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Mackey v. Philzona Petroleum Co.

Supreme Court of Arizona

December 29, 1961

Webber MACKEY and Marijorie Mackey, his wife, Appellants,
PHILZONA PETROLEUM COMPANY, a corporation, and John G. Phillips, Appellees.

Rehearing Granted Feb. 13, 1962.

Page 633

[90 Ariz. 273] Moore & Romley, Phoenix, for appellants.

Snell & Wilmer, Phoenix, for appellees.


This case arose out of a contract made August 3, 1956, by which the plaintiffs [90 Ariz. 274] transferred numerous leases and certain personal and real property to defendant Philzona Petroleum Company (called Philzona), a corporation organized by plaintiffs and the other defendant John G. Phillips. The entire transaction is involved and complex and only such details as are necessary will be discussed in this opinion.

Mackey went to work for Philzona but on October 2, 1956, he was discharged by Phillips who was acting for the corporation. It should be noted that Phillips was president and that the three directors were Phillips, Mrs. Phillips, and Mackey; they being the organizers and sole stockholders. Various other difficulties also developed and finally this suit was filed.

The second amended complaint upon which trial was had is very lengthy, and alleges fraud and mistake in great detail and seeks various relief including reformation, rescission, quieting of title, adjustment of equities, accounting, money judgment,

Page 634

and such other judgment and relief as may be proper. The complaint does not allege any definite amount as damages nor pray for damages as such. The answer is also quite detailed and denies many of the allegations of the complaint and also alleges certain new matter.

The only new matter alleged, material to the consideration of the particular questions raised on this appeal, appears in Paragraph XX of the answer as follows:

'Defendants further allege that at the time said plaintiff Webber Mackey severed connection with said Philzona Petroleum Company said Webber Mackey knew that the company was then actively carrying on its business, making contracts for the acquisition of property, the purchase and sale of personal property, incurring indebtedness and paying obligations incurred, by reason whereof the affairs of the company were in a state of constant change; despite the foregoing facts, without justification and with full knowledge that said plaintiff's employment had been terminated with Philzona Petroleum Company permanently, said plaintiff did not notify defendant that he claimed any fraud had been practiced on him or that he desired to rescind the agreement but on the contrary led defendant to believe that he abided by the contract, was satisfied therewith, other than for the claim of some additional adjustments as to the amount of stock due to said plaintiff and thereby ratified said contract and elected to rely thereon and accept the benefits thereof; alleging in this respect that said plaintiffs are barred by laches, ratification and want of equity in doing other than abiding by the contract as entered into as reflected by said Exhibit B.'

[90 Ariz. 275] This case came on for trial before a jury and while the plaintiff was testifying the defendant asked leave to examine him on voir dire. In connection with such examination the defendant, over objection, introduced three documents in the nature of assignments and pledges of the stock of the corporation which Mackey was to receive under the agreement executed by him to various third parties. Thereupon defendant objected to any further evidence upon the claim for rescission on the ground that the plaintiff had, with full knowledge of the facts, ratified the contract in that he had exerted dominion over the subject matter and had put it beyond his power to rescind.

Involved objections, offers of proof, and similar proceedings were had both in and out of the presence of the jury. The court eventually ruled that plaintiff had barred himself from the relief of rescission but would be permitted to proceed solely on a claim for damages. Plaintiff declined to do so and 'involuntarily rested.' A verdict was directed for defendants, motion for new trial denied and this appeal followed.

The trial proceedings were highly irregular. A defendant should not be permitted to interrupt the presentation of the plaintiff's case to establish an affirmative defense and then require the plaintiff to introduce evidence to rebut that defense before the plaintiff has even established his case in chief.

Orderly procedure requires that the plaintiff be permitted to prove his case. The defendant may then prove any affirmative defense he has pleaded and thereafter plaintiff may rebut such defense if he can. If a defendant has a defense that is absolutely iron-clad and non-assailable he may avoid trial by motion for summary judgment of which at least ten days notice must be given. A party may also move for separate trial upon particular issues. No such motions were made in this case.

If it appeared however to this Court that upon a new trial the defendants could as a matter of law establish an absolute defense to the entire case, the judgment should be affirmed as a ...

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