Martin Tire & Rubber Co. v. Kelley Tire & Rubber Co.

• Decision Date: 01 December 1924
• Citation: 126 A. 697,101 Conn. 534
• Parties: MARTIN TIRE & RUBBER CO. v. KELLEY TIRE & RUBBER CO.
• Court: Connecticut Supreme Court

126 A. 697

101 Conn. 534

MARTIN TIRE & RUBBER CO. v. KELLEY TIRE & RUBBER CO.

Supreme Court of Errors of Connecticut.

December 1, 1924

Appeal from Superior Court, New Haven County; Leonard J. Nickerson Judge.

Receivership proceedings, by the Martin Tire & Rubber Company, creditor against the Kelley Tire & Rubber Company, in which defendant filed a counterclaim. From judgment based on facts found by the state referee, allowing claimant's claims in part only, claimant appeals. No error.

The Kelley Tire & Rubber Company, hereinafter called the Kelley Company, is a Delaware corporation, formerly doing business in Connecticut in the manufacture and sale of automobile tires and tubes.

The claimant, the Martin Tire Corporation, is a New York corporation engaged in selling tires and tubes. The right of the Kelley Company to use the name " Kelley" on automobile tires being challenged by actual or threatened litigation, negotiations were entered into contemplating that James Martin, president of the claimant corporation, should become associated with the Kelley Company and that the corporation should be reorganized under the name of the Martin Tire & Rubber Company, with Martin as president.

In the course of these negotiations the contract, Exhibit 19, was entered into between Edward J. Kelley, president of the Kelley Company, Charles H. Bortell, Jr., its treasurer, James Martin, the Kelley Tire & Rubber Company, and the Martin Tire Corporation. Thereafter these receivership proceedings were instituted by the Martin Tire & Rubber Company, as owner of a large majority of the stock of the Kelley Company, upon the ground that its assets were in danger of waste through attachments litigation, liens, and otherwise.

The claim of the Martin Tire Corporation, as presented, was divided into three parts:

No. 1. For money loaned to and goods delivered to the defendant $21,805 33

No. 2. For merchandise delivered 4,214 93

No. 3. Damages and losses arising out of breach of the contract above referred to 75,000 00

The state referee allowed claim No. 1 in part, and claim No. 2 in full, and from these allowances neither party appeals. As to claim No. 3 the referee found the facts, which are not in controversy, and, being of opinion that the validity of claim No. 3 turned wholly upon questions of law, referred the matter to the court, which disallowed claim No. 3 in toto. This claim is itemized as follows:

Moneys paid under the contract $20,000 00

Liability on note 5,000 00

Damages for breach of contract 50,000 00

The item of $50,000 for damages for breach of contract is abandoned.

The defendant filed a counterclaim, on which the referee allowed a set-off of $12,881.85 against the claimant, and the net result of the referee's report, as approved and accepted by the judgment of the court, is as follows:

Allowed on claim No. 1 $14,035 89

Allowed on claim No. 2 4,214 92

$18,250 81

Contra.

Allowed on defendant's counterclaim $12,881 85

Balance due claimant 5,368 96

$18,250 81

The controversy in this court relates solely to the validity of the first two items of claim No. 3, amounting to $25,000; that is to say, whether the contract itself is ultra vires, and whether, on the facts found, it was authorized or ratified by the corporation.

Joseph G. Shapiro and Harry Allison Goldstein, both of Bridgeport, for appellant.

Albert H. Barclay, of New Haven, for appellee.

BEACH, J. (after stating the facts as above).

The preamble of the contract, Exhibit 19, is as follows:

" Whereas, Edward J. Kelley, aforesaid, is desirous of disposing of the shares of stock owned by him in the Kelley Tire & Rubber Company, a Delaware corporation; and

Whereas, Charles H. Bortell, Jr., and Edward J. Kelley have made certain representations to the Martin Tire Corporation and made certain proposals to the Martin Tire Corporation, contemplating the association of James Martin, president of the Martin Tire Corporation with the Kelley Tire & Rubber Company aforesaid and the association of the Martin Tire Corporation with the Kelley Tire & Rubber Company.

" Now, therefore," etc.

Then follow the agreements of the three individual and two corporate parties expressed in eighteen paragraphs, of which the first and tenth form the basis for the first two items of claim No. 3.

In paragraph 1 the Martin Tire Corporation agrees to purchase from Edward J. Kelley 10,000 shares of the Kelley Company stock and to pay him $10,000 in cash on the execution of the contract, and $15,000 in notes payable in three installments. This agreement is on its face absolute and unconditional. Then in paragraph 10 it is agreed:

" Between the parties of the second, third, fourth and fifth parts" --that is, between all the parties to the contract except Edward J. Kelley--" that the purpose of this association between James Martin and the Martin Tire Corporation with Kelley Tire & Rubber Company, is the forming of an association with a factory which can manufacture high class tires,

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