Palermo v. Pyke

WOOD (Parker), J.

In this action for rescission the plaintiff appeals upon the judgment roll from the judgment in favor of defendants.

[351]

Plaintiff is the assignee of Oswald Palermo. In October, 1947, Oswald Palermo, who was in the business of manufacturing women’s wearing apparel, and defendants Pyke and Nellis entered into a written agreement wherein Palermo represented that he owned certain machinery and equipment; wherein Pyke and Nellis represented that they owned all the issued capital stock of Cinema Modes, a corporation; and wherein Palermo agreed to sell said machinery and equipment to Pyke and Nellis for 10,000 shares of stock of Cinema Modes. It was also stated therein that Palermo understood that Pyke and Nellis intended to enter into commitments for leasing space in the name of Cinema Modes in reliance upon the performance of the agreement by Palermo; that in the event he failed to comply with the agreement he would indemnify them for all damage suffered; that Palermo would be elected the third director of Cinema Modes when he acquired said stock.

In November, 1947, the said parties entered into a written agreement which provided that the parties agreed that the inventory value of the machinery and equipment, namely, $18,463.09, had been reduced, for the purpose of said sale, to $15,119.36; and that the book value of the 10,000 shares of stock was $15,119.36. A bill of sale covering said machinery and equipment was made by Palermo and delivered to said buyers. A stock certificate representing 10,000 shares of Cinema Modes was made and delivered to Palermo. Pyke and Nellis transferred the machinery and equipment to Cinema Modes in settlement of their indebtedness to the corporation in the sum of $15,119.36.

On January 13, 1948, Palermo was arrested upon a charge of burglarizing a building of Caltex Corporation, his former employer, on March 1,1947, and stealing therefrom 20 sewing machines and 4 cutting machines, which machines were a part of the machinery and equipment that he sold to Pyke and Nellis. Later he pleaded guilty and was sentenced to the penitentiary.

On January 15, 1948, Palermo, Pyke, Nellis and Cinema Modes entered into a written agreement, entitled “Agreement of Rescission,” which recited in part that it had been ascertained by Pyke and Nellis and substantiated by Palermo that 21 sewing machines and 3 cutting machines which were a part of the machines and equipment sold by Palermo did not and do not belong to him; that others are claiming the