Case Name: Frank KOHNER, Appellant and Cross-Appellee, v. Abraham WECHSLER, Appellee and Cross-Appellant, and Manufacturers Hanover Trust Company, Defendant
Court: United States Court of Appeals for the Second Circuit
Jurisdiction: United States
Decision Date: 1973-04-06
Citations: 477 F.2d 666
Docket Number: Nos. 236, 366, Dockets 72-1721, 72-2062
Parties: Frank KOHNER, Appellant and Cross-Appellee, v. Abraham WECHSLER, Appellee and Cross-Appellant, and Manufacturers Hanover Trust Company, Defendant.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 477
Pages: 666–675

Head Matter:
Frank KOHNER, Appellant and Cross-Appellee, v. Abraham WECHSLER, Appellee and Cross-Appellant, and Manufacturers Hanover Trust Company, Defendant.
Nos. 236, 366, Dockets 72-1721, 72-2062.
United States Court of Appeals, Second Circuit.
Argued Dec. 18, 1972.
Decided April 6, 1973.
Sidney B. Silverman, New York City (Silverman & Harnes, New York City, and Lawson F. Bernstein, New York City, of counsel), for appellant and cross-appellee.
Nathan Lewin, Washington, D. C. (Miller, Cassidy, Larroea & Lewin, Washington, D. C., of counsel), for appellee and cross-appellant.
Before MOORE, MULLIGAN and TIMBERS, Circuit Judges.

Opinion:
MOORE, Circuit Judge:
Plaintiff, Frank Kohner, brought an action under sections 12(2) and 17(a) of the Securities Act of 1933 and section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 against Abraham Wechsler and Manufacturers Hanover Trust Company, wherein he sought to rescind a purchase agreement pursuant to which he agreed to purchase all of the outstanding shares of the Wecolite Company owned by • Wechsler.- Defendant, Manufacturers Hanover Trust Company, the escrow agent named in an escrow agreement which was a part of the transaction, is not a party to this appeal.
Shortly after the action was commenced, plaintiff sought a preliminary injunction to prevent Wechsler from leaving the country and for consolidation of the trial on the merits with the hearing on the injunction. The motion for consolidation was initially denied by Judge Frankel. After a four-day evidentiary hearing on the preliminary injunction, before Judge Cannella, the court, sua sponte, consolidated the hearing and the trial on the merits. From an order denying the preliminary injunction, dismissing the summons and complaint, and terminating the escrow agreement, plaintiff appeals.
The gravamen of plaintiff's complaint centers around the assertion of fraudulent representations allegedly made by the Seller, Wechsler, to Kohner to the effect that Wecolite, the Company purchased, operated in conformity with the law, whereas, in fact, it had violated provisions of the Robinson-Patman Act, had underpaid customs duties, and was engaged in-sharp and unethical business practices (withholding commissions and royalties due).
The only issue before the trial court was whether the proof justified rescission. The court found that plaintiff's charges as to violations of the Robinson-Patman Act had not been sustained, that if there were unpaid customs duties, they would very probably amount to the de minimis sum of $4,000, and that there was no substance to the charge that Wecolite engaged in unethical business practices.
On appeal, as in the trial court, Kohner conjures up the specter of Wecolite being forced to defend a Federal Trade Commission action for violations of the Robinson-Patman Act as well as a multiplicity of private suits by Wecolite's customers based on these same violations. The trial court found no such violations. Even now there are still no threats of Robinson-Patman actions or suits by the government for unpaid customs duties. If plaintiff, as the new owner of Weeolite, believes that certain of the business practices of his acquired Company are in violation of the law, he is free to remedy these practices, albeit the trial court found no such violations of law. If he does not approve of the Company's business policies, he is equally free to change them. If unpaid customs duties require payment, the indemnity agreement which is part of the purchase agreement is protective. Noting that "[T]he plaintiff, an experienced businessman and a sophisticated investor had many financial advisors to assist him in carefully analyzing defendant Wechsler's business before the sale was finalized," the trial court concluded that plaintiff's motion for a preliminary injunction should be denied and the summons and complaint dismissed. Wechsler cross-appeals the dismissal of his counter-claim for damages for interference with his employment and consulting contracts which were executed in connection with the sale of Wecolite. No proof was adduced at trial as to this claim and Judge Cannella properly dismissed it. We affirm.
Apparently, on its own motion, the trial court added: "The escrow agreement with defendant Manufacturers Hanover Trust Company is hereby terminated and the Court directs that the notes being held in escrow be turned over to defendant Wechsler, and that the legitimate fees incurred by the Bank in the amount of $1,350 be paid by the plaintiff."
The order appealed from must be modified because the escrow agreement and the indemnity agreement were vital parts of the purchase transaction. The purchase price was $650,000. Remaining unpaid is $274,000, consisting of a negotiable note for $124,000 due January 2, 1973, and two non-negotiable notes for $76,500 due January 2, 1973, and $73,500 due October 15,1974.
Since the trial court did not grant rescission, the purchase agreement remains in full force and effect including the indemnity and escrow provisions. Hence the escrow agreement should not have been terminated. The notes held pursuant thereto should continue to be held in accordance with its terms. Any fees thereunder should be paid in accordance with the terms thereof.
Order as modified affirmed.
. Kohner v. Wechsler, 72 Civ. 1898. (S.D.N.Y., filed June 16, 1972).
. Id.