Coberly v. Neumann

SHINN, P. J. In this action plaintiffs sought damages for the alleged failure of defendant to purchase the capital stock of a Mexican corporation which was engaged in the business of selling V-W automobiles in Tijuana and other points in Lower California. Findings and judgment were in favor of defendant and plaintiffs appeal. The appeal is on the judgment roll and presents an exceedingly narrow question.

Defendant’s agreement to purchase was subject to the condition that he could “rescind” the agreement, meaning that he could withdraw from it, in certain circumstances.

It is not denied by plaintiffs that defendant had a right to withdraw from the agreement upon discovering that he could not operate the business under conditions that would be satisfactory to him. The sole contention is that he did not give plaintiffs proper and sufficient notice of his intention to withdraw. We must agree with the trial court that plaintiffs were properly informed of defendant’s intention and of his election to terminate the agreement.

The agreement contained numerous representations on the part of plaintiffs, and it also provided that the buyer should have access to the books and records of the corporation, etc., in order to satisfy himself with respect to the following: “a. That the Company has been duly organized and is existing in accordance with the laws of the Republic of Mexico; b. That the sale, transfer and delivery of the aforesaid shares of Company to Buyer does not contravene and is not in violation of any federal, state or municipal law, statute, rule or regulation; c. That Buyer, or his nominee, will be able, upon delivery of the aforesaid stock to him, or to his nominee, to enjoy all of the rights, privileges and incidents of ownership in [722]and to said stock. If upon the investigation herein provided, Buyer shall ascertain that Guarantors have made a material misrepresentation herein or if Buyer is unable to satisfy himself with respect to the foregoing matters set forth as (a), (b) and (c) of this paragraph, then and in such event Buyer may, at his election, notify Guarantors that he will rescind this agreement, unless such misrepresentation or breach be cured or such circumstance remedied, and if not cured or remedied, Buyer may rescind this agreement . . . .”

The court found that subparagraph (c) was understood by the parties to include “. . . the legal right of the defendant under the laws of Mexico to personally and directly operate and control the affairs of the Mexican corporation notwithstanding that he was and would continue to be a resident and citizen of the United States.” This interpretation of the agreement is not questioned by plaintiffs.