Court: Supreme Court of Arkansas; February 15, 1971; Arkansas; State Supreme Court
Conley Byrd, Justice, details the ownership and financial state of two ready mix cement plants in Ashdown prior to August 25, 1969. "Ashdown Ready-Mix," initially owned by Robert Earl Priest, was purchased by Sheldon Madden for his son, Jack Madden, and was operated by Madden Manufacturing Co., Inc. In contrast, "Associated Ready-Mix," owned by Hart, Thomas, Hart, Inc., was facing severe financial difficulties, with liabilities of $48,194.16 and equipment valued at only $29,900.00. The business had unpaid checks totaling $2,590.85 and had been operating on a cash-on-delivery basis since April 1969. Internal conflicts among the stockholders led to discussions about shutting down or selling the business, with tensions escalating to physical altercations.
The First National Bank of Ashdown was involved financially, having participated in a Small Business Administration loan and providing additional loans to stockholders. Prior to August 25, negotiations were initiated by Jack Hart with Robert Earl Priest regarding the potential sale of Associated. A meeting occurred at the bank with all key parties, including bank officials, resulting in a purchase agreement for $48,194.16. This agreement, titled Exhibit No. 1, was typed and signed by the sellers and Jack Madden, while Robert Earl Priest declined to sign. The agreement stipulated the assumption of various debts, including bills payable, accounts receivable, and outstanding checks, and included a non-compete clause preventing the sellers from entering the ready mix concrete business in Little River County for 36 months. The document was sworn and subscribed on August 25, 1969.
On August 26, Jack Madden received approval from Associated to use one of its trucks for Ashdown Ready-Mix's highway construction project. Associated Ready-Mix had ceased operations the Friday before the August 25 meeting. Following the meeting, the Chancellor determined that Sheldon and Jack Madden had entered into a contract on August 25 to purchase Associated Ready-Mix for $48,194.16, which they subsequently breached. As a result, a judgment of $18,294.16 was awarded to the appellees against them.
Appellants contested the existence of a sales agreement on the grounds that no formal contract was finalized. Testimony from Roy Staggs indicated that discussions on the sales price occurred on August 25, where Sheldon Madden's $45,000 offer was rejected, and a new figure of $48,000 was agreed upon by all parties. Staggs then drafted a preliminary agreement, despite knowing further negotiations were necessary.
Jack Hart confirmed that all parties accepted the $48,000 price on August 25 but noted additional negotiations occurred afterward. He insisted on being relieved of the S.B.A. loan obligation before agreeing to any sale. Bowman testified that Sheldon Madden clarified he would not be involved in ownership, with Jack Madden and Robert Earl Priest as the intended purchasers. Despite the ongoing negotiations, Bowman acknowledged the uncertainty of the deal’s finalization, especially concerning the business's financial viability.
J. Darrell Bell from the First National Bank expressed the bank's interest in the sale due to its loan involvement and confirmed prior knowledge of the S.B.A. loan's assumability by the buyer. He assumed that other parties involved would be released from obligations, as no contrary indication was given.
The parties reached an agreement on August 25th for a payment of $48,194.16, prompting a discussion about documenting the agreement, particularly to clarify the indebtedness of Bowman and L. E. Hart. A surprise for the attendees was the shutdown of the plant prior to the meeting, which was not mentioned by the buyers or during the meeting. Additionally, it was unexpected for Mr. Bell to learn that Jack Madden was using the cement truck shortly after the meeting. Mr. Bell assumed Mr. Sheldon Madden would manage the business operations. Attorney Fred Pickett, representing Mr. Priest, was aware of the negotiations but not actively involved until after the August meeting, during which he noted differing opinions on Priest's commitment to the transaction. On October 2, 1969, Bell indicated that if an agreement existed from August 25th, Priest was implicated in it. Three weeks post-meeting, Hart and Bowman consulted Pickett about drafting sale documents, but he concluded that a valid contract was not in place, leading to another meeting to clarify matters.
Robert Earl Priest later questioned Bowman about agreeing to purchase the property, to which Bowman denied any agreement. Priest clarified that offers made by Sheldon Madden were on behalf of himself and Jack Madden, and mentioned a prior discussion about potentially shutting down the plant due to fluctuating figures. Sheldon Madden's interest was in facilitating a business relationship between Priest and his son, rather than acquiring the property himself. He expressed disinterest once he learned Priest was not proceeding with the deal. Additionally, issues arose regarding Hart's inability to remove his name from an S.B.A. loan, which complicated potential contracting business plans. Throughout the discussions, Sheldon Madden consistently stated he did not anticipate owning any part of the property.
Mr. Jack Madden was informed of an impending plant shutdown two weeks prior to August 25th. He expressed a willingness to buy the business only if he could partner with Mr. Priest, indicating he did not wish to proceed alone. Upon learning that Mr. Priest would not finalize the deal, Madden also chose not to pursue it. Testimonies from Mr. Staggs and Fred Pickett suggested that there was an expectation that Priest would not agree to the purchase, and Priest confirmed that Bowman acknowledged he had not consented to the deal. The trial court concluded that Priest did not agree to the purchase on August 25th, a finding supported by the evidence.
Regarding the Maddens, the court noted that the Chancellor failed to recognize the principle of contract law requiring mutual assent from all parties involved. There was no evidence that the Maddens intended to proceed with the purchase without Priest's agreement, as reflected in Exhibit No. 1 prepared by Staggs at the direction of Bell and Sheldon Madden. A claim that Jack Madden was estopped from denying assent was unsupported by evidence; the outstanding debts of Associated and the financial situation before the shutdown were highlighted. Mr. Staggs' assertion that Associated could have operated post-August 25th contradicted other testimonies about the shutdown. Ultimately, the conclusion drawn was that the August 25th negotiations did not trigger the plant's closure, as Mr. Hart indicated the decision to close was already made.
Jack Madden's request to use Associated's truck was deemed reasonable given the circumstances, and the evidence did not support a finding of estoppel. The court found it unnecessary to determine Sheldon Madden's potential liability as a principal due to his agency relationship. The decision was reversed and remanded for further proceedings, with Judge Fogleman dissenting in part.
