Crocker-Anglo National Bank v. Kuchman

WARNE, J. pro tem.

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Plaintiffs in their complaint allege that they had purchased all the capital stock of a certain corporation from the defendants, Carl Kuchman and Earl Shenker; that they had been induced to make such purchase by fraudulent representations concerning the value of the stock as reflected by the assets of the corporation, its business, its prospects, and its good will; that plaintiffs had paid

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$30,000 for the stock; that on discovering the fraud they had rescinded the contract, had tendered the return of the stock, and had demanded that the defendants restore to them the money paid; that the plaintiffs had received nothing except the stock; that the stock was without value; and that in perpetrating the alleged fraud defendants had acted maliciously. By an additional count plaintiffs allege that defendants had received from them the sum of $30,000 for the use and benefit of plaintiffs; that demand had been made for the return of said sum, which was refused, and that the entire sum remained unpaid. The prayer of the complaint asked 11 That the agreement of purchase and sale of stock ... be declared rescinded; 2. That defendants restore to plaintiffs the sum of $30,000.00 . . . , together with interest ... ; 3. That plaintiffs be awarded punitive damages; 4. For costs of suit; and 5. For such other and further relief as to the Court may seem just and equitable.”

The defendants answered by denying the particular allegations of fraudulent acts alleged to have been done by them. They asserted affirmatively that plaintiffs had not acted promptly and therefore had not been entitled to rescind when they did act; that this failure to act promptly had injured defendants; that plaintiffs had themselves breached the agreement by refusing to pay the balance of the purchase price for the stock; that said plaintiffs could not restore everything of value received by them because certain conduct of theirs had greatly depreciated the assets of the corporation and had injured the business; that plaintiffs could no longer place defendants

in statu quo;

that they, defendants Kuchman and Shenker, upon the sale of the stock, had in good faith relied upon the finality of the sale and if rescission were permitted they could not extricate themselves from their changed position without damage. They denied the allegations of the common count generally. They also cross-complained, alleging that a part of the purchase price was unpaid, for which they asked judgment. They further cross-complained that by reason of plaintiffs’ false representations they had been led to believe that a business broker who handled the deal was the sole agent of defendants Kuchman and Shenker in the transaction, when in fact, unknown to them, he was the agent of plaintiffs; and that in reliance upon the falsely induced belief they had paid the broker $3,000 commission. They asked judgment for this sum.