Hiatt v. Yergin
| Decision Date | 22 June 1972 |
| Docket Number | No. 871A145,871A145 |
| Citation | 284 N.E.2d 834,152 Ind.App. 497 |
| Parties | Lorraine HIATT, as Successor to the Estate of W. H. Hiatt, Deceased, Lorraine Hiatt, Plaintiffs-Appellants, v. Eugene H. YERGIN et al., Defendants-Appellees. |
| Court | Indiana Appellate Court |
Alan E. Yergin, Yergin & Yergin, New Castle, Frank E. Spencer, Indianapolis, Marshall E. Hanley, Muncie, C. Thomas Cone, Greenfield, for defendants-appellees.
STATEMENT OF THE CASE AND FACTS--This is an appeal from an adverse decision by the trial court against plaintiffs-appellants, W.H. and Lorraine Hiatt (Hiatt) on their Complaint for Damages and Specific Performance of two agreements for the sale and repurchase (resale) of corporate stock between Hiatt and defendants-appellees, Eugene H. Yergin, Beatrice R. Yergin, John D. Yergin, Betty L. Yergin (Yergin), and Henry County Beverage Company, Incorporated.
Hiatt's one paragraph Complaint, 1 filed in the Henry Circuit Court on February The prayer of the Complaint is accordingly. Hiatt, as plaintiff, seeks $500,000.00 damages jointly and severally against Yergin; asks the court to compel the transfer of the 500 shares of capital stock and that Yergin and the other defendant, Henry County Beverage Company, Incorporated, be enjoined from certain corporate and financial acts, including payment of earnings or salaries to Yergin, and to account therefor and hold everything of value in trust and not to change corporate operation and procedures or the corporate name, and for costs and other proper relief.
27, 1970, consisted of seven rhetorical paragraphs. The first rhetorical paragraph alleges the existence of two written contracts, one an agreement whereby Yergin would purchase from Hiatt 500 shares of capital stock of Henry County Beverage Company, Incorporated, and an agreement for repurchase of this capital stock by Hiatt. In rhetorical paragraph 2 Hiatt alleges that he and Lorraine Hiatt performed all the conditions of the agreements but [152 Ind.App. 502] were prevented from repurchasing the stock by Yergin's refusal to complete the repurchase after tender of the repurchase money. Paragraph 3 alleges that after written demand Yergin refused to deliver the capital stock unless Hiatt first produced a federal basic permit and that Yergin failed to perform as required by the repurchase agreement. Hiatt seeks $500,000.00 in damages in rhetorical paragraph 4, due to the injury caused by Yergin's wrongfully withholding the 500 shares of capital stock and the financial benefits flowing therefrom. By rhetorical paragraph 5 Hiatt seeks to have the defendant, Henry County Beverage Company, Incorporated, account for each corporate act until final adjudication of the action and that it not change its corporate operation or organization or procedures during such time. In rhetorical paragraphs 6 and 7 plaintiff alleges irreparable injury unless Yergin is compelled to transfer the 500 shares and to perform the conditions of the contract and unless all the defendants account and hold in trust funds and property coming into their possession; and that unless prevented from doing otherwise Hiatt will suffer irreparable injury and that he is without an adequate remedy at law.
The exact words 'specific performance' are not used in the prayer, although it is clear the effect of the relief sought is specific performance as the court is requested to require the transfer of the 500 shares of capital stock in question and the issuance of a new stock certificate accordingly.
On March 17, 1970, Yergin filed an Appearance and a Motion For Extension Of Time In Which To File Answer or Motion, which the court granted, giving Yergin an additional fifteen days to file a responsive pleading. On April 3, 1970, Yergin filed a Motion to Strike certain portions of Hiatt's Complaint.
On April 26 the cause was venued to Hancock County, and on May 4 Hiatt filed an Application for Default Judgment. On the same day Yergin filed an Answer in two paragraphs to the Complaint which specifically denied certain allegations and generally denied others. Three days later, on May 7, Hiatt filed a Reply to the Answer.
Then, on May 13 Hiatt filed a Demand For a Jury Trial in these words (omitting formal parts):
'Plaintiffs, and each of them, demand a trial by jury of the action herein and the issues formed on the pleadings herein.'
In response, Yergin, on May 20, filed Objections to a Jury Trial, alleging that (1) the Motion for Jury Trial was not timely filed, and (2) the relief sought by Hiatt in their Complaint was of an equitable nature, and under Rule TR. 38 IC 1971, 34--5--1--1 should be tried by the court. On September 9, 1970, the trial court granted Hiatt's Motion For a Jury Trial, but on November 11 reversed itself and sustained the Objections to trial by jury.
