Kraft v. Spencer Tucker Sales, 31861

• Decision Date: 17 January 1952
• Docket Number: No. 31861,31861
• Parties: KRAFT, v. SPENCER TUCKER SALES, Inc.
• Court: Washington Supreme Court

Page 943

39 Wn.2d 943

239 P.2d 563

KRAFT, v. SPENCER TUCKER SALES, Inc.

No. 31861.

Supreme Court of Washington, Department 2.

Jan. 17, 1952.

Cheney & Hutcheson and Blaine Hopp, Jr., all of Yakima, for appellant.

Gavin & Robinson, Yakima, for respondent.

HAMLEY, Justice.

A. J. Kraft brought this action against Spencer Tucker Sales, Inc., to recover twenty-eight hundred dollars. He had deposited this sum on the purchase price of a new Tucker automobile. The purchase could not be completed because Tucker automobiles have never been available for delivery. Defendant denied liability on the ground that the deposit had been made with one Henry E Spencer, individually, and was therefore not the obligation of the corporation.

Early in 1947, Spencer was the sole proprietor of a used car and automobile repair business located at 1606 North First street, Yakima, Washington. He also held a franchise from the Tucker Corporation, of Chicago, Illinois, for the sale of new Tucker automobiles in the city of Yakima. On July 2, 1947, plaintiff Kraft placed an order with Spencer for a Tucker automobile, the price of which was to be about twenty-eight hundred fifty dollars. He made a two-hundred-dollar cash deposit. On September 4, 1947, Kraft made an additional deposit of eight hundred fifty dollars, consisting of a check in the sum of five hundred dollars and delivery of a 1930 Chrysler automobile, for which a three-hundred-fifty-dollar credit was allowed.

On October 2, 1947, Spencer entered into an agreement with Dr. Russell L. Herr, of Yakima, to engage in the new and used car business under the name of Spencer Tucker Sales, Inc. A corporation having that name was organized early in November, 1947. Spencer transferred to the corporation his tools, equipment, option rights on the premises where he had been carrying on business, and the Tucker franchise. Dr. Herr paid Spencer half of the agreed value of this property. The two organizers each received forty-nine of the one hundred shares of stock the corporation was authorized to issue, the other two shares going to their respective wives. Spencer became president and general manager; Dr. Herr was made vice-president; Mrs. Spencer became secretary; and Mrs. Herr was elected treasurer.

It was understood that spencer could continue his personal used car and automobile repair business at the same location, and he did so until August, 1948. The board of directors, at the outset, established a definite policy against accepting cash deposits in connection with purchase orders for Tucker automobiles. The evidence does not show how soon the new corporation began soliciting and accepting such orders. Early in March, 1948, the corporation received a supply of used cars from Kansas City, Missouri. About the same time, it began the construction of a building on the North First street premises. This building was completed in late August or early September, 1948. On March 15, 1948, the corporation opened a bank account.

In the meantime, on January 19, 1948, Kraft came to the premises and gave Spencer a further five-hundred-dollar deposit on the Tucker automobile. Kraft did not then know about the corporation and made his check payable to 'Spencer Tucker Co.' as he had in the case of the two previous deposits. Spencer endorsed this check 'Spencer Tucker Co. Henry E. Spencer,' as he had the original two-hundred-dollar check. The five-hundred-dollar check of September 4, 1947, had been endorsed, 'Spencer Body Works Henry E. Spencer.'

On July 28, 1948, Spencer called Kraft to the place of business. Spencer and his wife there explained to Kraft that the order of sequence of the delivery of Tucker automobiles was then being fixed in connection with the signing of 'Accessory Purchase' orders. Kraft then executed such an order, evidencing purchase and sale of a group of accessories priced at $237.92, including tax. The order called for delivery of the accessories 'with car.' It is conceded that Kraft made no payment at that time. The accessory order was signed 'Spencer Tucker Sales, Inc., By Lucille G. Spencer.' There was issued to Kraft, at the same time, and similarly executed, a 'sequence allotment,' assigning Kraft the number one sequence for Tucker automobiles to be delivered in Yakima.

On November 10, 1948, Kraft delivered to Spencer, at the regular place of business, a 1942 Dodge sedan, as a further deposit on the Tucker automobile. Kraft testified at the trial that he did not then know that the corporation was involved in the transaction, though of course the accessory purchase order and sequence allotment provided that information. It is not disputed that Kraft was then unaware that Dr. Herr or any other individual, aside from Spencer, had an interest in the sale. A twelve-hundred-fifty-dollar credit was allowed on the Dodge, thereby bringing Kraft's total deposit to twenty-eight hundred dollars. The Dodge was kept in the used car lot on the premises for a time, and was then traded by Spencer for a 1941 Pontiac. The Pontiac was thereafter kept in the used car lot until early in 1949.

