Pearl Creamery Co. of Nappanee v. Montpelier Creamery Co., 18110

• Decision Date: 19 November 1951
• Docket Number: No. 18110,18110
• Citation: 123 Ind.App. 401,101 N.E.2d 709
• Parties: PEARL CREAMERY CO. OF NAPPANEE, Inc. v. MONTPELIER CREAMERY CO., Inc.
• Court: Indiana Appellate Court

Page 709

101 N.E.2d 709

123 Ind.App. 401

PEARL CREAMERY CO. OF NAPPANEE, Inc. v. MONTPELIER CREAMERY CO., Inc.

No. 18110.

Appellate Court of Indiana, in Banc.

Nov. 19, 1951.

Carl L. Chattin, Goshen, for appellant.

Mehl & Mehl, Richard W. Mehl, Goshen, for Montpelier Creamery Co., Inc.

ROYSE, Judge.

Appellee, by its complaint in one paragraph, brought this action on an open account for $93,953.04 against appellant. Appellant answered the complaint by an answer of admission and denial under the rules and by a further paragraph pleading an accord and satisfaction. Appellee replied in two paragraphs. The first asserted there was no consideration for the accord and satisfaction; the second averred that the obtaining of a refund of federal income tax by appellee was a condition precedent to the taking effect of the accord and satisfaction. Trial to a jury resulted in a verdict in favor of appellee for $20,000. Judgment accordingly.

The error assigned here is the overruling of appellant's motion for a new trial. The specifications of this motion assert error in the amount of recovery in this, the amount is too small; the insufficiency of the evidence to sustain the verdict; that the verdict is contrary to law; and error in the admission of certain evidence. We proceed to consider those necessary to a decision of this case.

At the trial of this cause it was stipulated by the parties 'that on the 31st day of December, 1947, the appellant was indebted to the appellee in the sum of $93,953.04, and that in the event of a recovery, the plaintiff (appellee) was entitled to interest at the rate of six percent.' The trial court instructed the jury that by reason of this stipulation the jury was to consider this fact proved. Appellant contends that the question as to the amount plaintiff was entitled to recover, if entitled to recover at all, was a question of law. The instruction of the court was the law of the case and the verdict not being in conformity with the instruction is contrary to law. We agree with this contention of appellant. Kundred v. Bitler, 1932, 93 Ind.App. 691, 696, 177 N.E. 345, transfer denied; Cohen v. Shubert, 1935, 100 Ind.App. 315, 320, 195 N.E. 574.

A reversal for the foregoing reason and a new trial of the issues in this case would not dicide the real question involved in this appeal.

In support of its contention that the verdict was not sustained by sufficient evidence, appellant says: 'This is a suit on account. The answer of the defendant alleged an accord and satisfaction. The controverted (uncontroverted) evidence clearly shows that a transaction was entered into between the Directors of the defendant, who were Grant Hoyt, Russell Hoyt and Donald Hoyt and the Directors of the plaintiff, who were Russell Hoyt, Donald Hoyt and Chester Ray, and J. E. Cox, an individual, whereby the plaintiff agreed to release and discharge an account in the amount of $93,953.04 due from the defendant and whereby Russell, Donald and Grant Hoyt, the stockholders in the plaintiff corporation, would transfer all of the outstanding common stock to J. E. Cox for the sum of $25,000 in cash to be paid by J. E. Cox and upon delivery to Cox of an insurance policy on the life of L. M. Hoyt. This agreement was reduced to writing and has been completely consummated. The plaintiff's reply, in three paragraphs, sets up three defenses to the accord and satisfaction of the account receivable. The burden of proof establishing the allegations in the plaintiff's three paragraphs of reply is upon the plaintiff. It was the plaintiff's contention in the trial court that in addition to the written agreement between the parties, there was an oral agreement whereby the defendant promised and agreed that the Montpelier Creamery Company would receive from the United States Government, in the form of a roll-back of income taxes, some unspecified amount of money due to the discharge of the account receivable owed by the defendant. The second paragraph of plaintiff's reply sets up a failure of consideration based upon the failure of Montpelier Creamery to receive any rollback of taxes. The third paragraph of reply alleges that the receipt of a tax refund was a condition precedent to the final compromise of the account sued upon and alleges that there was an agreement that in the event a tax refund was not received, the account receivable would be reinstated upon the books and the accord and satisfaction be of no force and effect.'

