Case Title: Lewis v. Cohen

Citation: 

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1991-09-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 89-612


 Donna Lewis & Gordon Lewis                   Supreme Court

                                              On Appeal from
      v.                                      Windsor Superior Court

 Steven Cohen & Jennifer Cohen, et. al.       September Term, 1991


 Alden T. Bryan, J.

 Harry A. Black of Black, Black & Davis, White River Junction, for
   plaintiffs-appellants

 Alan B. George and Timothy Martin of Carroll, George & Pratt, Rutland,
   for defendants-appellees


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      DOOLEY, J.  Plaintiffs purchased a video retail company from defendants
 in the spring of 1985 for $250,000.  When plaintiffs found that the business
 had more debts outstanding than they believed defendants had represented,
 they sued, claiming breach of the sales contract and misrepresentation.
 Plaintiffs appeal from a superior court judgment for defendants.  We affirm
 in part and reverse in part.
      Prior to the sale, defendants' accountants had prepared a "statement of
 operations" for the business for the year ending December 31, 1984.  In the
 purchase and sale agreement, defendants portrayed that statement as "true
 and complete and fairly and accurately" representative of the condition of
 the business.  In addition, defendants represented that the operation of the
 business for the year ended April 1, 1985 was "consistent with or better
 than the statement of operations for the year ended December 31, 1984."
 Based on figures in the accountant's statement, plaintiffs calculated the
 profitability and value of the business.
      Soon after closing, debts incurred by the business prior to the sale
 and not listed in the statement of operations began to surface.  At trial,
 plaintiffs alleged that the presence of those debts reduced the value of the
 business and contradicted defendants' representations in the purchase and
 sale contract.  Sitting without a jury, the court held for defendants.  It
 found that plaintiffs had not shown by clear and convincing evidence that
 the statement of operations, in the context in which it was presented to
 plaintiffs, was inaccurate, and that to the extent it was misleading,
 plaintiffs had not shown by clear and convincing evidence that defendants'
 actions constituted fraud.
      The court also found that plaintiffs received the items they bargained
 for, including equipment, leasehold improvements, furniture and fixtures, a
 covenant not to compete, customer lists, and good will.  It determined that
 plaintiffs knew of defendants' "checkered financial history" and had been
 informed by defendants in a general way that there were debts against the
 business other than those listed on the statement of operations.  If plain-
 tiffs overpaid for the business, the court found, it was the result of
 their own failure to investigate defendants' representations relevant to the
 value of the business.  Further, the court found that defendants had not, as
 alleged by plaintiffs, acted fraudulently to prevent plaintiffs from under-
 taking such an investigation.  In its conclusions of law, the court did not
 explicitly resolve plaintiffs' claim that defendant breached the contract of
 sale.
      On appeal, plaintiffs claim that the court erred in its findings of
 fact and conclusions of law regarding their fraud claim, and erred in
 finding for defendants without explicitly disposing of plaintiffs' breach of
 contract claim or making findings that could resolve that claim by the
 proper standard of proof.
      We look first at the fraud claim.  Plaintiffs claim that the trial
 court erred by finding certain facts, and by improperly holding plaintiffs
 to a duty to investigate the representations made to them by defendants
 about the financial condition of the business.
      We will not disturb findings of fact unless clearly erroneous or
 unsupported by the evidence.  Semprebon v. Semprebon, 2 Vt. L.W. 309, 310
 (July 19, 1991).  For each of plaintiffs' claims of errant findings, we find
 evidence in the record to support the facts found by the court. (FN1)
      In analyzing plaintiffs' argument on the duty to investigate, we start
 with the elements of fraudulent inducement to contract, stated recently as
 follows:
           "An action for fraud and deceit will lie upon an in-
         tentional misrepresentation of existing fact, affecting
         the essence of the transaction, so long as the misrepre-
         sentation was false when made and known to be false by
         the maker, was not open to the defrauded party's know-
         ledge, and was relied on by the defrauded party to his
         damage."

 Silva v. Stevens, ___ Vt. ___, ___, 589 A.2d 852, 857 (1991) (quoting Union
 Bank v. Jones, 138 Vt. 115, 121,