Opinion ID: 1248085
Heading Depth: 1
Heading Rank: 17

Heading: measure of recovery

Text: Having concluded that the Plaintiffs have established their case for the statutory remedies, the Court turns to the question of the recovery to which Plaintiffs are entitled. It is undisputed that Plaintiffs paid to Defendants on August 18, 1974 the sum of Ten Thousand and no/100 ($10,000.00) Dollars and, at closing of the purchase and sales transaction on September 3, 1974, the sum of Fifty-five Thousand Two Hundred Fifty and no/100 ($55,250.00) Dollars. Plaintiffs are entitled to recover these sums, together with interest. As part of the same overall stock purchase and sale transaction, shortly after taking over the business, Plaintiffs lent to Paul's Pontiac-Buick Co., Inc. the sum of Thirty-four Thousand Seven Hundred Fifty and no/100 ($34,750.00) Dollars. Since the transaction was subsequently rescinded by agreement and the stock of the corporation reconveyed entirely to the Defendants, Plaintiffs' loan to the corporation is a proper element of rescissionary damages to be recovered in this action, with interest. For authority squarely on point, see Bowman & Bourdon, Inc. v. Rohr , 296 F. Supp. 847, 852 (D. Mass. 1969), affd. , 417 F. (2d) 780 (1st Cir.1969): Plaintiffs also seek recovery of the $31,675 loaned to Drew [the corporation] by Bowman. Both Rohr and Bowman were aware, during their negotiations, that Drew needed immediately a considerable sum of money for working capital. In fact they agreed that this sum would amount to at least $40,000. In December, 1966, when discussing the sale of all Rohr's stock, Bowman informed Rohr that the amount he would pay for the stock would be limited by his need to retain $30,000 of his funds for immediate investment in the corporation. It was thus clearly foreseeable that such an investment would follow plaintiff's purchase of stock. Bowman's loan was an outlay legitimately attributable to Rohr's conduct and is recoverable. Janigan v. Taylor , 1 Cir., 344 F. (2d) 781, 786. Defendants have asserted a right to recover from Plaintiffs rent owing by the Corporation to the Defendants for the period during which Plaintiffs were in control of the Corporation. This question, too, was considered in the case of Bowman & Bourdon v. Rohr, supra , at page 852: Since September 1, 1967, Drew [the corporation], under the control of plaintiffs, has ceased to pay rent under the lease. Defendants by counterclaim seek to recover these rent payments. The short answer to this is that any right to rent payments is enforceable against Drew, the lessee, which is not a party here, and not against plaintiffs here. Moreover, any benefit from the withholding of rent payments has accrued to Drew, which under rescission will revert to the ownership and control of Rohr. As in Bowman , the Corporation is not a party to the suit, is liable for rent that may be owed, and any benefit from nonpayment of rent will accure to the Corporation. By virtue of the agreement of November 9, 1974, the Corporation reverted to the ownership and control of Defendants. I therefore find and hold that the Defendants are not entitled to an offset for the rent in question. Plaintiffs also seek to recover against the Defendants the sum of Eleven Thousand Two Hundred Fifty and no/100 ($11,250.00) Dollars, representing the amount of the fee or commission paid by Plaintiffs to Glen Covey Associates in connection with the transaction. Plaintiffs' claim for recovery of this amount is based upon the proposition that the commission paid to the broker is consideration paid for the security, in the language of the statute. I have fully considered Plaintiffs' contentions and authorities cited by them in respect to this matter. However, I conclude and hold that said commission is not a proper element to be recovered by Plaintiffs under their First Cause of Action, and it is therefore denied. By their Tenth Defense and Setoff, Defendants alleged entitlement to credit for certain expenses paid by the Corporation to or on behalf of Plaintiffs. At trial, a Stipulation was entered by the parties as to certain particular items that were paid by the Corporation for or on behalf of Plaintiffs. There was no dispute as to the amounts. After full consideration of the evidence, I find and hold that the following items paid by the Corporation were not business related expenses: Paid To Or On Behalf Of John Bradley: Insurance on car ........................... $ 258.00 Downpayment on car .......................... 590.71 Moving and Travel Expense ................... 3,904.07 Paid To Or On Behalf Of J.C. Gilbreth: Travel Expense .............................. 592.40 Paid On Behalf Of Bradley And Gilbreth: Chester Motor Lodge ......................... 368.16 _________ TOTAL .................................. $5,713.34 _________ I further find and hold that the aforesaid amount of Five Thousand Seven Hundred Thirteen and 34/100 ($5,713.34) Dollars should be credited to Defendants in reduction of the amount of the loan of Thirty-four Thousand Seven Hundred Fifty and no/100 ($34,750.00) Dollars made by Plaintiffs to the Corporation. Although the exact dates of said loan and of the said credit items are not established in the record, it is evident that they occurred shortly after Plaintiffs took over the business of the Corporation on September 3, 1974. I therefore find and hold that, for the purpose of interest computations, the said loan and credits should be deemed to have occurred on October 1, 1974. The statute plainly provides for interest at the rate of six (6%) per cent per year. I find and hold that Plaintiffs may recover interest at six (6%) per cent per year on the following amounts from the dates indicated until the twentieth day following entry of the Order of Judge Hayes dated February 8, 1975: On: From: $10,000.00 August 18, 1974 LESS: $34,750.00 55,250.00 September 