Kelly v. Richards

• Decision Date: 04 November 1938
• Docket Number: 5600
• Citation: 83 P.2d 731,95 Utah 560
• Court: Utah Supreme Court
• Parties: KELLY v. RICHARDS et al

83 P.2d 731

95 Utah 560

KELLY v. RICHARDS et al

No. 5600

Supreme Court of Utah

November 4, 1938

Appeal from District Court, Third District, Salt Lake County; Roger I. McDonough, Judge.

Action by H. B. Kelly, receiver for Tri-State Motors, Incorporated against M. R. Richards, and others, to recover sum defendants were allegedly obligated to pay into the capital stock of the corporation of which plaintiff was receiver. From a judgment for the defendant, plaintiff appeals.

AFFIRMED.

Henry D. Moyle and Mr. Willis W. Ritter, both of Salt Lake City for appellant.

Badger Rich & Rich, and E. A. Rogers, all of Salt Lake City, for respondents.

LARSON, Justice. FOLLAND, C. J., and HANSON, MOFFAT, and WOLFE, JJ., concur.

OPINION

LARSON, Justice.

The only question presented by this appeal is: Did the complaint of the plaintiff state a cause of action? The District Court of Salt Lake County held it did not, plaintiff declined to amend, the action was dismissed, and plaintiff assigns error. The action was brought to recover a judgment against defendants for $ 35,000 as moneys defendants were obligated to pay into the capital stock of the Tri-State Motors, Incorporated, a defunct corporation of which plaintiff is receiver. In the complaint, after certain formal allegations, it is charged that prior to the 24th day of September, 1929, the Richards-Barlow Motor Company, whose name was later changed to Tri-State Motors, Incorporated, had applied for a franchise or distributorship of Willys-Overland automobiles in Utah, southern Idaho, and western Wyoming, and then alleges:

"4. That prior to September 24, 1929, the said Willys-Overland, Incorporated, notified the Richards-Barlow Motor Company and the defendants herein as stockholders of said company, that this distributorship would be granted them, as requested, provided the Richards-Barlow Motor Company acquires paid in capital of not less than $ 50,000,00.

"5. That on or about the 24th day of September, 1929, the Richards-Barlow Motor Company and the defendants herein wrote the said Willys-Overland, Incorporated, a letter, in words and figures as follows, to wit:

"'Salt Lake City, Utah

"'September 24, 1929

"'Willys-Overland, Inc.

"'405 Continental Bank Bldg.

"'Salt Lake City, Utah.

"'Gentlemen:

"'Complying with your request, we are submitting for your approval the following statement:

Our Net Worth as shown by our Statement of August 1st,

1929, was approximately

$ 10,000.00

We now have Paid In by our Stockholders an additional

5,000.00

Should we be granted the Willys Knight and Whippet

Distributorship we will agree that on or before October

1st, 1929, we will have available an additional

10,000.00

by October 15th, 1929, an additional

10,000.00

by January 15th, 1930, an additional

15,000.00

Making a Total of Paid in Capital

$ 50,000.00

"'It is understood also that we will immediately start or make preparations and plans for a new building, in a suitable location, which can be occupied within the next ninety (90) days.

"'Very truly yours,

"'Richards-Barlow Motor Co.,

"'By M. R. Richards

"'Treasurer

"'Stockholders:

"'Geo. A. Allen

"'Wm. L. Rich

"'P. E. Roberts

"'John H. Barlow

"'Ira C. Holbrook

"'Richard Stringham'

"6. That said letter was written and delivered by the defendants, to be relied upon and accepted as a contract by the Willys-Overland, Incorporated, and for the sole purpose of inducing the Willys-Overland, Incorporated, in so accepting and relying thereon, to grant to the Richards-Barlow Motor Company said distributorship and the credit allowed incident thereto, and for the benefit of the Richards-Barlow Motor Company, in which defendants and each of them were then personally interested as stockholders." (Italics added.)

