Bradley v. Hullander
| Decision Date | 29 August 1978 |
| Docket Number | No. 20753,20753 |
| Citation | 272 S.C. 6,249 S.E.2d 486 |
| Court | South Carolina Supreme Court |
| Parties | , Blue Sky L. Rep. P 71,455 John W. BRADLEY, Beverly J. Bradley, John C. Gilbreth and Cheri Gilbreth, Respondents, v. Paul W. HULLANDER, Vivian Hullander, and Glen Covey Associates, Inc., of whom Paul W. Hullander and Vivian Hullander are, Appellants (two cases). John W. BRADLEY, Beverly J. Bradley, John C. Gilbreth and Cheri Gilbreth, Respondents-Appellants, v. Paul W. HULLANDER and Vivian Hullander, Appellants-Respondents. |
William R. Hare, of Hemphill, Hemphill & Hare, Chester, for appellants and appellants-respondents.
David A. White, of Roddey, Sumwalt & Carpenter, Rock Hill, for respondents and respondents-appellants.
James C. Hardin, III, of Roddey, Sumwalt & Carpenter, Rock Hill, for respondents-appellants.
The plaintiffs herein bought all of the stock of Paul's Pontiac-Buick Company, Inc. from the defendants and took charge of the corporation business. About two months The defendants in answering the complaint, interposed a defense and counterclaim, in essence alleging a right to recover damages from the plaintiffs for mismanagement of the corporation business during the two months they were in possession and control.
later plaintiffs commenced this action 1, alleging misrepresentation as to the worth of the corporation by the defendants; a rescission of the contract and damages were asked in the prayer for relief. The action is founded upon the Uniform Securities Act, § 62-1, Et seq., Code of Laws of South Carolina (1962) (). Upon commencement of the action, the parties entered into an agreement for partial rescission of the purchase, and the defendants immediately resumed control of the business of the corporation.
There are before us, for review on this appeal, three orders:
(1) Order of Judge George F. Coleman dated October 16, 1976. This order ruled upon the first cause of action in the complaint on its merits. Both plaintiffs and defendants have appealed from this order.
(2) Order of Judge Clyde Eltzroth dated December 29, 1976. This order refused to grant defendants' motion to declare the plaintiffs in default on the counterclaim and for judgment as relates to the counterclaim alleging mismanagement. Defendants have appealed this order.
(3) Order of Judge George F. Coleman dated May 9, 1977, which sustained the demurrer of the plaintiffs to defendants' counterclaim for mismanagement. Defendants have appealed this order.
The order in (2), refusing to declare the plaintiffs in default and refusing judgment on the counterclaim, and the order in (3), sustaining plaintiffs' demurrer to the counterclaim, are so related that they will be disposed of together after our treatment of the appeal arising from the order of Judge Coleman disposing of the issues raised in the complaint on the merits.
This order ruled that the plaintiffs were entitled to a rescission of the contract under the Uniform Securities Act. In addition, it directed that the defendants refund to the plaintiffs monies which they had paid for the stock, and pay back monies loaned to the corporation, plus interest. We are of the opinion that the order of Judge Coleman properly sets forth and disposes of all issues raised by the defendants-sellers and the plaintiffs-buyers except one, which will be discussed later. His order, with modifications, will be printed. The matters included in brackets are our own.