3, 1974 5,713.34 29,036.66 October 1, 1974 Although interest would normally be six (6%) per cent per annum, the Court's attention is directed to the Order of Judge Robert W. Hayes, dated February 8, 1975, containing the following provisions: However, in view of statements of counsel for the Hullander Defendants to the effect that the audit may not be completed until the middle of March, counsel for plaintiffs has agreed that the case be not called for trial without the consent of the Hullander Defendants prior to March 13, 1975, provided that the Hullander Defendants agree with Plaintiffs that there shall be added to any judgment upon the First Cause of Action or any counterclaim thereto that may be asserted by said Defendants, interest at the rate of four (4%) per cent per annum over and above any interest otherwise permitted by law, which additional four (4%) per cent interest shall run from the 20th day following the entry of this Order. It is the opinion of the Court that the foregoing provision embodies an agreement reached by the parties as a basis for the Court's Order granting the Hullander Defendants additional time for completing an audit. It further appears that an appeal was taken from other provisions of said Order, but not from the quoted language. I therefore hold that Plaintiffs are entitled to the statutory rate of six (6%) per cent per annum, plus an additional four (4%) per cent by virtue of the aforesaid agreement, for a total of ten (10%) per cent per annum from the twentieth day following entry of the Court's Order dated February 8, 1975. I further hold that interest at the rate of ten (10%) per cent per annum shall be added to the total sum of Ninety-four Thousand Two Hundred Eighty-six and 66/100 ($94,286.66) Dollars from February 8, 1975 until the date of entry of judgment. The Statute further provides for the recovery by Plaintiffs of costs and attorney fees. Consideration of these matters is reserved. When they are determined, any award for costs and attorney fees will be added by the Court to the sums found to be due as set forth above and judgment will thereupon be entered accordingly. AND IT IS SO ORDERED. As indicated hereinabove, we affirm the order of Judge Coleman of October 16, 1976, with one exception. Buyers submit that the judge erred in failing to find that they are entitled to recover the brokerage commission in the amount of $11,250.00, plus interest, paid to Glen Covey Associates. We agree. This was a consideration paid for the security as contemplated by the statute. The entire transaction arose because the sellers listed the security with Covey for sale. The commission paid by the buyers was attributable to the sellers' wrongful conduct. It involved a detriment to the buyers and a benefit to the sellers, and was therefore a proper element of the buyers' recovery under the statute. We hold that the sum of $11,250.00 shall be added to the amount awarded by the lower court to the buyers, with interest from September 3, 1974, at the rate heretofore found proper, in keeping with the order of Judge Robert W. Hayes, dated February 8, 1975. In all other respects the order of Judge Coleman, dated October 16, 1976, is affirmed. THE APPEAL FROM JUDGE ELTZROTH'S ORDER DATED DECEMBER 29, 1976, AND FROM JUDGE COLEMAN'S ORDER DATED MAY 9, 1977 The trial of the case on its merits, resulting in the order of Judge Coleman dated October 16, 1976, related only to the first cause of action stated in the complaint. All other causes of action stated in the complaint have now been abandoned. The trial did not deal with the issue of the sellers' counterclaim for mismanagement. After the order of October 16, 1976, Judge Clyde Eltzroth considered: (1) a motion by the sellers for a declaration that the buyers were in default on the counterclaim, because they failed to answer, and for judgment on the counterclaim; (2) a motion by the buyers, requesting that they be permitted to serve a reply or amended reply. Judge Eltzroth denied the sellers' motion and granted the motion of the buyers. This is the second order on appeal. After the order of Judge Eltzroth, Judge Coleman considered the buyers' demurrer to the counterclaim and sustained it by his order of May 9, 1977. This is the third order on appeal. The order of Judge Coleman dated May 9, 1977, makes review of the order of Judge Eltzroth somewhat moot. We have, however, considered the appeal from Judge Eltzroth's order and are of the unanimous opinion that no matter of precedent is involved and no error of law appears. We therefore affirm Judge Eltzroth's order under Rule 23 of our Rules of Practice. As relates to the appeal from Judge Coleman's order sustaining the demurrer, we agree that the counterclaim does not state a cause of action which the sellers are entitled to pursue in this proceeding. If the buyers are liable for mismanagement during the two months they were in control of the corporation, the recovery is an asset of the corporation and not of the stockholders. Johnson v. Baldwin , 221 S.C. 141, 69 S.E. (2d) 585 (1952). Judge Coleman recognized that the corporation has the right to pursue the claim in another action, when he said: I further conclude that if judgment were entered on behalf of defendants on the eighth defense and counterclaim, the corporation would not be barred from bringing a subsequent action since the corporation is not a party to the present action and would not be bound thereby. The order of Judge Coleman of May 9, 1977 is affirmed. In summary: (1) The order of Judge Coleman dated October 16, 1976 is affirmed in part and reversed in part. The case is remanded to the lower court to carry out the directive as indicated hereinabove. (2) The order of Judge Eltzroth dated December 29, 1976 is affirmed under Rule 23; and (3) The order of Judge Coleman dated May 9, 1977 is affirmed. Affirmed in Part; Reversed in Part; and Remanded.