It is then alleged that thereafter the Willys-Overland, Incorporated, granted the distributorship to the Richards-Barlow Motor Company; that the latter changed its name to Tri-State Motors and operated the business of the distributorship, and then sets out:

"That the said Tri-State Motors, Incorporated, with the defendants herein as its officers and stockholders, advertised openly and publicly and continuously throughout the territorial limits of its said distributorship the fact that it was the distributor and held and maintained said distributorship so granted by the Willys-Overland, Incorporated, as aforesaid, and that the defendants herein, as its stockholders, had guaranteed to it a paid in capital of $ 50,000.00 by January 15, 1930, and by means thereof established and received credit from its numerous creditors, as hereinafter more specifically set forth, and otherwise fully and completely received and accepted the benefit of said contract as fully executed by the Willys-Overland, Incorporated, as aforesaid.

"9. That except for its said distributorship so obtained, as aforesaid, the said Tri-State Motors, Incorporated, could not and would not have established or obtained said credit."

The $ 35,000 was never paid into the company; in about three months it became insolvent, and this action followed. It does not appear from the complaint how many creditors there are, the amount of debts, or whether Willys-Overland is a creditor. Neither does it appear from the complaint how many or who were stockholders in the Tri-State Motors, Incorporated, or who were its officers. The parts of the complaint quoted are all that are germane to the issue and the complaint must stand or fall upon those allegations. Appellant advances three theories upon one or all of which he contends his complaint is sufficient. We state them and shall note them in order.

1. The averments of the complaint show facts from which may be inferred an agreement on the part of the defendants (respondents) to subscribe for the shares of an increase of capital stock.

2. The averments of the complaint show facts which estop the defendants as against creditors to deny that they guaranteed to Tri-State Motors a paid capital of $ 50,000.00 by January 15, 1930.

3. The averments of the complaint show a contract between the defendants and Willys-Overland, Incorporated, for the benefit of a third party, to wit: The creditors of Tri-State Motors.

We have set forth above all the facts alleged as far as helpful in any way in testing the pleading.

1. Do the facts pleaded state a cause of action on the theory that defendants subscribed for or agreed to subscribe for an increase in capital stock of the company?

There is no allegation that defendants subscribed for any additional stock and no allegation that they agreed to subscribe for any additional stock; there is no allegation that the capital stock was increased, or that any capital stock was offered for sale or available for subscription; there is no allegation as to how much stock any of defendants had subscribed for or promised to take and no allegation that any defendant had failed to take or pay for any stock he had agreed to purchase. There is no allegation that there was any agreement or contract between the Richards-Barlow Motor Company, or the Tri-State Motors, Incorporated, on one hand and the defendants on the other hand, for the subscription or sale of stock. The most that can be claimed is that defendants promised not the Richards-Barlow Company but the Willys-Overland that in event of certain actions by Willys-Overland Incorporated, they would undertake to provide in some way additional capital for the business of the distributorship. We do not wish to be understood as saying that the complaint justifies such a construction but merely that for the purposes of this question that is the most that could be claimed for it. And assuming for the moment such construction, there is then no allegation that the Tri-State Motors ever acquired any rights to, in, or under, any promise to, or agreements by defendants with the Willys-Overland, Incorporated, and no allegations that Willys-Overland is a creditor of the Tri-State Motors. It is elementary that where one seeks to recover under a contract he must allege the making of the contract either with him or with some one under whom he claims. We are concerned here with a question of pleading, not of proof. The fact that upon trial a contract may be inferred or found from facts and conduct shown in evidence, without the making of the contract being proved by direct evidence thereof, does not change the fact that in suing upon a contract the making or existence of the contract must be alleged and also plaintiff's rights thereunder. There are no allegations here of the making or existence of a contract between Tri-State Motors and the defendants, nor of how plaintiff acquired any rights under any contract made with any other party; there are no allegations of any debt due from defendant to plaintiff, making a basis for a contract of subscription to capital stock, and the complaint upon that theory does not state a cause of action.

2. Does the complaint state a cause of action on the grounds of estoppel? Does it properly and sufficiently aver facts to estop the defendants from denying that they guaranteed the payment into the treasury of the Tri-State Motors of $ 35,000 in new capital? It is elementary that as a matter of pleading an estoppel in pais exists only when facts are alleged which show that one person has by his words, deeds, or conduct so behaved that another person in good faith relying upon such conduct has been intentionally led thereby to change his position for the worse and who would not so have changed his position except for the conduct of the other party.

"This estoppel arises when one by his acts, representation, or admissions, or by his silence when he ought to speak out intentionally or through...