Decided: October 4, 1948.
SAMUEL NUSSBAUM, COMPLAINANT-RESPONDENT,
JOSEPH HETZER AND MARY HETZER, HIS WIFE, DEFENDANTS-APPELLANTS
For affirmance: Chief Justice Vanderbilt and Justices Case, Heher, Wachenfeld and Burling. For reversal: None.
[1 NJ Page 30]
The decree appealed from is affirmed for the reasons expressed in the opinion filed in the court below by Vice Chancellor Grimshaw.
On appeal from a decree of the Court of Chancery advised by Vice Chancellor Grimshaw, who filed the following opinion. "For several months prior to May 8, 1947, the defendants, Joseph Hetzer and Mary, his wife, had operated a retail store for the sale of children's clothing, in the Village of Ridgewood. Being desirous of selling the business, the Hetzers engaged the services of a business broker who contacted the complainant, Nussbaum. Nussbaum, a man of about sixty-five years of age, had conducted successfully several retail businesses. He testified that because of his age he desired to do less work and was looking for a business which would produce enough income to support him and his wife and at which he would not be required to spend long hours. Accordingly, upon learning of the desire of Hetzer to sell, Nussbaum went to Ridgewood to investigate.
"Hetzer named a price of $10,500.00. Nussbaum told Hetzer that he was interested principally in the income from the business. Hetzer then stated that the sales averaged between $700.00 and $800.00 per week and he would guarantee sales of $500.00 per week. Nussbaum asked to see the records and was told that they were at Hetzer's home and would be produced. The sales records consisted of sales slips on which were recorded the individual purchases. There were no other records.
"After some further discussion, Nussbaum agreed to purchase the business for $10,000.00, provided Hetzer would guarantee an average weekly sales volume of at least $500.00. This was satisfactory to Hetzer and the next day the parties met at the office of Benjamin Greene, an attorney-at-law, who is the son-in-law of Nussbaum. Greene asked for Hetzer's sales records and was given a copy book in which appeared a series of columns of figures, mostly without identifying marks. Hetzer stated that the book contained the totals of weekly sales since the commencement of the business. He said that the totals had been taken from the individual slips. Greene asked for the supporting slips and was told by Hetzer that the slips were then at his home but would be left at the store. The slips were never produced. Greene excused his failure to press for the production of the slips by the statement that he was ill at the time.
"At the hearing Hetzer testified that he destroyed the sales slips before the transaction was closed. When pressed to account for such extraordinary behavior, Hetzer said that Nussbaum had not asked for the slips and he destroyed them because they were of no further use to him. I do not believe Hetzer's statement. Both Nussbaum and Greene testified that they asked for the sales slips. Nussbaum was largely interested in the income from the enterprise. And, in spite of the amazing confidence they apparently had in Hetzer's good faith, it is inconceivable that Nussbaum and Greene would have failed to ask for the only records Hetzer had. I am satisfied that Hetzer destroyed the sales records because they would not support the entries in the book.
"In any event, a contract was drawn. It contained, among other things, the following provisions:
'It is further understood and agreed that this sale is made upon the express warranty by the Sellers that the business is currently averaging Five Hundred ($500.00) Dollars per week. In the event that proof is not submitted that the sale have reached the aforesaid sum, the buyer shall have the right to cancel this agreement and all deposits paid thereon shall be refunded to him.
'The Sellers hereby represent the gross weekly receipts of said business to average the sum of ($500.00) Five Hundred Dollars, and hereby guarantee that the gross receipts thereof for the period from May 12, 1947, to May 17, 1947, will aggregate at least the sum of Five Hundred ($500.00) Dollars. Said period shall be deemed the trial period during which full opportunity shall be afforded the Purchaser to keep tally of said gross receipts, and in the event the total of such gross receipts for said period is less than said guaranteed sum, the Purchaser shall be repaid in full any deposit or payment on account hereunder, upon demand.'
"During the trial period from May 12 to May 19, the sales totalled an amount slightly in excess of $800.00. Both Nussbaum and his wife, were in the store during a portion of the trial period, testified that their curiosity was aroused by some of the large sales. Nussbaum said the customers exhibited 'no sales resistance', taking what was offered without argument or comment. Mrs. Nussbaum noticed that Mrs. Hetzer, in making the larger sales, appeared nervous and her manner seemed strained, while, at the same time, being on terms of familiarity with the customers. None of those who made large purchases has since returned. However that may be, it is interesting to note that the available sales slips for the trial period disclose frequent sales in amounts varying from $15.00 to $50.00, and since that time sales in excess of $10.00 have been practically non-existent.
"The transaction was closed on May 19. Hetzer left two days later and Nussbaum took over. Immediately, the volume of sales dropped. According to Hetzer's book the sales for the entire period of operation by Hetzer averaged better than $500.00 a week. For the four weeks immediately preceding May 8 the book showed average weekly sales in excess of $690. From the time Nussbaum took over the weekly sales have never risen above $161.00. And from May 19 to September 4, the average weekly sales have been $103.34. For the trial period the sales were $813.27. For a like period immediately after Hetzer left the sales were $197.57, and they continued to decline.
"The suspicions of Nussbaum and Greene were aroused by the abrupt drop in sales. They contacted Hetzer and sought a rescission of the contract. Greene says Hetzer agreed to take back the business. This Hetzer denies, though admitting that Greene made demands upon him. No settlement was reached and this litigation ensued.
"The immediate and extreme drop in the volume of sales cannot be charged to the ordinary hazards of business. There was no change in the name, appearance or method of operating the shop. The woman who did the selling seemed ideally suited to the type of business from the standpoint of experience and appearance. An explanation for the collapse in business was indicated but none was forthcoming.
"Hetzer was not an impressive witness. He was evasive and repeatedly contradicted himself. If he had been honest he would have presented to the complainant the records which, he claimed, justified his representations. Instead, he rushed to destroy the records as soon as the contract was signed and before the transaction was closed.
"I am of the opinion that the defendants failed to produce the proof of sales as required by the contract. I am also of the opinion that Hetzer falsely represented the amount of the sales for the purpose of inducing the complainant to purchase the business. The complainant relied upon the representations. The destruction of the records prevented the complainant from checking Hetzer's statements. Nussbaum and Greene were negligent or at least gullible in failing to insist upon proof before closing the transaction. But a court of equity will not permit a man to benefit by his deliberate fraud, especially when his own action prevented a discovery of the fraud."
"I will advise a decree rescinding the sale."