This requires a consideration of facts as disclosed by the record herein. They may be summarized as follows: On or about April 1, 1927 one J. E. Cox took over the business of appellee. He says he operated appellee's business with a partner until 1937 after which he became the sole owner. In the fall of 1945 he sold this business to L. M. Hoyt for $114,000. He received $35,000 in cash and took a mortgage on appellee which was duly recorded in the County of Ohio where it was doing business.

For some time prior to December 3, 1947 the aforementioned Hoyt owned a substantial majority of the capital stock of both appellant and appellee. The other minority stockholders in these corporations were the sons of said Hoyt. On said last mentioned date L. M. Hoyt was bankrupt. Appellant, because it was insolvent, ceased operations. At the time it ceased operations it owned appellee the sum of $93,953.04 for milk. In addition it owed several large accounts other than secured accounts. Appellee at this time was having financial difficulties. In an effort to work out its difficulties its Board of Directors did, on said date, appoint the aforementioned Cox to act as its general manager and superintendent. He immediately took full charge of appellee's business. The stock which L. M. Hoyt owned in these corporations was in the hands of the United States Bankruptcy Court. Subsequent to the appointment of Cox as such general manager and superintendent, Grant Hoyt, a son of L. M. Hoyt, purchased from the referee in bankruptcy the stock of L. M. Hoyt in these companies. Two other sons of L. M. Hoyt owned a minority of the stock in these companies. After Grant Hoyt purchased this stock friction arose between the Hoyts and Cox who was continuing to act as appellee's general manager and superintendent.

In the latter part of January, 1948, the Hoyts and Cox commenced negotiations for the sale of all of the stock in appellee owned by the Hoyts to Cox. The story of these negotiations, as set out in appellant's brief (without correction by appellee) from the testimony of Cox, is as follows: 'On or about the first of February in the office of the Montpelier Creamery Company with Chester Ray, Donald, Russell and Grant Hoyt present, we started negotiations for the purchase of the Montpelier Creamery. I saw that something had to be done to clear the stock up and I wanted to make good with the creditors, so I started to negotiate the deal. The Hoyt brothers and I discussed the values and the possibilities of financing the creamery. I offered the Hoyts $16,000 for the stock, but Grant Hoyt, who held the bulk of the stock, said he couldn't take that and they made a counter offer of $35,000. We dickered back and forth and finally came down to $25,000 and that was finally the deal it was closed on. I raised the question of the tax roll back by telling them there was a tentative revised income tax form for the creamery company for a roll back tax and I would apply for that. They said it was alright with them to do it but Grant wanted to get this $93,000 off of their books and told me there weren't enough assets in Nappanee to cover the protected creditors and therefore they wanted to charge the $93,000 account off as a bad debt for $100. There was nothing said at that time about the account being charged off and being included in the tax roll back. This all took place at the end of January until the 5th day of February. I agreed to assume the accounts payable, the payment of a note at the bank and the mortgage. The tax roll back was again discussed on the 4th of February at my auditor's office in Toledo, at which time the auditors said, in the presence of myself, the Hoyts and Mr. Ray, that the Pearl Creamery Company account, which was charged off, could be included in the roll back of taxes if the account was uncollectible. After the auditors made that statement, Grant Hoyt said that the account was uncollectible and that was why they put the resolution in the minutes.'

The record discloses the meeting in the office of Cox' tax consultants, and attorney was held at his request. Cox' version of this meeting, as shown by the recital of his evidence in appellant's brief, is as follows: 'At the meeting in Toledo, Ohio, with the two accountants, Mr. Ray and the three Hoyt Boys, Grant Hoyt said that I could use the $93,000 account with Pearl Creamery Company in a claim for a roll back of taxes. Chester Ray then asked the accountants whether or not it would be permissible and Mr. Dobson said it could be used if the account was not collectible and then Grant Hoyt made the statement that it wasn't collectible and that there were not enough...