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Daibo v. Kirsch

December 17, 1998

VICTOR DAIBO, PLAINTIFF-RESPONDENT,
v.
NED KIRSCH AND MELVIN KIRSCH, DEFENDANTS-APPELLANTS, AND B.G. A/K/A ROBERT GRAY AND A.Z. A/K/A ABRAHAM ZUCKERMAN, JOHN DOES 1 AND 3, JOINTLY AND SEVERALLY, AND INMAR ASSOCIATES, INC., A NEW JERSEY CORPORATION, AND LINN ASSOCIATES, A NEW JERSEY GENERAL PARTNERSHIP, MICHAEL AND ALLA KIRSCH, GREGG AND JILL STONE, NANCY KESSELMAN, AND ROBERT KIRSCH, DEFENDANTS.



Before Judges Stern, Braithwaite and Wecker.

The opinion of the court was delivered by: Stern, P.j.a.d.

[9]    Argued October 15, 1998

on appeal from the Superior Court of New Jersey, Chancery Division, Union County.

Defendants appeal from a judgment for plaintiff in the amount of $225,500, comprising (1) $100,000 for "the total purchase price for all of plaintiff's right, title and interest in Inmar Associates[, Inc.]" (Inmar), (2) $100,000, "representing damages for equitable fraud," based on plaintiff's payment of an overvalued purchase price for his interest in Inmar, and (3) prejudgment interest on the equitable fraud award. All claims by plaintiff for "legal fraud" were "dismissed with prejudice."Defendants do not contest the order, which they requested, requiring them to "buy out" plaintiff's interest in Inmar, a corporation which owned a building in Linden. Defendants challenge the $100,000 damage award for "equitable fraud" attributed to the overvalued purchase price. They argue that the purchase price plaintiff paid for his interest in Inmar was based on figures plaintiff claimed he never saw and, therefore, could not have relied upon, and, in any event, could have verified with his own experts. Defendants also claim that plaintiff cannot base a fraud action upon reliance on their "opinion" of the value of the property and that money damages cannot be awarded as a remedy for equitable fraud. There is no cross appeal.

The parties agree that the Chancery Division's findings of fact are supported by substantial credible evidence in the record. Based on those findings, we hold that the trial Judge erred in reaching his legal Conclusions. Accordingly, we reverse the award of damages for equitable fraud.

I.

Plaintiff, Dr. Daibo, brought the action against Ned and Melvin Kirsch and other defendants alleging that he was fraudulently induced to invest in Inmar after agreeing to purchase an interest in Linn Associates, a partnership in which the Kirsch brothers (defendants) had the controlling interest.*fn1 Both entities owned real property in Linden. The Kirsches cross-moved to buy out plaintiff's interest in Inmar "at fair value."

After a trial, the Judge found defendants committed no legal fraud, but were liable based on equitable fraud because of an inflated purchase price paid by plaintiff for his share of Inmar. Plaintiff's case centered on defendants' alleged unilateral transfer of plaintiff's initial investment in Linn Associates to an interest in Inmar.

In defending the judgment, plaintiff argues that "the trial court's findings of fact should not be overruled." He thereby acknowledges that there is substantial evidence in the record to support the trial Judge's findings of fact. See Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). Accordingly, we quote the Judge's material findings at length:

"We have a situation in which we have Mel [Kirsch], who is much more sophisticated than Dr. Daibo, selling an interest in a corporation that owns real estate, to a doctor who, in my book, appears to be extremely careless and I used the word "laissez- faire," and I was trying to be kind. This is a man who appears not to be particularly careful in what he does. His credibility is seriously impugned by virtue of the various inconsistencies in his testimony and the exaggerations that I thought were rather self-evident. He's a bit impetuous. He's someone who appears to be, in my mind, opinionated. One who suffers from some kind of an idea that somehow one can be careless with one's investment, and then if something goes wrong, blame the other guy. "He makes a charge that there was a switch that was perpetrated on him, in which he thought he was investing in Linn and he ended up with Inmar, which owns and controls 104 East Elizabeth Avenue, Linden, New Jersey. We have to deal in this court with reality not fantasy."

The Judge found that plaintiff, after purchasing an interest in the Linn partnership, entered into an agreement which terminated that interest. The agreement provided that:

"The sale agreement is hereby terminated, declared null and void and of no further force and effect, and the parties thereto shall have no further rights or obligations thereunder."

According to the Judge:

"Simultaneously, there was a stock sale agreement, in which [plaintiff] agreed to purchase 500 shares of common stock of Inmar Associates, a whole different company, a new corporation. This time, for a different percentage of ownership; that is a third ownership as opposed to 22.3 percent. The agreement again is relatively simple, and the doctor wants me to believe that somehow only the signature page was slipped under his nose and ...


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