Vitale v. Coyne Realty, Inc.

• Decision Date: 28 February 1979
• Docket Number: No. 1,No. 3,No. 2,1,2,3
• Citation: 66 A.D.2d 562,414 N.Y.S.2d 388
• Parties: Thomas J. VITALE, Respondent-Appellant, v. COYNE REALTY, INC., Shirley Coyne, Sally Dumond, Patricia Tawil, Appellants-Respondents. AppealThomas J. VITALE, Appellant-Respondent, v. COYNE REALTY, INC., et al., Defendants, Patricia Tawil, Respondent-Appellant. Patricia A. TAWIL, Respondent-Appellant, v. Thomas J. VITALE, Appellant-Respondent. AppealThomas J. VITALE, Appellant, v. George H. VANLENGEN, Respondent, Coyne Realty, Inc., et al., Defendants. Appeal
• Court: New York Supreme Court — Appellate Division

Page 388

414 N.Y.S.2d 388

66 A.D.2d 562

Thomas J. VITALE, Respondent-Appellant, v. COYNE REALTY, INC., Shirley Coyne, Sally Dumond, Patricia

Tawil, Appellants-Respondents. Appeal No. 1.

Thomas J. VITALE, Appellant-Respondent, v. COYNE REALTY, INC., et al., Defendants, Patricia Tawil,

Respondent-Appellant.

Patricia A. TAWIL, Respondent-Appellant, v. Thomas J. VITALE, Appellant-Respondent. Appeal No. 2.

Thomas J. VITALE, Appellant, v. George H. VANLENGEN, Respondent, Coyne Realty, Inc., et al.,

Defendants. Appeal No. 3.

Supreme Court, Appellate Division, Fourth Department.

Feb. 28, 1979.

Crystal, Manes & Rifken, P.C., Syracuse, for Patricia Tawil (Milton Crystal, Syracuse, of counsel).

McCrone & Davis, Syracuse, for Coyne Realty & Sally Dumond (Jeffrey McCrone, Syracuse, of counsel).

Driscoll, Mathews, Gingold & Case, Syracuse, for Thomas Vitale (Eric Alderman, Syracuse, of counsel).

Coulter, Fraser, Ames, Bolton, Bird & Ventre, Syracuse, for George VanLengen (Bruce Bolton, Syracuse, of counsel).

Before SIMONS, J. P., and HANCOCK, SCHNEPP, CALLAHAN and WITMER, JJ.

PER CURIAM.

The members of the court are in general agreement with the disposition of the various issues on this appeal as set forth in the Opinion of Justice Callahan. A majority of the court, however, believe that the method used to measure restitution due upon rescission of the sale of the restaurant business was improper. Indeed, were it not for the fact that the property has already changed hands and both the vendee, plaintiff Vitale, and the vendor, defendant Tawil, have stated they now elect rescission and restitution, we might well find rescission impossible (see Ungewitter v. Toch, 31 A.D.2d 583, 294 N.Y.S.2d 1013, affd. 26 N.Y.2d 687, 308 N.Y.S.2d 858, 257 N.E.2d 40). In view of their stipulation, however, we reverse and remit the matter to Trial Term for appropriate findings of fact and further proof if necessary.

Upon remand, the trial court should, as nearly as possible, attempt to place the parties in their original positions before the sale (see generally, 12 C.J.S. Cancellation of Instruments § 77 et seq.). Since the court was reviewing the transfer of the real estate and operation of a going business, certain considerations were appropriate.

Trial Term properly determined that plaintiff's total investment (for down payment, legal fees and broker's commission) when he purchased the restaurant was $56,576.17 (see 3 Black, Rescission and Cancellation (2d ed.) section 688). Second, the court should determine any change in the net worth of the business from the date of plaintiff's purchase to the date of rescission. If the net worth was greater at rescission, that increment should be added to plaintiff's investment and if it was less, it should be deducted from his investment. Third, the court should determine the gross income from the business during the period plaintiff operated it and subtract from that amount the expenses of operation, including a reasonable salary to plaintiff for the time he worked at the restaurant. The net profit of the business determined by this calculation should be subtracted from the sum of plaintiff's original investment and any additional net worth or the difference if there was a loss in the net worth. If the business sustained a net loss the amount of that loss should be added to the original investment plus the net worth computations. The resulting sum represents the amount of the restitution in plaintiff's favor and he is entitled to interest on this amount at such rate as the court shall find as a fact is reasonable for investments of this type during the period involved.

The amended judgments awarding damages against defendants Tawil, Dumond, Coyne and Coyne Realty, Inc. should be reversed and the complaints against said defendants dismissed; the order granting rescission against defendant Tawil should be reversed insofar as it determined the amount of restitution and the matter remitted to trial term for further proceedings in accordance with this Opinion; and the judgment dismissing plaintiff's complaint against defendant VanLengen should be affirmed.

Appeal No. 1. Judgments unanimously reversed with costs to defendants and complaint dismissed.

