3. By the terms of the contract, Robinson was not only to deliver the inventory and business premises, but also to assure the purchaser of clear title, in connection with which he was to compile a list of creditors of the business, and the purchaser was to make a complete inventory of the business.

4. Since the parties, by their actions, made the Bulk Sales Act inapplicable, the state court receivership was necessary to accomplish a conveyance free of claims of creditors.

5. An inventory was promptly taken in November, 1976, and defendants were aware they were purchasing the business at a "distress price" and that the inventory was not in first class condition.

6. By failing to act promptly, defendants waived the deficiency in the inventory and the attempt of appellant to rescind the contract was ineffective because it was not timely.

7. Appellant was entitled to credit for $508.74 for the proceeds of accounts payable (receivable) incorrectly credited to Robinson and to $1,491.26 credit for deficiencies in the equipment sold.

After the judgment was entered, appellant filed an amendment to his motion for a new trial. In it he alleged that the federal internal revenue service had on January 3, 1979, served a "Notice of Levy" on him for delinquent taxes amounting to $6,705.31. By this notice, he was notified that demand for payment had been made on Robinson, but that Robinson had neglected or refused to pay this amount. The levy was upon "all property and rights to property, monies, and credits" in appellant's possession belonging to Robinson and all sums of money or other obligations owing by appellant to Robinson, or on which there was a lien under Chapter 64, Internal Revenue Code. It included a demand upon appellant for the amount necessary to satisfy this tax liability or for such lesser sum as appellant might be indebted to Robinson. The levy indicated that it was for the unpaid balance and statutory additions owed by Robinson for income taxes and social security taxes withheld for tax periods ending March 31, June 30, and September 30, 1976.

Appellant's first point for reversal is stated thusly:

I

TRIAL COURT ERRED (A) IN DISMISSING COUNTERCLAIM OF CARL HERRICK AND GRANTING JUDGMENT TO PLAINTIFF, AND (B) IN FAILING TO ACT UPON AND GRANT MOTION FOR NEW TRIAL, BECAUSE OF EFFECT OF:

A & B.

1. THE UNDISPUTED EVIDENCE, WHICH SHOWS THE EVIDENCE INSUFFICIENT TO SUPPORT THE JUDGMENT.

2. APPELLEE-SELLER'S MISREPRESENTATIONS AND CONCEALMENTS RELIED AND ACTED ON, AND FAILURE TO COMPLY WITH UNDERSTANDING AND MAKE BUSINESS CONFORM, IN GENERAL.

3. THE UNDISCLOSED INTERNAL REVENUE AND SALES TAX LIENS.

4. THE UNDISCLOSED TWIN CITY BANK LIEN.

5. THE FAILURE OF SELLER TO COMPLY WITH BULK SALES PROVISIONS.

6. THE RECEIVERSHIP PROCEEDINGS TO SELL TO APPELLANT'S SON AND DAUGHTER-IN-LAW, AND INSOLVENCY OF THE BUSINESS.

7. LACK OF MEETING OF MINDS SUFFICIENT FOR CONTRACT.

ALSO

8. IF THERE WAS CONTRACT AS TO APPELLANT: (A) THERE WAS TOTAL FAILURE OF CONSIDERATION; (B) APPELLEE ABANDONED IT.

9. TRIAL COURT'S FAILURE TO TRANSFER TO EQUITY WAS ERROR.

Appellan...

To continue reading

Request your trial
26 cases
  • Kazerouni v. De Satnick
    • United States
    • California Court of Appeals Court of Appeals
    • March 20, 1991
    ...551, 519 P.2d 278, 282.)5 (Compare Foster v. Colorado Radio Corporation (10th Cir.1967) 381 F.2d 222, 226; Herrick v. Robinson (1980) 267 Ark. 576, 595 S.W.2d 637, 649; 1 Anderson, Uniform Commercial Code (3d ed. 1981) § 2-105:25, p. 568; with De Filippo v. Ford Motor Company (3d Cir.1975) ......
  • Bauer v. Beamon
    • United States
    • Arkansas Court of Appeals
    • March 1, 2023
    ...and binding, he will be held to have waived the objection and will be as conclusively bound by the contract as if the fraud had not occurred. Id. Stated another way, "[a] buyer who has the option of rescinding a contract may waive that option by continuing to exercise acts of ownership over......
  • Baan, U.S.A. v. Usa Truck, Inc.
    • United States
    • Arkansas Court of Appeals
    • May 21, 2003
    ...a contract on grounds of fraud or deceit must do so as soon as that person discovers the truth. We stated in Herrick [v. Robinson, 267 Ark. 576, 595 S.W.2d 637 (1980)] that the rescinding party must announce his purpose at once and act with reasonable diligence so that the parties may be re......
  • Brown v. Bush, CA03-100.
    • United States
    • Arkansas Court of Appeals
    • September 3, 2003
    ...the circumstances have been so altered by part execution that the parties cannot be restored to the status quo. Herrick v. Robinson, 267 Ark. 576, 595 S.W.2d 637 (1980). This is such a case. There is no dispute that appellee built a house, appraised at $180,000, on the property. Thus, there......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT