N. J. K. Corp. v. Pacific Vital Foods Stores, Inc.

DRAPEAU, J.

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The N. J. K. Corporation, of which Mr. and Mrs. Nathan Jack Smith are the sole stockholders, filed the present complaint asking rescission of a contract of sale of a retail health food store purchased from appellants, and damages for fraud. After trial before a judge, respondent corporation recovered judgment in the sum of $10,956.25, and the cancellation of a $3,000 promissory note given to appellants as part of the purchase price.

It is appellants’ contention that the evidence does not support the findings; that the true measure of damages is not the loss alleged to have been suffered; that respondent was not damaged in the amount of the judgment by reason of the alleged fraud, and was not entitled to a cancellation of the $3,000 note; and that the appellants’ motion for a nonsuit should have been granted.

The record discloses that when Mr. and Mrs. Smith first inquired about the health food store, appellant Kordell, vice president of Pacific Vital Food Stores, Inc., represented that the store business grossed approximately $57,000 during 1953, whereas it appeared from the appellants’ books that the entire gross sales of Pacific Vital Food Stores, Inc., which was engaged in both wholesale distribution of health foods and

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the operation of retail stores, was only $56,496.07, which amount included mail sales as well as sales from the store in question. The exact amount of such mail sales was not established.

Appellants also represented to respondents that the store business made an “operator’s profit (before wages) of $15,-392.00” during the calendar year of 1953, and that with an allowance of $2,400 for wages, the “owner-operator’s profit or earnings” was $13,273. The books of appellant corporation, however, show that the appellants lost $8,634.19 during the fiscal year ending August 31, 1953, and during the fiscal year ending August 31, 1954, appellant corporation lost $2,852.42. Appellants’ auditor was unable to determine from the books what percentage of this loss was attributable to the Broadway store. Mr. Kordell, appellant corporation’s vice president, who might have produced explanatory record, did not appear or testify at the trial, and his counsel was uncertain as to Kordell’s whereabouts. There was also evidence to the effect that although in the sale agreement appellant represented that they were transferring at least $7,500 worth of “salable quality” merchandise, much of which was in sealed containers, respondent found that “A good deal of it was in very poor condition. In fact, we had to discard quite a few things,” such as “crackers and different kinds of nuts and fruits, and . . . almost one entire counter full of things that were bad, and the macaronis and things like that that were made out of flour, they were wormy and spoiled.”