Kahn v. Revett

THE COURT.

This action was brought to recover the purchase price of certain stock in a corporation. The company was engaged in the manufacture of a combination vibrator and vacuum apparatus. The defendant was interested in and desirous of obtaining control of the vibrator portion thereof, upon which he was assured the company owned a patent. With this, end in view, he negotiated for the purchase of the patent rights, but subsequently changed his plans and sought to purchase all the stock of the corporation which owned the patent. Accordingly the parties entered into a written agreement in May, 1915, by the terms of which plaintiff agreed to sell and the defendant agreed to buy certain shares of the company. The corporation was known as the Vital Force Vibrator Company. The names of the holders of the stock and the number of shares owned by each of them are set forth in the agreement, the total number be

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ing 2,152 shares. The stock was placed in escrow, to be delivered to the defendant upon payment of the purchase price of $6,332.17. Defendant failed to pay, and this action was brought to recover the agreed amount.

The case was tried below upon issues raised by plaintiff’s complaint and defendant’s second amended answer and his counterclaim thereto, and by defendant’s cross-complaint against plaintiff and the other stockholders of the company and the joint answer thereto of plaintiff and his cross-defendants. The answer set up the following defenses: First, that the defendant was induced to enter into the agreement sued upon solely by reason of the false and fraudulent representations of the plaintiff and his associates; (2) that the defendant entered into the contract solely by reason of his mistake as to a material fact induced by the misrepresentations of plaintiff and his associates; and (3) want of consideration. Practically the same allegations appear in the counterclaim and the cross-complaint by which the defendant sought to have the contract sued upon rescinded and to recover damages for the money expended by him in reliance upon the representations of plaintiff. No relief was granted defendant, however, under these subsequent pleadings.

The false representations alleged to have been the inducement of the contract are, first, that the Vital Force Vibrator Company was the owner of letters patent issued by the United States patent office, No. 1,025,504, and that said letters patent were basic, unassailable, and absolutely free from infringement, having been upheld and sustained in an infringement suit against the manufacturers of a similar device. It is also claimed that plaintiff represented that the principal and essential feature of the vibrator was an unbalanced arm or hammer, and that the same was covered by the patent; and, further, that the corporation and the officer’s and directors thereof had caused the letters patent to be examined, and that they covered the vibrator device.