The record does not disclose any ruling on Hiatt's Motion for Default Judgment.
At the conclusion of the evidence, the court entered Special Findings of Fact and Conclusions of Law, which may be summarized thusly:
After prolonged negotiations, Hiatt and Yergin entered into an original sales agreement and a resale agreement on the same date, November 30, 1968. Two separate instruments provided for the sale to Yergin and the possible resale to Hiatt of 500 shares of the capital stock of the Henry County Beverage Company, Incorporated, operating subject to the regulations of the operating subject to the regulations of the Alcohol, Tobacco and Firearms Division of the Internal Revenue Service (IRS).
Under the terms of the original sales agreement, Yergin as buyer paid Hiatt as seller the sum of $500.00 as earnest money to be applied on the total purchase price of $85,000.00 immediately upon the issuance of a Federal Basic Permit by the IRS and the approval of the transfer of the stock by the Alcoholic Beverage Commission of the State of Indiana (ABC). The parties further agreed to use all 'reasonable diligence' in obtaining said Permit and approval.
In the event the IRS should not issue a Permit of the ABC not approve the transfer of the stock as contemplated, then the agreement would be null and void and the buyer, Yergin, would be entitled to a return of the $500.00 earnest money deposit.
The resale agreement of the same date provided that Hiatt would sell the same 500 shares of stock of the Henry County Beverage Company, Incorporated, to Yergin upon the 'same terms and conditions under which said stock was purchased' and for the same price in the event Hiatt was unable to obtain control and ownership of the Norris Beverage Distributors and obtain a Federal Basic Permit for the operation of Norris Beverage Distributors and approval of the transfer by the ABC to such ownership and control.
On January 7, 1969, the IRS issued a Federal Basic Permit to the Henry County Beverage Company, Incorporated, to operate it as a beer wholesale business, and on January 10, 1969, the ABC granted its approval to the contemplated transfer of stock. Both of these permits were issued on the basis that Eugene H. Yergin and John D. Yergin owned 25% each of the stock in the corporation.
Hiatt then assigned the 500 shares of stock to Yergin and received in return the full contractual price ($85,000.00).
On January 13, 1969, Hiatt, in the name of Rose City Beverage, Inc., made an application to the IRS for a Federal Basic Permit to operate Norris Beverage Distributors and also made application to the ABC, in the same name, for approval of the transfer.
Hiatt received notice from the IRS that disapproval of the application was contemplated because of Hiatt's wrongdoing in previously owning a hidden interest in Norris Beverage Distributors contrary to Indiana law, which was not disclosed when making application for the Federal Basic Permit.
Hiatt had a right to appeal this decision of the IRS disapproving the application and he did ask for a hearing on appeal, and a hearing date was set for 10:00 A.M. on July 24, 1969. On July 18, 1969, Hiatt withdrew his appeal because of an alleged illness. IRS '. . . would have granted a continuance on said hearing had it been requested so to do . . .'
The parties to these agreements were aware that any time 10% or more of the stock in Henry County Beverage Company, Incorporated, changed hands, it was necessary to obtain both a Federal Basic Permit from the IRS and the approval of the ABC.
Hiatt did not use due diligence in obtaining a Federal Basic Permit to operate Norris Beverage Distributors. Also, neither Mr. Hiatt nor Mrs. Hiatt ever made application after November 30, 1968 to the IRS for a Federal Basic Permit so that Henry County Beverage Company, Incorporated, could operate as a beer wholesale business with either or both of the Hiatts as major stockholders. Further, neither Mr. Hiatt nor Mrs. Hiatt ever made application to the ABC for a permit approving the retransfer of the stock from Yergin to either or both of the Hiatts. The inability of Hiatt to obtain a Federal Basic Permit was due to the wrongdoing of W. H. Hiatt.
If the specific performance requested in the Complaint was granted, an operating business would be closed, causing irreparable harm to the owner of the other 500 shares of the Henry County Beverage Company, Incorporated.
On July 10, 1969, Hiatt gave notice to Yergin of a demand for the sale back to them of the 500 shares of capital stock of Henry County Beverage Company, Incorporated, and Yergin either failed or refused to resell the stock to Hiatt.
The court's Conclusions of Law were in essence:
(1) The obtaining of a Federal Basic Permit from the IRS and approval of a transfer by the ABC were conditions precedent of the original sales contract, and therefore conditions precedent to the resale contract, for the reason that the resale contract is based 'on the same terms and conditions and for the same...
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