Appeal No. 2. Order reversed without costs and matter remitted to Supreme Court, Onondaga County for further proceedings.

Appeal No. 3. Judgment unanimously affirmed with costs.

SIMONS, J. P., and HANCOCK, SCHNEPP and WITMER, JJ., concur.

CALLAHAN, J., dissents in part in the following Opinion.

CALLAHAN, Justice (dissenting).

I dissent in part. The majority demand acceptable accounting principles or certitude in a small business operation when it does not exist from the proof. The trial court found that because of the bookkeeping methods used by the plaintiff, Thomas J. Vitale, it is impossible to arrive at a mathematically certain conclusion. The impossibility of establishing certitude in computing damages should not foreclose the parties right to recover. If the trial court's apportionment of damages can be reasonably supported by the record it should not be disturbed.

In April, 1976 plaintiff, Thomas J. Vitale, sought employment as a salesman with defendant, Coyne Realty, Inc. At the time of his interview with the manager, defendant Sally Dumond, he expressed an alternative interest in purchasing and operating a restaurant. She indicated that Pfeiffer's Drive-In, among others, was available. Returning in May, he restated his interests in employment or a business venture. Dumond advised that Pfeiffer's could be purchased for $160,000.00 and arranged an appointment with the owner, defendant, Patricia Tawil. On inspection of the premises, equipment, and fixtures he was told by Tawil that she grossed $650.00 to $700.00 per day. When a request for an examination of the books was made, Tawil indicated that they were not accurate as some cash from certain operations was never recorded and that she discarded her register tapes. After viewing the premises, Sally Dumond and Vitale drafted a composite list of the assets and equipment of the business and calculated the income and expense of the operation from available figures. Dumond allocated $35,000.00 to good will and indicated that the place was "a gold mine". Relying on Tawil's appraisal of operations it was estimated that Vitale could reasonably anticipate a yearly income of $50,000.00. Plaintiff expressed a sincere interest in purchasing the business. A purchase offer was typed by Shirley Coyne, subject to approval by Vitale's father, and contained a provision that a more formal detailed contract would be drafted with the purchase offer serving to determine the sales price and terms of sale. That evening, Vitale, his father, Shirley Coyne and Sally Dumond viewed the restaurant. Tawil informed plaintiff's father that she grossed $17,000.00 per month. After father approved, arrangements were made for financing and closing the transaction.

When advised that Vitale had no personal attorney, Coyne recommended George H. VanLengen as one familiar with restaurant closings. A phone call by the broker informed VanLengen of the contents of the purchase offer and arranged for him to meet his new clients. At their first meeting, VanLengen expressed his disappointment about certain changes made in the purchase offer which he had not approved. Upon learning from the plaintiff that the records of the business were not utilized in preparation of the statements of assets and profit, VanLengen recommended an accountant be retained to analyze the operational accounts and records. An accountant was hired but commissioned merely to establish books, capitalization and a record keeping system.

The closing occurred on May 28, 1976; the deed was executed transferring the premises, and Vitale was in business. The selling price paid was $150,000.00 and Tawil took back a first mortgage of $106,000.00 payable with interest at 81/2% Per annum. Vitale agreed to pay the broker's commission of $10,000.00 and an attorney's fee of $1,000.00. He continued operation of the business for some period of time; however, it failed to provide the income as represented and an action was commenced against Tawil and the brokers, for damages and rescission based on fraudulent misrepresentation and also against attorney VanLengen for malpractice.

At the trial, plaintiff's complaint against VanLengen was dismissed at the close of the plaintiff's proof and the jury rendered a verdict against defendants Dumond, Coyne and Tawil in the amount of $8,000.00 each and against defendant Coyne Realty, Inc. in the amount of $1,000.00. On motion, the verdict was reduced pro rata to conform with the $20,000.00 Ad damnum clause. After an extensive hearing to determine the efficacy of rescission and restitution, the Court granted rescission and ordered restitution by Tawil in the amount of $14,065.12. Of this amount $11,065.12 was to be paid immediately to the plaintiff; $3,000.00 was to be held in escrow to cover anticipated restoration costs. Vitale was ordered to transfer certain checks within his possession to Tawil.

Defendants Coyne Realty, Inc., Shirley Coyne, Sally Dumond and Patricia A. Tawil appeal from the amended judgment of $20,000.00. Vitale cross-appeals from the judgment insofar as it reduced the verdict pro rata to conform with the Ad damnum clause, from the dismissal of his malpractice complaint against defendant George H. VanLengen, also from a judgment and an amended judgment respectively which granted him rescission on the condition, Inter alia, that he accept $14,065.12 in restitution and convey to defendant a warranty deed free and clear from all liens and encumbrances. Tawil's cross-appeal from the aforesaid judgments has been withdrawn, except as to the amount of restitution.

We affirm the dismissal of plaintiff's malpractice complaint against George H. VanLengen. He was retained subsequent to the execution of the...