OCTOBER 16, 1976
I find as undisputed facts the following historical background:
Under date of June 12, 1974, the Defendant Paul Hullander entered a Listing Agreement with Glen Covey Associates under which Glen Covey Associates, as broker, was given exclusive right of sale of the corporate stock of Paul's Pontiac-Buick Co., Inc., a South Carolina corporation, whose business was located at Chester, South Carolina. Glen Covey Associates, Inc. was contacted by the Plaintiffs John Bradley and J. C. Gilbreth and engaged by them to locate an automobile dealership for purchase. Covey sent to Bradley and Gilbreth a document entitled "Dealership Prospectus No. 37" containing certain information about the business of Paul's Pontiac-Buick Co.,
Inc. Covey put Bradley and Gilbreth in contact with Paul Hullander by giving them the telephone number of the latter and inviting them to contact Hullander. Around the first of August, 1974 John Bradley made a trip to Chester and conferred with Paul Hullander. Thereafter, on or about August 17, 1974, John Bradley and J. C. Gilbreth made a trip to Chester, as did Glen Covey. The three of them met and conferred with Paul Hullander. After some hours of discussion, Glen Covey prepared a written agreement entitled "Stock Purchase Agreement." This agreement was reviewed by Paul Hullander, John Bradley and J. C. Gilbreth and executed by them under date of August 18, 1974. At the time of entry of the agreement, Bradley and Gilbreth paid the sum of Ten Thousand and no/100 ($10,000.00) Dollars as an earnest money deposit. Paul Hullander continued in control of the business until the time of closing of the Stock Purchase Agreement, [272 S.C. 13] which occurred at the office of Attorney Arthur Gaston in Chester on September 3, 1974. At that time, Bradley and Gilbreth made payment by check of the additional sum of Fifty-five Thousand Two Hundred Fifty and no/100 ($55,250.00) Dollars toward the purchase price of said stock, and they gave a note or notes in the amount of One Hundred Fifty-nine Thousand Seven Hundred Fifty and no/100 ($159,750.00) Dollars evidencing the balance of the purchase price owed, which balance was subject to adjustment. Under the agreement, the total purchase price was to be Two Hundred Thousand and no/100 ($200,000.00) Dollars, plus any increase in the net worth of the corporation occurring after May 31, 1974 and prior to take-over by the purchasers. The final amount was to be determined at some time after the take-over, and the notes were to be adjusted accordingly. The agreement, as originally drawn, contemplated the payment of an additional Ninety Thousand and no/100 ($90,000.00) Dollars at closing. However, immediately before the closing, it was agreed that the payment at closing would be Fifty-five Thousand Two Hundred Fifty and no/100 ($55,250.00) Dollars. The sum of Thirty-four Thousand Seven Hundred Fifty and no/100 ($34,750.00) Dollars was to be used in the business of Paul's Pontiac-Buick Co., Inc. until after the first of 1975, at which time it would be paid to seller. In addition to the other payments mentioned above, at the closing, Bradley and Gilbreth paid to Glen Covey Associates a fee or commission of Eleven Thousand Two Hundred Fifty and no/100 ($11,250.00) Dollars. Bradley and Gilbreth assumed control of the business immediately after closing. While in control of the business, they did advance to Paul's Pontiac-Buick Co., Inc. the sum of Thirty-four Thousand Seven Hundred Fifty and no/100 ($34,750.00) Dollars. While in control of the business, Bradley and Gilbreth caused certain expenses incurred by them to be paid by the corporation. Some time after assuming control of the business, Bradley and Gilbreth engaged the services of the firm of James E. Rhyner, Certified [272 S.C. 14] Public Accountant, to perform an audit of the Balance Sheet of Paul's Pontiac-Buick Co., Inc. as of August 31, 1974. The audit was performed under the supervision of Mr. Rhyner. Much of the work was done by Floyd E. Taylor, an employee of Mr. Rhyner. The audit report of Mr. Rhyner was rendered under date of October 9, 1974. After receipt of the audit report, Bradley and Gilbreth engaged attorneys and commenced the within legal action. After commencement of the action, under date of November 9, 1974, the parties to this action entered an agreement for partial rescission of the purchase and sale transaction, and Paul Hullander immediately resumed control of the business of the corporation.
After extensive pre-trial conferences, by agreement of counsel, the case came on for trial before the undersigned without a jury on the first cause of action of the Amended Complaint, which is founded on Sections 62-1 through 62-319, Code of Laws of (2) Offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, the buyer not knowing of the untruth or omission, and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission;
South Carolina, 1962, commonly known as the "Uniform Securities Act." Plaintiffs rely primarily on the following language from Section 62-309 of the Code: "Any person who:
Is liable to the person buying the security from him, who may sue either at law or in equity to recover the consideration paid for the security, together with interest at six per cent per year from the date of payment, costs, and reasonable attorneys' fees . . ."
The specific untrue statements or omissions sought to be proved by Plaintiffs are as set forth in a set of specifications entitled "Stipulation" dated April 10, 1975 and an addendum thereto entitled "Addendum to Stipulation" dated May 29, 1976. Together, these set forth nineteen (19) specifications. By agreement of counsel, these specifications are treated as a part of Paragraph 12 of the First Cause of Action of the Amended Complaint.
No proofs were developed at trial with reference to specifications numbered 8, 11, 14 or the following items under No. 15(a)(6), (b)(1), (4), (5) or (6). The court therefore gives no consideration to these...
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