Leone v. Rose

• Decision Date: 05 May 1960
• Citation: 199 N.Y.S.2d 946,10 A.D.2d 412
• Parties: James LEONE, Plaintiff-Respondent, v. Isadore G. ROSE, Defendant-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 946

199 N.Y.S.2d 946

10 A.D.2d 412

James LEONE, Plaintiff-Respondent, v. Isadore G. ROSE, Defendant-Appellant.

Supreme Court, Appellate Division, Fourth Department.

May 5, 1960.

Michaels, Port & Cuddy, Auburn (Edmund Port, Auburn, of counsel), for defendant-appellant.

Paul Magill, Auburn, for plaintiff-respondent.

Before BASTOW, J. P., and GOLDMAN, HALPERN, McCLUSKY and HENRY, JJ.

PER CURIAM.

In an action for damages for fraudulent misrepresentation which plaintiff claimed induced him to purchase certain machines and equipment, defendant appeals from a judgment for plaintiff entered upon the verdict of a jury. Plaintiff alleged that defendant informed him that he had purchased the assets in question for $60,000 and offered plaintiff a one-third interest in them for $20,000. Plaintiff further asserts that relying on defendant's representation that he had paid $60,000 for the machines and on his representation that this was a bargain price, he accepted the offer, paid defendant $14,268 in cash or material and executed a promissory note for the balance. Pursuant to their agreement, the parties formed a corporation to manufacture products with the machinery, title to which defendant transferred to the new enterprise. Shortly thereafter, defendant withdrew from the business, cancelled a note due him from the corporation, forgave plaintiff's unpaid note for part purchase price, transferred his shares in the corporation to the plaintiff without further payment and released plaintiff and the corporation from all obligations to him. Plaintiff contends that he then discovered that defendant had in fact paid only $5,000 for all the assets and had grossly misrepresented their cost and value.

The issues of fraudulent misrepresentation of defendant's cost of the equipment and plaintiff's reliance thereon were properly submitted to the jury which found a verdict for the plaintiff for $10,000. This amount cannot be arrived at by any analysis and review of the evidence. This verdict resulted from the failure of the court to charge the correct rule of law dealing with the measure of damages.

In cases of fraudulent misrepresentation the measure of damages is the difference between the value of the thing received and its purchase price. As stated in Sager v. Friedman, 270 N.Y. 472, 481, 1 N.E.2d 971, 974:

'* * * the injury is the inducement to make a contract which otherwise would not have been made, and the measure of damages is indemnity for loss suffered through that inducement. From such damages 'all elements of profit are excluded. The true measure of damage is indemnity for the actual pecuniary loss sustained as a direct result of the wrong,' i. e., the difference between the value of the bargain which a plaintiff was...