Opinion ID: 256509
Heading Depth: 1
Heading Rank: 2

Heading: Benton Laundry Transaction.

Text: 32 At the time Reed's Hot Springs laundry burned in 1956 he was also operating a small laundry at Benton, Arkansas, some thirty miles away. In an effort to retain his Hot Springs laundry business until he was financially able to rebuild, he transported his Hot Springs laundry collections to Benton for processing. This necessitated some expansion of the facilities at Benton. As a result, Reed purchased additional laundry and drycleaning equipment from Pellerin in April and November of 1957 and executed notes to the latter in amounts of $46,552.80 and $13,684.36 secured by conditional sales contracts. 33 Early in 1958 the Craighead Laundry in Hot Springs was put up for sale. Reed was very interested in purchasing it but realized that he would first have to be free from his obligations on the new equipment at the Benton plant which at that time exceeded $40,000.00. He discussed the matter with Pellerin and it was decided that the best way to handle the situation would be to sell the Benton laundry as a going business. Pellerin agreed to give some assistance in securing a buyer for the plant and did in fact find a buyer named Vernon Hogue. It is the precise nature of the arrangement between Reed and Pellerin pursuant to Hogue's acquisition of the Benton laundry which is in dispute. 34 At the trial, Pellerin and Reed were in direct conflict in their testimony as to the agreement between them in connection with Hogue's taking over the Benton plant. Reed testified that it was agreed that if Pellerin found a purchaser for the laundry Reed was to lease the building housing the facilities to the purchaser. In addition, Reed was to convey to Pellerin the unencumbered laundry equipment in the Benton plant, which had an agreed value of $9,235.00. Pellerin would then be in a position to transfer to the purchaser the entire equipment in the plant, as he already held title to the encumbered equipment under conditional sales contracts. According to Reed's testimony, if Pellerin completed such a transaction Reed's notes for the encumbered equipment were to be returned to him and he was to be given credit on another account he had with Pellerin for the amount of his equity in the encumbered equipment in the Benton plant plus $9,235.00 for the unencumbered equipment. It is Reed's contention that he was to have nothing to do with the arrangements to be worked out between Pellerin and the purchaser as to terms, and that the situation was such that if Pellerin secured a buyer Reed was to turn the equipment in question over to Pellerin to be sold by the latter to the purchaser. 35 Pellerin testified that his agreement with Reed was that if he negotiated a sale of the equipment to a purchaser, in this case Hogue, for a price (excluding interest and carrying charges) exceeding the principal balance yet owing by Reed on such equipment, then the latter would be entitled to a credit, upon payment of the purchase price by Hogue, for the amount of this difference. Pellerin maintains, however, that the risk of nonperformance was not to be borne by him and that if the purchaser defaulted Pellerin was to keep Reed's unencumbered machinery plus the encumbered machinery (in which Reed had a substantial equity) in exchange for releasing Reed from the indebtedness remaining on the two notes in question. Pellerin urges that Reed is, therefore, entitled to no credit arising out of the transaction with Hogue for the reason that (1) there was never any sale to Hogue but rather an option which Hogue failed to exercise; and (2) that even if there has been a sale to Hogue any credit due Reed is conditioned upon Hogue's payment of the notes given for the purchase price upon which the latter has defaulted. 36 The trial judge in his findings of fact found the transaction to be as follows: 37 Pellerin agreed to sell and finance the complete laundry, and, after the sale was consummated, to credit Reed's account for the personal property in the laundry conveyed by Reed to Pellerin and for his equity in the other machinery. (Emphasis supplied.) 38 In addition, the trial court found that a sale had been consummated between Pellerin and Hogue and, therefore, that Reed was entitled to a credit. It would seem that such findings necessarily reject Pellerin's theory that any credit due Reed was to be conditioned upon the purchaser's financial performance for the trial court in its findings noted the fact that Hogue was in arrears on his payments on notes issued for the Benton equipment. 39 In examining the somewhat insufficient record before this court, it is clear that there is ample evidence to support the finding of the court below that Reed is entitled to certain credits in connection with the transfer of the Benton laundry business to Hogue. Reed's testimony alone is sufficient to preclude this court finding otherwise for where, as here, there is a clear conflict between the only two principal witnesses to a transaction the question presented is largely one of credibility and must be resolved by the trier of fact. See Noland v. Buffalo Ins. Co. (8th Cir.1950), 181 F.2d 735, 738; Cleo Syrup Corp. v. Coca-Cola Co. (8th Cir.1943), 139 F.2d 416, 417-418, 150 A.L.R. 1056. 