Theye v. Bates
| Decision Date | 24 November 1975 |
| Docket Number | No. 2--774A173,2--774A173 |
| Citation | 337 N.E.2d 837,166 Ind.App. 652 |
| Court | Indiana Appellate Court |
| Parties | , Blue Sky L. Rep. P 71,262 Terry L. THEYE and Abner W. Elzey, Appellants, v. William C. BATES et al., Appellees. |
David Peebles, Fort Wayne, Robert W. McNevin, Indianapolis, for appellants.
Charles W. Symmes, D. Robert Webster, Indianapolis, for appellees.
Plaintiff-Appellants, Terry L. Theye (Theye and Abner W. Elzey (Elzey), (collectively, Appellants), appeal from a trial court judgment denying them return of their investment in Development Corporation of America (DCA), claiming Defendant-Appellees We affirm.
William C. (Bill) Bates and Walter T. Bates (collectively, Appellees), committed two violations of the Indiana Securities Law (Securities Act) (IC 1971, 23--2--1--1 et seq.): (1) failure to register the securities of DCA; and (2) fraud.
The evidence and facts most favorable to the trial court's judgment are:
Prior to September, 1966, an attempt to franchise the Spaghetti Bowl Restaurant (Spagetti Bowl) of Fort Wayne, Indiana, as a fast-food franchise was undertaken by Paul Alles (Alles), an employee of Spaghetti Bowl. Unsuccessful, Alles contacted Bill Bates to undertake the franchising of Spaghetti Bowl.
After several months of negotiations between Bill Bates and the owners of Spaghetti Bowl, Ted Schleich (Schleich) and Elmer Lambright (Lambright), it was determined 'that Development Corporation of America (DCA) would be formed for the purpose of launching this franchising operation.' It was characterized as a 'Turnkey Operation', i.e. nine 'satellite' corporations, operating independently and fulfilling specialized purposes, would combine their efforts through the coordinated effort and control of Development Corporation of America (DCA), the 'nucleus' corporation.
DCA's 'Real Estate Mortgages' booklet described the 'Turnkey Operation' this way:
The franchisor will provide the franchisee with: (1) location, (2) building, (3) equipment, (4) product, (5) supplies, (6) program, and (7) training period. These items are packaged at a fixed cost, sold in the form of a franchise and the purchaser is in business. Each of these functions individually is of no great obstacle; however, combined they represent a considerable task for the franchisor to tackle alone--this is usually the case. Thus, the need for an organization, such as DCA, has become apparent both to ourselves and the food franchise industry. DCA forms the nucleaus for a group of 9 satellite corporations and combines their individual purposes for one goal--to build the nation's largest, and most successful food franchise by 1970.
To insure the proper co-ordination, effectiveness, and singleness of purpose to all the DCA satellite corporations, W. C. (Bill) Bates serves as Chairman of the Board and Chief Executive officer with each of the nine corporations.
Alles was also instrumental in introducing Bill Bates to both Elzey and Theye.
Bill Bates first became acquainted with Elzey sometime in August, 1966, after Elzey had already purchased two Spaghetti Bowl franchises from Alles. At that time, Bates and Elzey discussed the opportunity afforded Elzey to contribute his experience and knowledge of real estate to the proposed venture.
In September, 1966, Terry Theye's father was approached for the ownership of a Spaghetti Bowl franchise; but in later conversations he suggested that his son Terry (who had a Business Administration Degree from International College in Fort Wayne) should both invest in and be employed by DCA.
Before meeting Elzey and Theye, Bill Bates had obtained financial information from the owners of Spaghetti Bowl which he accepted and believed to be 'true and correct', the substance of this information was that Spaghetti Bowl grossed $10,000--$15,000 monthly. Bill Bates passed these figures on to Theye prior to his investment into DCA and Theye was aware that they originated from the Spaghetti Bowl owners. After DCA was incorporated, Spaghetti Bowl grossed no more than Eight Thousand Dollars ($8,000.00) monthly, and Prior to establishing DCA, the owners of Spaghetti Bowl (Schleich and Lambright), Elzey, Theye, Bill Bates, and Bill Patton (President of one of the 'satellite' corporations, Marketing Corporation of America), agreed that Twenty Thousand Dollars ($20,000) in cash should be the starting capital basis of DCA. It was also understood by Elzey and Theye that each would contribute one-half of this Twenty Thousand Dollars ($20,000.00) in return for Two Thousand Five Hundred (2,500) shares each of DCA's total Fifty Thousand (50,000) shares of authorized stock. This understanding was subsequently incorporated into a written 'Subscription Agreement' on September 26, 1966:
averaged Five Thousand Dollars ($5,000.00) gross income per month.
