Lolos v. Berlin
| Decision Date | 30 October 1958 |
| Citation | 153 N.E.2d 636,338 Mass. 10 |
| Parties | Speros T. LOLOS v. Jerome I. BERLIN and another. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Gerson Askinas, Springfield, for plaintiff.
Emerson S. Searle, Vincent J. Panetta, Springfield, for defendants.
Before WILKINS, C. J., and SPALDING, WILLIAMS, COUNIHAN and CUTTER, JJ.
In this suit seeking rescission of the sale of a business, the master to whom the case was referred found the following facts: The defendant Berlin was the owner of all of the capital stock of a corporation known as The House of Carpets, Inc. The corporation was engaged in the business of selling rugs in Springfield. The plaintiff wished to acquire a business, and entered into negotiations with Berlin for the purchase of his stock. After many conferences the plaintiff, Berlin and the corporation entered into a written agreement on March 23, 1955. The agreement provided for a sale of all of the capital stock of the corporation to the plaintiff for $5,400. Berlin agreed that the corporation would own at the time of transfer inventory of a wholesale value of $5,900 as shown by a list attached to and made part of the agreement, all the fixtures and personal property then used in the corporation's business, and accounts receivable as listed in a record attached to the agreement and incorporated therein by reference. The agreement also provided that the liabilities on the date of transfer would be as set forth on a list attached to the agreement and incorporated therein by reference. The plaintiff agreed to assume all liabilities set forth in this list. The agreement provided that insurance held by the corporation should be adjusted as of the date of transfer. Berlin agreed to deposit the sum of $1,250 with the defendant Panetta, who acted as Berlin's attorney in the transaction. This sum was to be held by Panetta in escrow for the following purposes: $250 to be held for three months to be applied in payment of any liabilities existing on the day of the transfer which did not appear on the list attached to the agreement; and $1,000 to be held to guarantee that the landlord of the premises occupied by the corporation would execute a lease for an additional term of two years at a rental no greater than $275 per month. In the event that a higher rent was demanded, Panetta was to pay to the plaintiff the amount of the increase but only to the extent of $1,000.
The plaintiff was represented by counsel at the time of the execution of the agreement. Within a few days after the transfer of the property (which took place on the same day or the day after the contract was signed) the plaintiff employed another attorney, and with him had several interviews with Berlin and Panetta. The plaintiff complained of discrepancies concerning the inventory, accounts payable and accounts receivable, and Berlin promised to investigate these matters. The plaintiff also had several conferences with the defendant Berlin alone shortly after the sale and before any claim of fraud or misrepresentation was made. At these conferences the plaintiff told Berlin that he was not suited for business and had had no prior business experience, and that the transaction was causing distress to him and his wife. He asked Berlin to take the stock back and return the purchase money, but Berlin refused to do so. No charge of fraud or deceit was made by the plaintiff at any of these conferences. The conferences took place after the time alleged by the plaintiff in his bill that he had discovered that certain of Berlin's representations were fraudulent.
On April 27, 1955, while negotiations with regard to the plaintiff's complaints were being conducted, the plaintiff's attorney told the defendant Panetta that he was preparing a bill in equity based on fraud and intentional misrepresentation. This disclosure terminated all discussions between the parties. On the same day the defendant Panetta notified the plaintiff that he had assigned to himself as attorney for the defendant $1,000 of the escrow money. 1 The master concluded that the plaintiff showed no right with respect to this fund, as he had voluntarily abandoned any attempt to renew the lease with respect to which the fund was put in escrow.
At the time that the agreement was executed, Berlin represented that the corporation owned certain prepaid insurance to the value of $532. This value was overstated in the amount of $404.41 but the representation was not made with any intent to deceive. When the error was discovered, and before the bill of complaint was brought, Berlin offered to pay $404.41 to the plaintiff out of the $1,000 escrow fund. The plaintiff refused to accept payment from the escrow fund and insisted that Berlin make it out of his personal resources.
There items in the list of accounts receivable, amounting in all to $263.74, were overstated, but this was done unintentionally and with no fraudulent purpose.
With respect to the inventory and accounts payable, the master concluded that the plaintiff had failed to establish any discrepancy.
When, in his bill, the plaintiff first demanded that the contract be rescinded and offered to restore the capital stock of the corporation to Berlin, he still had all of the stock, but the assets of the corporation had dwindled by a substantial amount. On July 26, 1955, nearly three months after the commencement of suit, the plaintiff caused The House of Carpets, Inc., to execute an assignment for the benefit of creditors.
The ultimate finding of the master was in favor of the defendants Berlin and Panetta, except in so far as the bill of complaint as drawn would support a finding...
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