40 In addition, Reed's version of the transaction is corroborated to some extent by a letter from Pellerin to Reed's accountant which is part of the record here. In this letter Pellerin lists figures showing that a credit had in fact been made to Reed's account in the amount of $18,143.58 for a sale to Vernon Hogue. The letter is dated June 25, 1959, which is ten months after Hogue took over the Benton plant, and at which time, according to the testimony of both Pellerin and Hogue, the latter was already in arrears on his monthly payments. It also appears of record that at this time Pellerin had been apprised of Reed's understanding of the effect of the transaction by a letter written to Pellerin by Reed's attorney in August, 1958, at approximately the same time that Hogue took possession of the laundry. These facts, considered as a whole, support the trial court's finding that Reed became entitled to the credit at the time a sale was consummated between Pellerin and a purchaser of Pellerin's choosing and was not to be conditioned upon the financial performance of the purchaser. 41 Furthermore, the trial court's finding that a sale of the Benton laundry had been consummated between Pellerin and Hogue is supported by substantial evidence. The latter, in connection therewith, executed three conditional sales contracts and three promissory notes totaling $82,350.00 and delivered them to Pellerin. Although these instruments were not dated, and it appears that it was agreed between Pellerin and Hogue that only one of the three notes was to be immediately negotiated, this does not lend any support to Pellerin's theory that Hogue was only given a one-year option to purchase the laundry which he never exercised. There apparently was a one-year written option agreement for the purchase of the laundry executed by Hogue during the preliminary negotiations with Pellerin but Hogue testified that this was superseded by the execution of the conditional sales contracts which in effect constituted a purchase of the business by him. Pellerin in his argument in this court does not stress or rely upon this preliminary written option agreement. Hogue was in continuous possession of the laundry and operating it either individually or as a partnership or corporation from August, 1958, up until the time of the trial in April, 1961. When all of these facts are considered, it appears that the trial court's conclusion that a sale had been consummated was clearly correct. 42 Accepting the fact that Reed was entitled to a credit upon the consummation of the Pellerin-Hogue sale, there is still left for determination the proper amount of the credit to be allowed. Pellerin challenges the computation of the credit which was made by the trial court. It should be pointed out that just as Pellerin's and Reed's testimony was in conflict as to when a credit was to arise it also conflicted as to the basis for computing the credit. Reed testified that it was agreed that his credit should be for the amount of his equity in the encumbered Benton equipment, i. e., the amount of his payments on that equipment less earned interest, plus $9,235.00, the value agreed upon for his unencumbered equipment. Pellerin testified that the basis for the credit under his agreement with Reed was to be the difference between the purchase price obtained on the sale to Hogue (absent interest and carrying charges) and the amount yet owing by Reed on the two Benton notes (reduced by unearned interest). 43 The portion of the findings of the trial court which has been previously quoted in this opinion appears to adopt Reed's version of how the credit was to be arrived at. Also, the trial court in its discussion of the Benton transaction stated: 44 Since a sale was consummated, Reed was entitled to credit by Pellerin for the agreed value of personal property he had conveyed to Pellerin in order to complete the sale, together with his equity in the equipment being purchased from Pellerin, in accordance with the agreement between Pellerin and Reed. 45 It would seem that crediting Reed for the value of his equipment, including his equity in the equipment being purchased on time, as contemplated by the court below, could and should have been done entirely independently of Pellerin's arrangement with Hogue as to price. It would seem to inhere in the trial court's findings that Reed's credit was to be fixed and certain upon the consummation of a sale by Pellerin and that the terms of that sale were entirely up to the latter and were in no way to affect Reed's credit. Nevertheless, in computing the amount of the credit to which Reed was entitled from the Benton transaction, the trial court subtracted the principal balance of $40,649.16 owed by Reed on the two notes to Pellerin from the amount of the sale price on the Benton laundry to Hogue ($60,880.05 not including interest and carrying charges), thus arriving at a figure of $20,230.89. 1 In addition, Reed was granted a miscellaneous credit of $2,950.00 for a down payment which he had made on the Benton equipment covered by the $46,552.80 note. An analysis of this computation by this court leads to the conclusion that it is not precisely in accord with either of the two conflicting theories referred to, or with the lower court's findings as to Reed's agreement with Pellerin. 46 Pellerin urges that the trial court's method of computation is in effect an adoption of his theory that the credit was to be the difference between the purchase price with Hogue and the principal balance remaining on Reed's Benton notes. From this he reasons that it was error for the trial court to grant the additional miscellaneous credit to Reed for the down payment on the Benton equipment as this is inconsistent with such a theory. 