Opinion
Sept. 6, 1972.
Editorial Note:
This case has been marked 'not for publication' by the court.
Page 132
Meer & Wolf, Albert B. Wolf, Denver, for defendants-appellees.
John A. Kintzele, Denver, for plaintiffs-appellants.
Jerome R. Strickland, Denver, for third-party plaintiffs-appellees.
ENOCH, Judge.
This appeal arises from four separately filed actions which were consolidated for trial concerning disputes which arose in conjunction with the sale and resale of a tavern. Plaintiffs-appellants, Paul Hilst and 521 Club, Inc., appeal from a judgment in favor of defendants-appellees, E. Bernard Gaffey and Therese C. Gaffey and third-party plaintiffs-appellees, John S. Burkins and Orma G. Burkins. We affirm the trial court's judgment in all respects with the exception of a clerical error made in computing damages.
The background of this controversy is as follows: In 1964, the Gaffeys sold a sole proprietorship tavern business known as '521 Club' to V. D. Fransen and Kenneth W. Lewis. Fransen and Lewis executed a promissory note for the purchase price, which was secured by a chattel mortgage on fixtures located in the 521 Club. Concurrently, the Gaffeys entered into an agreement with Paul Hilst whereby Hilst agreed to pay any balance due on the Fransen-Lewis note in event of default and Hilst received a second chattel mortgage on the same assets.
Subsequently, the 521 Club was acquired through foreclosure by Hilst who then sold it to one William Sanders. The receipt recited as part of the purchase price '$19,000.00 approximately by assumption of the first mortgage.' Sanders thereafter made payments on the note to the Gaffeys. Sanders subsequently incorporated the 521 Club, caused all of the stock to be issued to himself and continued to operate the business. After the incorporation, payments to the Gaffeys were made in the name of the corporation until it defaulted and Hilst regained possession.
Hilst next sold the 521 Club, Inc., to the Burkinses and, as part of the transaction, executed a document whereby he agreed to hold the 521 Club, Inc., harmless of any and all bills to date. The Burkinses were not informed of the existence of the Gaffey note. After this sale no further payments were made to the Gaffeys and Hilst failed in his commitment to pay. The present consolidated suits resulted. The Gaffeys sought the unpaid balance on the note and the Burkinses sought rescission of their contract with Hilst for the purchase of the 521 Club, Inc. Trial was to the court, which found Hilst and Sanders jointly and severally liable to the Gaffeys for the principal and interest on the note and attorney's fees. The trial court also found that the Burkinses were not informed of the existence of the Gaffey note and they were entitled to rescission and a return of the downpayment which they had made to Hilst.
I.
Hilst first contends that the promissory note payable to the Gaffeys and the chattel mortgage securing said note are void in that they fail to show a due date or any method of calculating a due date. The record does not support this argument. The note is for an amount certain with fixed monthly payment to be paid 'until said amount is paid in full.' The note is clearly identified in the chattel mortgage, and the due date could be mathematically determined from either instrument.
II.
Hilst more seriously contends that the Gaffey note is not an obligation of the 521 Club, Inc., in that neither Sanders nor the 521 Club, Inc., assumed the obligation. Hilst argues that, although Sanders attempted to assume the note, this attempt was ineffectual because parol evidence was necessary to establish whose chattel mortgage was assumed. Hilst further argues in this regard that Sanders' assumption was also ineffective because it was of the chattel mortgage and not of the note.
Under the parol evidence rule, oral evidence is admissible to explain a writing where an ambiguity exists. Regan v. Customcraft Homes, Inc., 170 Colo. 562, 463 P.2d 463. In the present case, the writing referred to as a first mortgage being assumed by Sanders did not identify the mortgage holder. These are proper circumstances for the allowance of parol evidence to establish whose chattel mortgage was being assumed. See Regan v. Customcraft Homes, Inc., Supra.
We also find no merit in Hilst's assertion that the Sanders' assumption was ineffective because it was of the chattel mortgage and not of the note. The agreement reads:
'(Sanders) agrees to purchase for a total purchase price of $28,000 payable as follows: $2,000 cash or check at time of closing payable in addition to said note dated May 20, 1965,.$19,000 approximately by assumption of first mortgage in said appropriate amount . . ..'
This document evidences a clear intention that the debt be assumed. Any element of doubt is removed by the testimony of Sanders, who stated that he agreed to pay the note owned to the gaffeys which was secured by the chattel mortgage in question.
We also find no merit in Hilst's argument that the 521 Club, Inc., did not assume the note in that there was no express assumption by the corporation. After Sanders, personally, had made payments on the note, he incorporated the business. All assets of the 521 Club were transferred to the corporation and Sanders received in exchange all stock in the corporation and remained the sole owner and operator. Following incorporation, 521 Club, Inc., made payments on the note. Under these circumstances, the corporation is presumed to have assumed the debts of its predecessor. Curtis, Jones & Co. v. Smelter National Bank, 43 Colo. 391, 96 P. 172. The evidence is more than ample to support the trial court's determination that this presumption had not been overcome.
III.
Hilst further contends that he is not obligated to pay the note under the original chattel mortgage with the Gaffeys, whereby he had the option to pay the Fransen and Lewis note or to keep it current. Hilst argues this contract did not obligate him to do either, but allowed him to take either course of action if he so chose. The trial court found the agreement required Hilst to either pay the note or keep it current and he did neither. We find the trial court's interpretation of the writing correct and, accordingly, affirm its determination. See Burns v. Burns, 169 Colo. 79, 454 P.2d 814.
IV.
Hilst next argues that he is entitled to judgment or set-off against the Burkinses for certain property removed by the Burkinses and also for $180 damage deposit. Hilst also contends that the Burkinses were not entitled to the judgment of rescission. The record does not support these contentions. After the Burkinses returned the premises to Hilst, they removed only stock and glasses purchased by them, and the $180 damage deposit was made to replace an electric utility deposit, which was to be left with the utility company for one year. Under these circumstances, Hilst was not entitled to a set-off. We also hold that the trial court correctly ordered a rescission of the contract between Burkinses and Hilst. Hilst's misrepresentation of the financial structure of the business and his failure to inform the Burkinses of the Gaffey note were sufficient grounds to support the trial court's finding that the Burkinses were entitled to rescission and a return of their down payment.
The judgment of the trial court contains a clerical or mathematical error in stating the amount due the Gaffeys. This cause is remanded with directions to amend the amount of the judgment for the Gaffeys in accordance with this opinion, and as amended, the judgment is affirmed.
DWYER and PIERCE, JJ., concur.