On December 31, 1948, Sepencer sold all of his stock in the corporation to Dr. Herr, who then took over active management of the business. Sometime prior to that date, most of the corporate records, including the books of account, of which Spencer and his wife had had custody, disappeared.

Early in February, 1949, Kraft discovered that Dr. Herr had an interest in the Tucker sales business in Yakima. Kraft then went to Dr. Herr and requested return of his deposit. This demand furnished Dr. Herr with his first information regarding Kraft's deposits with Spencer. It may be, however, that Dr. Herr already knew that Kraft had placed an order for a Tucker automobile. Dr. Herr immediately called a conference, which was held two days later, attended by Kraft, Spencer, Dr. Herr and their respective attorneys. At this conference Kraft renewed his demand for return of the twenty-eight hundred dollars. He exhibited to Dr. Herr and the latter's attorney the receipts and other papers evidencing the deposit payments.

Dr. Herr contended at this conference that the twenty-eight-hundred-dollar sum was the individual obligation of Spencer, while Spencer took the position that it was a corporate obligation. With particular reference to the five-hundred-dollar payment which had been made on January 19, 1948, Spencer told Dr. Herr that he had accepted this sum for the corporation and had used it for corporate purposes. Regarding the delivery of the Dodge on November 10, 1948, Spencer stated that he acted for the corporation in accepting this automobile, in extending the twelve-hundred-fifty-dollar credit, and in later trading the Dodge for a Pontiac. Dr. Herr criticized Spencer severely for allowing a twelve-hundred-fifty-dollar credit on the Dodge or for trading it for the Pontiac, stating that the Pontiac was worth far less than that amount.

No agreement was reached at the conference. Shortly thereafter Spencer disappeared and had not been located at the time of the trial. Kraft began this action on June 3, 1949. On June 27, 1949, Dr. Herr sold the Pontiac to an employee of the corporation for seven hundred dollars.

The action was tried to the court without a jury. At the conclusion of the trial the court orally announced that judgment would be granted for plaintiff in the sum of twelve hundred fifty dollars, representing the credit which had been given for the Dodge automobile. Thereafter the court granted plaintiff's motion for judgment notwithstanding the oral decision, to the extent of allowing recovery of an additional five hundred dollars. This additional sum represents the January 19, 1948, payment made by Kraft. Judgment was accordingly entered in the sum of seventeen hundred fifty dollars. Defendant has appealed, and plaintiff has cross-appealed.

Respondent's motion that the appeal be dismissed, for the reason that no appeal bond has been served on him or his attorney, is denied. Adjustment Dept., Olympia Credit Bureau, Inc. v. Smedegard, Wash., 236 P.2d 560.

We will first consider appellant's assignments of error relating to the allowance of recovery on the twelve-hundred-fifty-dollar item representing the credit given Kraft on the 1942 Dodge. The trial court found, in effect, that in accepting the Dodge and giving Kraft a twelve-hundred-fifty-dollar credit thereon, and in trading the Dodge for a Pontiac, Spencer purported to act for the corporation. The trial court further found that the corporation sold the Pontiac for seven hundred dollars, which sum was deposited in the corporate bank account. Appellant challenges these findings of fact. Our review of the record, however, leads us to believe that the evidence does not preponderate against these findings.

On the basis of these findings, the trial court entered a conclusion of law to the effect that the corporation had ratified, approved, accepted and agreed to be bound by the purchase contract to the extent of the twelve-hundred-fifty- dollar credit. Appellant contends that this conclusion is erroneous.

When Spencer accepted the Dodge and allowed Kraft a twelve-hundred-fifty-dollar credit thereon, he was without authority to so act on behalf of the corporation. Such a transaction was, in fact, contrary to the specific policy of the corporation's board of directors, as Spencer well knew. For the same reason, his later trade of the Dodge for a Pontiac was also probably in excess of his authority. It therefore follows that the corporation cannot be held liable to the extent of that credit unless, after obtaining knowledge of the facts attending the transaction, the corporation received and retained the benefits of it. If the latter circumstances are shown to exist, the corporation must be held to have ratified the unauthorized acts and to have estopped itself to repudiate them. Kirwin v. Washington Match Co., 37 Wash. 285, 79 P. 928; ...