47 Reed seeks to support the credit awarded him for the down payment in question on the theory that absent such a credit he would not be reimbursed to the full extent of his equity in the equipment in question in accordance with the trial court's findings. He attempts to support the rest of the court's computation, based upon the purchase price to Hogue, on the theory that the terms of the sale to Hogue were such that the difference between the purchase price to be received by Pellerin from that transaction and Reed's unpaid balance was substantially equivalent to the value of Reed's equipment plus his equity in the equipment he was purchasing on time. 48 Reed urges in support of his latter contention the following facts: (1) the cost of the first Benton equipment purchased by Reed was $39,120.00 before interest and carrying charges while one of the three notes executed by Hogue to Pellerin was for the principal sum of $39,693.50; (2) the principal balance of the second note executed by Reed was $11,973.19 while one of the Hogue notes was for the principal sum of $11,951.55; (3) the third note executed by Hogue was for the principal sum of $14,235.00 and Pellerin testified that this was to cover the unencumbered machinery secured from Reed valued at $9,235.00 plus a $5,000.00 advance to Hogue for operating expenses. The trial court in figuring the purchase price paid by Hogue to be $60,880.05 did not include this extra $5,000.00 just referred to. It appears that the situation was such that while Hogue was buying a going laundry business, in the sense that that was what he was in fact getting, Pellerin was only selling the equipment. The notes in question were related to specific items of equipment. 49 It seems clear that if the terms of the sale negotiated between Pellerin and Hogue were such that the principal balance to be paid by Hogue was exactly equal to the sum of the value of Reed's unencumbered equipment plus an amount identical to the principal sum Reed was paying Pellerin for the encumbered equipment, then a figure representing the value of Reed's equipment, plus his equity in the encumbered equipment, could be ascertained in the manner employed by the trial court, i. e., by subtracting the principal balance yet owing by Reed on the encumbered equipment from the principal balance of the price to Hogue. While it appears that Pellerin's price to Hogue on specific items of equipment which Reed had been purchasing on time was substantially the same as the price Reed had been charged for the same equipment, it obviously is not exactly the same. Only if the amounts were identical would the trial court's method of computing the credit result in a figure accurately representing the value of Reed's equipment plus his equity in the equipment he had been purchasing on time. Furthermore, the values just referred to can be accurately ascertained from the record without resort to the terms agreed to between Pellerin and Hogue by merely computing Reed's equity on the basis of subtracting the principal balance he owed Pellerin for the equipment from the principal sum of the original purchase price. 50 It is the view of this court that this discrepancy cannot be disposed of merely by saying that there can be no objection by Pellerin to the trial court's computing the credit in a manner which he himself advocated, for, under Pellerin's proposed method of computing the credit, there would have been no allowance for Reed's down payment. The very fact that the trial court granted the credit for the down payment is strong evidence that it realized the basis of the credit was to be dependent upon the value of Reed's equipment plus his full equity in the encumbered equipment regardless of the purchase price to be paid by Hogue. This is the argument advanced in Reed's brief to support the credit granted him for the down payment. Such argument serves equally well to establish the fact that the basis for the credit was not to depend upon the terms between Pellerin and Hogue. 51 The discrepancy involved is in favor of Reed and against Pellerin. Since the latter complains of this on appeal, this court should modify the credit allowed by the lower court to the extent that such credit is inconsistent with its findings. The correct computation of Reed's equity in the encumbered Benton equipment would seem to be as follows: 52 $39,120.00 cost of equipment covered by first note after down payment 2 $ 2,950.00 down payment __________ $42,070.00 total cost of equipment covered by first note $11,973.19 cost of equipment covered by the second note 3 __________ $54,043.19 total cost of equipment covered by both notes less $40,649.16 principal balance yet owing by Reed as found by the trial court __________ $13,394.03 Reed's equity in the equipment 53 When the amount of Reed's equity is added to the $9,235.00 amount which was to be credited to Reed for his unencumbered equipment, the total credit becomes $22,629.03. This is $551.86 less than the credit awarded Reed by the trial court for this transaction (including the allowance for down payment). For this reason the judgment below should be modified by increasing the judgment in favor of Pellerin by this amount. 54