Opinion
No. 50/195.
08-11-1922
KORFAGE et al. v. KAHRS et al.
Reed & Reynolds, of Newark, for complainants. William Newcorn, of Plainfield, for defendants Wessels and others. Osborne, Cornish & Scheck, of Newark, for defendants Henry Kahrs and Paul Rosen.
Suit in equity by Bernard Korfage and Bernard Mammos against Henry Kahrs and others. Decree for complainants.
Reed & Reynolds, of Newark, for complainants.
William Newcorn, of Plainfield, for defendants Wessels and others.
Osborne, Cornish & Scheck, of Newark, for defendants Henry Kahrs and Paul Rosen.
FOSTER, V. C. This is a suit for the specific performance of a contract made between complainants and the defendant Henry Kahrs for the sale of a confectionery business in Orange, or, more accurately stated, for the sale of the capital stock consisting of 50 shares of Henry Kahrs, Inc., in which name the business was conducted.
The contract was made about October 7 or 8, 1920, and complainants agreed to purchase from Kahrs all the shares of the corporation for $15,000; of this amount $2,000 was then paid by them to Kahrs, and they assumed the payment of Kahrs' notes, amounting to $5,800, held by the defendant Paul Rosen, and the balance of the purchase price, $7,200, was to be paid in a series of notes which complainants were to give to Kahrs. The Kahrs notes held by Rosen were payable quarterly, and it was agreed between the parties that these notes, and also the notes to be given Kahrs for the balance of $7,200, should be payable monthly, and that the aggregate of the monthly payments to be made by complainants on account of both series of notes should not exceed $400. It was also agreed that Kahrs should have the necessary papers prepared by his attorney, and should have them ready for execution on October 11, as the complainant Korfage was to sail for Germany on October 13th. When notified by Kahrs on October 11th that the papers had been prepared, complainant Korfage was to call at the office of Kahrs' attorney and execute them, and the complainant Mammos was to sign them at the store in Orange, where he was employed by Kahrs.
Through some misunderstanding the parties did not meet to execute the papers, if they were prepared, before Korfage sailed on October 13th. Complainants, through Mammos, entered into possession of the business on October 8th, assisted by Kahrs, who agreed to assist in the business until the return of Korfage in December. At the time the payment of $2,000 was made Korfage also gave to Kahrs $300 to open, or to continue, the company's bank account.
After October 8th Mammos, in fairness to Korfage, as he states, voluntarily reduced his weekly salary of $40 and 25 per cent. of the profits, which Kahrs had been paying him, to $30, and he collected and took home with him each night the daily receipts, and the following day handed them to Kahrs, who deposited them to the company's account in bank, and paid therefrom the current bills of the business. This arrangement was adopted as a result of Kahrs' offer to assist complainants in the business.
The defendant Wessels about the time complainants had agreed to purchase the business from Kahrs had learned through some brokers that it was for sale, and he thereupon entered upon negotiations with Kahrs directly and through the brokers for its purchase, and, with full knowledge of the contract of sale between complainants and Kahrs, Wessels, after extended negotiations, purchased the business on December 12, 1920, through the purchase of the shares of stock from Kahrs for $16,500, and immediately thereafter he took possession of the business, and has since conducted it for his own benefit.
Defendants claim the contract with complainants was never completed, because it was contemplated by the parties that papers should be prepared and executed by them to set forth the terms of payment of the balance of the purchase price and the manner in which the payment of this balance should be secured. Admittedly the preparation of these papers was left to the defendant Kahrs, and that they were not prepared, or, if prepared, were not executed by Korfage, is the fault of Kahrs and no one else. Their preparation and execution were unnecessary, however, for the completion of the contract, for, while Korfage thinks, or assumes, that a chattel mortgage was to be given by complainants to Kahrs, and while Mammos has no knowledge on the subject, the fact is clearly established that it was left to Kahrs and his attorney to prepare these papers in any form they pleased that would afford this security, and it is also clearly established that all other terms and details of the transaction had been definitely understood and agreed upon by the parties.
It is also claimed that Mammos consented to or acquiesced in the sale to Wessels. If he did, and I do not find the proofs to show it, then his conduct is in no way binding upon Korfage.
It is further claimed that, as Korfage had failed to execute the papers, and neglected for such a long time to do so, the contract was not binding upon Kahrs, and that he was at liberty to sell the business to Wessels. The only foundation for this contention is a cablegram which Kahrs sent to Korfage about December 1, asking when he was going to sail, to which Korfage immediately replied that he would arrive in New York on December 21." Apparently upon receipt of this reply, Kahrs and Wessels and their brokers entered upon their arrangements to conclude the sale to Wessels, and this sale was effected, with full knowledge on the part of both Kahrs and Wessels that Mammos claimed the business belonged to Korfage and himself, and that he further claimed that Kahrs had no right to sell nor Wessels to purchase it.
As a result of this sale to Wessels the brokers were entitled to an increased commission; Kahrs received, or is to receive, $1,500 more than complainants had agreed to pay him, and Wessels is in possession of a very profitable business, with a valuable lease upon the store in which the business is conducted, and which will not expire for eight or ten years.
The proofs convince me that Kahrs, having made the sale to complainants, was tempted by the increased price offered by Wessels to take advantage of Korfage's absence in Europe, and that he and Wessels and their brokers combined to fraudulently annul the sale to complainants and to effect the sale to Wessels. And, notwithstanding that complainants had made a substantial payment on account of the purchase price and had taken possession of the business, the proofs show that this sale was made to Wessels, without any notice or opportunity to either Korfage or Mammos to complete their purchase of the stock, if anything remained to be completed, and the only uncompleted feature, if it can be considered such, was the execution of papers securing to Kahrs the payment of the balance of the purchase price, and the nature of this security was left by complainants to be in any form Kahrs desired and his attorney prepared. And the proofs also show that Kahrs, having ignored the sale to complainants, retained possession of the money they had paid him, and also of the receipts and profits of the business, from the date of the sale to them to the date of the sale to Wessels, and only made tender of the $2,300 when legal proceedings were threatened.
Under these circumstances a particularly equitable situation is presented that justifies me in advising a decree for complainants, the terms of which may be settled on notice.