Barber v. Somers

• Decision Date: 07 April 1959
• Citation: 150 A.2d 408,102 N.H. 38
• Parties: Eugene L. BARBER et al., v. Emma L. SOMERS.
• Court: New Hampshire Supreme Court

Page 408

150 A.2d 408

102 N.H. 38

Eugene L. BARBER et al., v. Emma L. SOMERS.

Supreme Court of New Hampshire.

Argued Nov. 6, 1958.

Reargued March 4, 1959.

Decided April 7, 1959.

SYLLABUS BY THE COURT

1. The granting of rescission for mutual mistake, misrepresentation or fraud is not a matter of right but is discretionary with the Trial Court.

2. Rescission will be granted in the Trial Court's discretion only when damages have resulted, undue hardship will not be suffered by the defendant, the status quo can be restored, and it appears right and just to the parties to do so.

3. The election by the plaintiffs to seek rescission of a purchase and sale agreement does not deprive the Trial Court of its broad and flexible discretion to deny rescission and award damages to the plaintiffs when it is more equitable and just to do so.

4. The fact that the plaintiffs in their undertaking to purchase the capital stock of defendant's corporation, which consisted in part of a gas business, relied upon an innocent misrepresentation of an accountant, who occupied a fiduciary relationship with the plaintiffs, as to the value of the gas business on the basis of an offer made by another to the defendant and the fact that the accountant received a commission from the defendant for consummating the sale to the plaintiffs did not as a matter of law entitle them to a rescission of the contract where the evidence was not conclusive that the status quo of the parties could be restored and the granting of rescission would not work an undue hardship on the defendant.

5. In such case, the Trial Court's denial of plaintiffs' petition for appointment of a receiver for the corporation was designed to hold matters in abeyance pending a hearing on the merits and was not res judicata of the fact that the status quo could be restored.

6. In awarding damages to the plaintiffs, in such case, in lieu of rescission, the plaintiffs were held entitled to recover the difference between what the capital stock was worth determined by ascertaining the value of the entire business represented by it, and what it would have been worth had the representation been true.

7. Evidence of what the plaintiffs paid for the capital stock in such case may properly be considered in determining what the stock was in fact worth.

Devine & Millimet (Mr. Millimet orally), for the plaintiffs.

Hamblett, Kerrigan & Hamblett (Mr. David C. Hamblett orally), for the defendant.

Duncan, J., Dissented; the others concurred.

The opinion of the court was delivered by: Blandin Bill in Equity by the plaintiffs Eugene L. and Dorothy Barber against Emma L. Somers, the defendant, to rescind a purchase and sale agreement dated May 6, 1956, of the capital stock of J. Therrien, Inc., all of which was owned by the defendant. The purchase price was $110,000, of which the plaintiffs paid $30,000 down and gave a note for $80,000 for the balance, with interest at five per cent annum, payable monthly. The principal was to be paid ten years after the date of the note.

The bill as amended asked for a rescission, a return to the status quo, and for 'such other and further temporary relief as may be just,' on the grounds of fraud, misrepresentation, mutual mistake of fact, and the violation of a fiduciary duty on the part of an accountant who allegedly participated in the transaction in behalf of both parties.

After hearing on the merits, the Court made certain findings and rulings and denied the petition for rescission, but awarded the plaintiffs damages. Shortly thereafter, the plaintiffs moved to reopen, to amend the findings and rulings, and to submit evidence as to the value of the capital stock of the company. Hearings were held which finally resulted in the Court's receiving evidence as to the value of the company's inventory at the time of the sale, and making certain technical amendments in its findings and rulings, but otherwise affirming its original conclusions. To this, both parties filed numerous exceptions and these, together with exceptions to the admission and exclusion of evidence during the trial, are transferred.

In addition to its findings as to the terms and date of the agreement between the parties, as to which there is no dispute, the Court also found:

'That the said Petitionee represented to said Petitioner, Eugene L. Barber, that there was an outstanding offer of Eighty Thousand Dollars ($80,000.00) for the gas business of said corporation.

'The true value of the gas business as a separate unit was not in excess of Forty-two Thousand Dollars ($42,000.00).

'The said Petitionee herself did not believe the gas business was worth more than Sixty Thousand Dollars ($60,000.00).

'The son of said Petitionee, Robert Sullivan, did not value the said gas business as it actually existed at more than Forty-five Thousand Dollars ($45,000.00).

