Mariani v. Schonfeld

DOOLING, J.

This is an appeal from a judgment for $37,500 entered upon a jury verdict in favor of the plaintiffs. The cause of action was based on misrepresentations made by defendants in connection with a sale of a business.

Appellants Charles and Sidney Schonfeld sold to respond

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ents all the stock in the Lincoln Bowl, a corporation, which operated a bowling alley at 319 Sixth Avenue in San Francisco. The contract of sale was signed on October 25, 1950, in which it was agreed that the purchase price was to be $80,000, and if it should become necessary for the sellers to personally finance any part of the transaction, then the purchase price was to increase to $82,500. The respondents took over the business on November 1, 1950, with the appellants remaining in an advisory capacity for the first 10 days. Respondents made payments aggregating $40,000 and signed promissory notes agreeing to pay the balance.

In October, 1951, respondents filed a complaint for damages based on fraud alleging that the appellants misrepresented the net income of the Lincoln Bowl and that appellants kept and maintained two sets of statements of the business operation in order to defraud respondents.

Appellants make two contentions: (1) The evidence is insufficient to support a recovery based on fraud; (2) the damages awarded were excessive and the result of passion and prejudice.

Appellants argue that there was no misrepresentation of any material fact. To support this contention they cite separate facts that were either known to the respondents or were truthfully represented to them. For example, the respondents obtained a complete inventory of all the equipment at the Lincoln Bowl prior to sale, they knew the terms of the lease, etc. Respondents, however, testified that there were two sets of statements on the operation of the business, one of which is false and is the one on which respondents relied to their damage. They further testified that prior to the purchase appellants showed respondents some figures which were represented to be the true income from the business. At the conclusion of the meeting appellants put these papers away and stated that these papers would be destroyed. However, four or five months after the purchase a portion of these secret figures were discovered accidentally by Mariani when he was cleaning out the files at the Lincoln Bowl. Manning took the papers down to Lazarus and Company, the accountants for the Lincoln Bowl, in order to compare the figures. A comparison of the two sets of figures shows that the records held by Lazarus and Company were invariably lower in the amount of income. During preliminary negotiations the explanation of the appellants for the discrepancy was that the statements prepared by Lazarus, which