WHEREAS, it is proposed by certain interested parties to organize a corporation to be known as DEVELOPMENT CORPORATION OF AMERICA, with its principal office and place of business at 836 East 64th Street, Indianapolis, Indiana, and having a capital structure of fifty thousand (50,000) shares of common capital stock of no par value;
NOW, THEREFORE, the undersigned, subscribers hereto, in consideration of the mutual agreements herein contained, hereby agree each for himself and with each other, and with the corporations hereinafter named, to take and pay for the number of shares set opposite our respective names, the consideration in payment for said shares and options to purchase said shares, as herein stated, to be that set forth opposite our names and shares to be taken.
DATED this 26th day of September, 1966.
Number Consideration
of to Exercise
Name and Address Shares Consideration Options Option
---------------- ------ ------------- ------- -------------
/s/Abner W. Elzey 2500 $10,000.00 One $10,000.00
----------------- Year
Abner W. Elzey option
210 Ogdon Street to
Ossian, Indiana purchase
2500
shares
/s/Terry L. Theye 2500 $10,000.00 One $10,000.00
----------------- Year
Terry Lee Theye option
5024 Forest Grove to
Fort Wayne, Indiana purchase
2500
shares
/s/W. C. Bates 5000 Promotional NONE
----------------- Services
W. C. Bates
6025 Meadowlark Drive
Indianapolis, Indiana
/s/Paul M. Alles 1250 Promotional NONE
----------------- Services
Paul M. Alles
415 Edgeknoll
Fort Wayne, Indiana
Spaghetti Bowl 5000 Five Percent NONE One Yr.-
Systems, Inc. (5%) of $40,000.00
3509 N. Clinton St. Authorized Option to
Fort Wayne, Indiana Capital Stock purchase
of Marketing 10,000
Corporation Shares
of America
By: /s/Theodore A. Schlarch
-----------------------
President
Marketing Corporation 10,000 Five Percent
of America (5%) of
836 East 64th St Authorized
Indianapolis, Indiana Capital Stock
of Marketing
By: /s/William H. Patton Corporation
----------------------- of America
President Twenty Percent
(20%) of
Authorized
Capital Stock
of Spaghetti
Bowl Systems
Inc.; Ten
Percent (10%)
of Authorized
Capital Stock
of United
Printing
Corporation
Ten Percent
(10%) of
Authorized
Capital Stock
of United
Advertising &
Publishing
Corporation;
Ten Percent
(10%)
Authorized
Capital Stock
of
International
Accounting
Systems,
Incorporated;
and, National
Management
Contract for
Spaghetti Bowl
Systems, Inc.
The next day, September 27, 1966, Elzey, Theye, Alles, Schleich, Patton, Bill Bates, and his brother, Walter Bates, incorporated DCA, and the Secretary of State of Indiana approved DCA's incorporation.
Among those serving both as directors and officers of DCA were Theye (Vice President), Elzey (Vice-President), Bill Bates (Chief Executive Officer) and Walter Bates (President), all parties to this appeal. 1
Both Elzey and Terry Theye were...
To continue reading
Request your trial
-
In re Del-Met Corp.
...which means that where the wrong of both parties is equal, the position of the defendant is the stronger." Theye v. Bates, 166 Ind.App. 652, 337 N.E.2d 837, 844 (1975) (quoting W.M. Moldoff, Annotation, Purchaser's Rights to Set Up Invalidity of Contract Because of Violation of State Securi......
-
Marwil v. Farah, CASE No. 1:03-cv-0482-DFH (S.D. Ind. 12/11/2003)
...holders. B. In Pari Delicto "The doctrine known by the latin phrase in pari delicto literally means `of equal fault.'" Theye v. Bates, 337 N.E.2d 837, 844 (Ind. App. 1975), quoting Perma Life Mufflers, Inc. v. Intern. Parts Corp., 392 U.S. 134, 135 (1968). "The expression `in pari delicto' ......
-
Knauer v. Jonathon Roberts Financial Group, Inc., IP 01-1168-C-K/T (S.D. Ind. 9/30/2002)
...them are barred by the doctrine of in pari delicto. The Latin phrase "in pari delicto" means "of equal fault." Theye v. Bates, 337 N.E.2d 837, 844 (Ind.Ct.App. 1975) (citing Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134, 135 (1968)). The doctrine is premised upon the equitabl......
-
Gilmer , Gilmer v. Board of Commissioners of Marshall County
...Ind.App., 419 N.E.2d 1024; Indiana Broadcasting Corp. v. Star Stations of Indiana, (1979) Ind.App., 388 N.E.2d 568; Theye v. Bates, (1975) 166 Ind.App. 652, 337 N.E.2d 837; Wilhoite v. Beck, (1967) 141 Ind.App. 543, 230 N.E.2d 616; Rosenberg v. Rosenberg, (1961) 131 Ind.App. 437, 171 N.E.2d......