'For some years prior to the execution of said purchase and sale agreement, Raymond L. Houde had been employed by both the Petitioner, Eugene L. Barber, and the Petitionee as an accountant in their respective businesses.

'Both the said Petitioner and the said Petitionee knew that said Raymond L. Houde had been so employed.

'Some time prior to the execution of said agreement, said Petitionee and said Raymond L. Houde entered into an agreement whereby said Petitionee agreed to pay said Raymond L. Houde the sum of Five Thousand Dollars ($5,000.00) for his services in selling the said corporation's capital stock for One Hundred Ten Thousand Dollars ($110,000.00).

'The said Petitioners did not know nor were they told by either the Petitionee or Raymond L. Houde of this agreement.

'After the said agreement was executed, the said Petitionee paid the said Raymond L. Houde the sum of Five Thousand Dollars ($5,000.00) as per agreement. This Five Thousand Dollars ($5,000.00) was subsequently returned to Petitionee or her counsel.

'The said Petitioners neither agreed nor intended to pay the said Raymond L. Houde for any service rendered by him in connection with the sale of the capital stock of the corporation to said Petitioners.

'The Petitioner, Eugene L. Barber, and the said Raymond L. Houde were friends, and this was known to the Petitionee, and the said Petitioner trusted and relied upon Raymond L. Houde to advise him in the transaction.

'No one representing the Petitioners ever found out about the Five Thousand Dollars ($5,000.00) being paid to Raymond L. Houde until about two weeks before the beginning of the hearing of this proceeding.

'The Petitioners believed the representation of the Eighty-Thousand Dollar offer of the corporation's gas business and made no independent effort to test its truth. The Petitioners relied upon this offer in deciding to buy the said capital stock.

'There was no bona fide offer outstanding to buy the corporation's gas business as it then existed.

'The said Petitionee did not intend to deceive the said Petitioner, Eugene L. Barber, when she represented that such an offer had been made.

'The said Petitionee did not know the details of the offer and made no investigation or inquiry to determine the facts concerning said offer.

'Neither the Petitionee nor Raymond L. Houde misrepresented the value of the corporation's inventory, as the fair value of the inventory was substantially as stated in the books of the corporation.

'When the Petitioner, Eugene L. Barber, first discussed the sale of the business with the Petitionee, she told him to go and see Raymond L. Houde who would furnish him with the necessary information with respect to the corporation's accounts, financial statement and books.

'The said Raymond L. Houde did not bargain with either of the Petitioners concerning the sale of the business but transmitted the terms of the sale as given to him by the Petitionee.

'The said Petitioner, Eugene L. Barber, knew or ought to have known that said Raymond L. Houde was acting for the Petitionee and that he was receiving compensation for his services from the Petitionee.

'While the said Raymond L. Houde was not employed by the Petitioners to act for them in this transaction, his part in it would have been above reproach if he had disclosed the agreement between Petitionee and himself with respect to the payment of the Five Thousand Dollars ($5,000.00) for his services in the event the sale was effected. The evidence does not warrant a finding that the Petitioners were materially injured by his failure to make such disclosure.

'Neither the Petitionee nor the said Raymond L. Houde intentionally made misrepresentations to the Petitioners.

'The Petitioners did not purchase the capital stock in order to liquidate the business.

'The Petitioners never liquidated or attempted to liquidate the business.

'The Petitioners did not purchase the capital stock in order to liquidate the gas business.

'The Petitioners never liquidated or attempted to liquidate the gas business.

'The Petitioners were never materially damaged by any representation made by Raymond L. Houde concerning the amount for which the Corporation might be liquidated.

'The Petitioners were never materially damaged by any representation made by the Petitionee concerning the corporation's liability as an accommodation party upon any notes or other obligations of its customers.

'The consideration for the sale of the capital stock of the corporation is found to be excessive.

'The fair value of said capital stock at the time the purchase and sale agreement was executed was Eighty-nine Thousand Dollars ($89,000.00).'

On these findings it ruled as a matter of law that the prayer for recision should be denied, but that the plaintiffs were entitled to relief 'in view of all the facts and circumstances'; that the relief would be the difference between the purchase price and the fair value of the capital stock when the agreement was executed, and it accordingly gave a verdict to the plaintiffs for $21,000. Further facts appear in...