Weltman v. Kaye

• Decision Date: 05 February 1959
• Court: California Court of Appeals Court of Appeals
• Parties: Sldney WELTMAN, Plaintiff and Respondent, v. Herman H. KAYE, Defendant and Appellant. Civ. 23043.

Page 917

334 P.2d 917

167 Cal.App.2d 607

Sldney WELTMAN, Plaintiff and Respondent, v. Herman H. KAYE, Defendant and Appellant.

Civ. 23043.

District Court of Appeal, Second District, Division 1, California.

Feb. 5, 1959.

Bertram S. Harris, Los Angeles, for appellant.

Joseph Stell and Herbert Murez, Los Angeles, for respondent.

FOURT, Justice.

This is an appeal from a final judgment for $10,250 plus interest in favor of Sidney Weltman, which sum represents the amount paid by Weltman to Herman H. Kaye for a one-half partnership interest in a collection agency known and operated as Superior Collectors, and decreeing that Weltman was entitled to retain the sum of $2,154.06, which sum represents monies previously paid to Weltman for services rendered during the continuance of the partnership.

The material allegations set forth in plaintiff's complaint consisting of six causes of action, are that prior to March, 1955, Kaye was the sole proprietor of a collection agency operated as Superior Collectors; that Kaye, knowing that Weltman had no previous experience in and was wholly unfamiliar with said collection agency business, solicited Weltman to purchase a one-half partnership interest in said collection agency; that Kaye represented to Weltman that he had earned net profits of $13,200 from the operation of said collection agency in the calendar year 1954, whereas the net profits earned in said business for said year were $680.38; that Kaye represented to Weltman that the value of said business was the sum of $23,000, whereas its value was substantially worthless; that in reliance on the aforesaid and other representations, Weltman was induced to enter into a partnership agreement with Kaye, to purchase a one-half partnership interest in said business from Kaye for the sum of $10,250, and to pay said sum to Kaye; that Weltman first discovered that Kaye's representations and each of them were false and untrue in August of 1955, and that promptly thereafter he served a notice of rescission upon Kaye and demanded the return of $10,250 from Kaye, none of which sum has been paid to Weltman; and that at the special instance and request of Kaye, Weltman performed work and rendered services to Kaye of the reasonable value of $2,500.

Kaye's answer consisted of a denial of the allegations, and, as affirmative defenses, Kaye alleged that his books and accounts at all times during the negotiations were open for inspection by Weltman and his accountant; that Weltman had knowledge of other offers received by Kaye for the purchase of a partnership interest in said business and that Weltman's attorney prepared the written partnership agreement which Kaye signed without legal advice; that on or about May, 1955, Kaye discovered the inability of Weltman to perform his duties as required under the partnership agreement and offered to cancel the partnership agreement, to pay Weltman the sum of $10,250, and to allow Weltman to retain his drawings to date, which offer Weltman refused to accept; that Weltman was paid from the partnership bank account a draw of $2,288.95 plus personal expenses of approximately $50; and that Weltman has failed to perform his duties as required under the partnership agreement and that on August 13, 1955, Kaye gave Weltman written notice of his intention to dissolve the partnership under the terms of the partnership agreement.

The trial court heard considerable testimony and received into evidence many exhibits, including books of original entry and various documents and copies of income tax returns prepared by certified public accountants.

Appellant contends that Weltman perpetrated a fraud against appellant and committed a continuing breach of the partnership agreement; and that Weltman came into court with unclean hands seeking equity, but failing to do equity. Appellant contends Weltman knew he could not obtain a collection agency license because ha did not have an education beyond the ninth grade, and that appellant had no such knowledge of Weltman's educational limitations.

The partnership agreement entered into by the parties on March 25, 1955, contains the following provisions:

'5. It is fully understood that Kaye has owned, operated and managed and had full responsibility in the conduct of the collection agency prior to the date hereof for a period of approximately six years and is familiar with the operation of the same, whereas Weltman has had no previous experience in either the operation or conduct of a collection agency or any similar business. Kaye shall do everything possible within working hours to acquaint Weltman with the problems attendant the operation of a collection agency and give him such assistance as is possible to prepare him for the taking of the written examination prerequisite to the obtaining of an individual license by Weltman to operate a collection agency as is required by the Business & Professions Code of the State of California, Division 3, Chapter 8.

'6. Immediately upon the execution of the within instrument Kaye shall take such steps as are necessary in conjunction with Weltman to make application for licenses with the State of California for said partnership to conduct a collection agency, in the place and stead of his individual license and shall make the necessary change in licenses with the City of Los Angeles. It is distinctly understood and agreed that as a condition subsequent to the purchase of the interest in said business by Weltman that if a license is refused said partnership for any reason whatsoever, and it therefore or for any other reason becomes impossible for the parties hereto to operate a collection agency as said partners, said partnership shall terminate as of the date hereof, and any sums of money that may have been paid shall be returned to the party making said payment.

'It is expressly declared to be the essence of this agreement that a license for said partnership shall be issued by the State of California and the City of Los Angeles within the time prescribed by law after the date hereof.

'7. Weltman agrees to make such preparation as he is able, and to take the examination as is provided by law to become individually licensed to become actively in charge of the business of a collection agency, and if he is not successful on the taking of the first examination shall take said examination from time to time until he shall be successful.'

Section 6887 of the Business and Professions Code reads as follows: 'The Secretary of State with the concurrence of the board, subject to the provisions of this chapter, may fix and determine by rule and regulation the qualifications of applicants.

'The rules and regulations shall require, among other things, both of the following:

'(a) That the educational qualifications of applicants shall be at least graduation from a four-year high school, or proof satisfactory to the board that applicants are possessed of the equivalent of a four-year high school education in point of intellectual competency and achievement.

'(b) Proof satisfactory to the board that applicants have diligently and in goof faith studied the subjects specified as subjects for examination.'

Appellant states 'It is obvious from the record and from respondent's own testimony and conduct that he cannot conceivably possess the equivalent of a four-year high school education in point of intellectual competency and achievement.'

The record before us is completely lacking in information as to the type of proof required by the examining board in making its determination that an applicant is or is not possessed of the equivalent of a four-year high school education in point of intellectual competency and achievement. Deficiency in formal educational requirements is capable of being remedied by the applicant and need not operate as a permanent barrier to eligibility for a...