Rosenberry v. Clark
| Decision Date | 26 February 1963 |
| Docket Number | No. 9093,9093 |
| Citation | 85 Idaho 317,379 P.2d 638 |
| Parties | Richard ROSENBERRY, as Receiver of Clark's Material Supply Co., Inc., a corporation, Plaintiff-Respondent, v. D. Earl CLARK, also known as D. E. Clark and Florence E. Clark, his wife, Defendants-Appellants |
| Court | Idaho Supreme Court |
Earl E. Reed, Nampa, for appellants.
Smith & Miller, Caldwell, for respondent.
For a number of years, appellant D. E. Clark, operated a retail lumber business as a sole proprietorship, under the name of Clark's Material Supply Co. On or about April 16, 1959, he caused said company to be incorporated, at which time the abbreviation 'Inc.' was added to the corporate name (hereinafter referred to as the corporation). D. E. Clark owned all the stock of the corporation except three shares, one of which was owned by Florence E. Clark, his wife, and another by his son. D. E. Clark was president, manager and a director of the corporation. After incorporation the real estate and buildings in which the business of the proprietorship was being carried on were not transferred to the corporation, the title thereto remaining in appellants.
Under date of June 1, 1959, the corporation, together with D. E. Clark and Florence E. Clark, individually, executed a promissory note made payable to Eugene M. Kleiner in the sum of $50,000. As security for the payment of said note appellants, as husband and wife, executed a mortgage upon certain real property owned by them in which the business of the corporation was being conducted. As consideration for said note and mortgage Mr. Kleiner issued his check in the amount of $50,000 drawn payable to the order of 'Clark's Material Supply Co., Inc. of Nampa, Idaho and D. Earl Clark and Florence E. Clark, Nampa, Idaho'.
By order of the trial court dated November 27, 1959, plaintiff-respondent Richard Rosenberry, was appointed receiver of the corporation. This action was commenced by said receiver seeking to recover from appellants the $50,000 and other sums, claiming the same to be assets of the corporation.
Trial was had before the court with an empaneled jury acting in an advisory capacity. Judgment was entered in favor of plaintiff-respondent. This appeal is from said judgment.
It was stipulated by the parties that only two questions were to be submitted to the jury and that the findings of the jury would be advisory only.
The principal issue presented to the trial court is concisely stated in paragraph (c) of the 'Pretrial Stipulation' entered into by the parties as follows:
'The sole controversy before the Court is whether or not the $50,000.00 which was borrowed was an asset of the company and belonged to the company, and if it is an asset of the company, then D. EARL CLARK could be compelled to return the $50,000.00 or in the alternative if he is unable to return the $50,000.00, to have judgment against him for that amount.'
It is appellants' contention that negotiations for some kind of loan were carried on with Julius M. Kleiner (who was acting on behalf of his son, Eugene M. Kleiner) over a considerable period of time; that the original negotiations related to a proposed factoring loan which was finally determined to be unacceptable to Mr. Kleiner, and the later and final negotiations related to a $50,000 loan to be secured by a second mortgage upon property owned by appellants and not the property of the corporation; that the loan of $50,000 which was finally agreed upon was in fact a loan to appellants and not to the corporation.
The evidence submitted by the respective parties tending to show whether the loan here involved was borrowed by and for the corporation is conflicting and it therefore becomes necessary to determine if the findings of the trial court are supported by competent evidence.
The record contains a certified copy of the minutes of a special meeting of the directors of the corporation as follows:
'MINUTES OF SPECIAL MEETING OF DIRECTORS OF CLARK'S MATERIAL SUPPLY CO., INC.
'We, the undersigned, being all of the directors of Clark's Material supply Co., Inc., meeting as a result of a special waiver of notice of a special meeting do hereby agree that all of the directors are present pursuant to a waiver of said notice of said meeting and a quorum being present and a loan to the corporation of Fifty Thousand Dollars being considered, the following action was taken.
'Upon motion duly made, seconded and carried it was agreed to accept the offer of Eugene M. Kleiner for a loan of Fifty Thousand Dollars to the corporation upon terms and conditions contained in the note, which said note shall be the primary obligation of the corporation herein and that in order to permit the obtaining of such loan it is necessary to furnish security therefore and the offer of D. Earl Clark to give security of his property interest to-wit: the real property on Highway 30 in the City of Nampa, to be accepted and that the second mortgage given therefore shall be the primary obligation of the corporation hereunder and a lien against the assets of the corporation. 'It is moved, seconded and carried that the officers of the corporation be authorized and instructed to execute all papers necessary for the accomplishment of these requirements.
'There being no further business to come before the meeting, the meeting adjourned.
'D. EARL CLARK
MAX D. CLARK
'I hereby certify that the above is a true and correct copy of the minutes of the corporation taken from the corporation minute book.
'June 2, 1959
'MAX D. CLARK
'Secretary'
The promissory note was executed by the corporation and by appellants. The mortgage specifically provides that it was executed to secure the payment of that certain note. The $50,000 check from Mr. Eugene M. Kleiner was drawn payable to and endorsed by the corporation and appellants. $45,000 of the $50,000 was deposited in the specific account used by the corporation for corporate business. The only repayment made upon the loan was by check issued on the corporation account.
The correspondence contained in the record (copy of a letter written by appellant Florence E. Clark, addressed to J. M. Kleiner and a copy of a letter written by J. M. Kleiner to the corporation, both dated May 8, 1959) is convincing that the loan then being considered was for and on behalf of the corporation.
Four witnesses, including Julius M. Kleiner, through whom the loan was negotiated, testified that during conversations with appellant D. E. Clark, he, Mr. Clark, represented to them that the $50,000 loan was to the corporation and to be used for corporate business. All of said witnesses, except Mr. Kleiner, represented substantial creditors of the corporation on the occasions of their respective conversations with Mr. Clark.
We realize appellants contend that the conversations testified to by respondent's witnesses took place during negotiations for a factoring loan which was never consummated; that the factoring loan, had it been consummated, was to be a primary obligation of the corporation and for its use and benefit; that the loan here involved was a personal loan to appellants.
However, two specific questions regarding representations made by appellant D. E. Clark were, pursuant to stipulation, submitted to the jury. Said questions and the jury's answers are as follows:
'Questions to the Jury:
'1. What representations, if any, were made by D. E. Clark, his agents or representatives, to creditors and to Mr. Julius M. Kleiner relative to the $50,000 in question?
'Jury's Answer:
'The jury finds that D. Earl Clark represented to creditors that he was securing or had secured a loan on behalf of, and for the use of Clark's Material Supply Co., Inc.
'We also find that representations were made by D. Earl Clark, his agents or representatives, to creditors and to J. M. Kleiner that the $50,000 in question was a loan to the Clark Material Supply Co., Inc.
'Question to the Jury:
'2. If you find there were representations made, did any creditor or Mr. Kleiner rely upon such representations, and if your answer is that any creditor or Mr. Kleiner or either or any of them did rely upon such representations, state who relied upon such representations, specifying who relied on what representations.
'Jury's Answer:
'We find that Mr. Wood and Mr. Chapman acting as agents for Weyerhauser Sales Co. and Mr. Miller, acting as agent for the M & C Lumber Co. relied upon the following representations:----
'That D. Earl Clark represented that he was securing or had secured a loan on behalf of and for the use of Clark Material Supply Co., Inc.
'We find that Julius M. Kleiner & Eugene M. Kleiner relied upon the representation by ...
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