Opinion
279 A.D. 768 108 N.Y.S.2d 797 FREDERICK WEIDNER et al., Respondents, v. FLORENCE C. WALSH et al., Appellants, and WALTER BRUCHHAUSEN, Respondent. Supreme Court of New York, Second Department. December 21, 1951
On July 25, 1947, plaintiffs, then owners of all the issued and outstanding shares of the capital stock of the F. Weidner Printings&sPublishing Company, Inc., sold the said shares to defendants Florence C. Walsh, Jessie F. Shields, Anne B. Shields and Marie S. Daly, hereinafter referred to as the purchasers, and resigned their positions as officers and directors of the corporation, pursuant to written agreement. At the same time, and by contemporaneous agreement, the purchasers, collectively and in their individual capacities, hired the plaintiffs as employees for a period of three years. The corporation transferred its assets and business to the purchasers at a later date. The agreement of sale of the stock provided that the price, $128,000, was based on the assumption that the net worth of the corporation, exclusive of fixed assets, was at least $75,000; and that, if the net worth was less than that, the deficiency would be made good out of a fund in the amount of $30,000 which was taken out of the purchase money and placed in escrow into the hands of the sellers' attorney. This action was brought to recover commissions earned by plaintiffs upon the employment agreement during the period of the first two years of the term of employment, and defendants Joseph A. Shields and William C. Walsh were joined as defendants, upon still another contemporaneous agreement by the employers. The employers counterclaimed for alleged deficiencies in the net worth of the corporation, not only against plaintiffs, but against the escrow agent, whom they brought into the action for that purpose. At the trial, appellants conceded plaintiffs' right to recovery as demanded in their complaint; plaintiffs conceded appellants' right to offset against such recovery the amount involved in the fourth counterclaim; the court dismissed the third counterclaim; and the jury, finding in favor of defendants and against plaintiffs and the escrow agent on the first counterclaim, and offsetting the amount thereof and the amount of the fourth counterclaim against the amount to which plaintiffs were entitled on their complaint, returned a verdict in favor of plaintiffs and against the defendants other than the escrow agent in the amount of $19,895.26. These defendants have appealed from the judgment which was entered in pursuance of the verdict and from the order dismissing the third counterclaim. Judgment reversed on the law and the facts and a new trial granted, with costs to abide the event. The appeal from the order dismissing the third counterclaim is dismissed; there is no such order printed in the record. No fair and reasonable interpretation of the evidence could support a finding that the amount of the corporation's potential liability for taxes, as set forth in the balance sheet of June 30, 1947, in the sum of $32,836.30, as a reserve for such purpose within the intent of the contract, was other than a liability to be considered in computing the net worth of the corporation, unreduced by the fact that, because of losses during the second half of the year, the actual tax liability for the year was later determined to be less than $6,000; or a finding that the purchasers, in consummating the transaction, waived the claims asserted in the counterclaims or brought about an accord and satisfaction. Accordingly, the court should have dismissed the first, third and fourth defenses set forth in the reply of plaintiffs and the escrow agent, in addition to the second, which pleaded payment and which the court dismissed. Further error was committed in excluding defendants' evidence as to what the value of the corporation's inventory was on January 1, 1947, together with accretions and detractions up to the date when the net worth of the corporation was required to be not less than $75,000. We are also of the opinion that the finding, implicit in the verdict, that the three checks in the total amount of $9,429.60, representing alleged accrued earnings of the plaintiffs, which were drawn out of the corporation's bank account at the time of the consummation of the transaction, were not to be considered as a reduction of the net worth of the corporation, was contrary to the evidence.
Johnston, Acting P. J., Sneed and Wenzel, JJ., concur; Adel and MacCrate, JJ., concur in result.