Opinion
May 25, 1955.
June 27, 1955.
Equity — Fraud — Failure of proof — Dismissal of complaint.
Where the plaintiff filed a complaint in equity charging fraud and seeking to obtain the entire profits resulting from a real estate venture entered into by himself and defendants as partners, rather than his agreed upon share of the profits, and the court below found that there was no fraud and dismissed the complaint, it was Held that the decree should be affirmed.
Before STERN, C. J., STEARNE, JONES, BELL, CHIDSEY, MUSMANNO and ARNOLD, JJ.
Appeal, No. 164, January T., 1955, from decree of Court of Common Pleas No. 6 of Philadelphia County, in equity, Dec. T., 1952, No. 7596, in case of Samuel Edelson v. Samuel Bernstein et al. Decree affirmed.
Same case in court below: 2 Pa. D. C.2d 443.
Equity. Before BOK, P. J.
Plaintiff, charging fraud, filed a complaint in which he claimed the entire profit resulting from a real estate venture entered into by himself and defendants.
Early in 1951 the parties entered into a partnership agreement to purchase a property then occupied by General Motors Corporation as tenant. The partnership agreement provided that profits or losses should be divided 45% to the plaintiff and 55% to the defendants, and that 5% interest should be paid on any monies advanced to purchase the property. Plaintiff advanced $50,611.96, the defendant Smith advanced $10,000, and defendant Bernstein discovered, developed, negotiated and consummated the investment plan of the joint venture, managed the property and in November 1952 negotiated a 5 year term renewal lease with General Motors for a rental of $30,000 a year. The parties purchased the property in March 1951 for $157,500, of which $57,500 was paid in cash and title was taken in the name of plaintiff, subject to an existing $100,000 mortgage. At the insistence of the mortgagee plaintiff executed a $100,000 collateral bond. After this action was started the property was sold in 1954 for $212,000.
Plaintiff did not ask for (1) a true rescission of the partnership agreement and a restoration of the status quo ante or (2) an award of damages (there were none); he prayed for a decree adjudging him to be the sole owner of the premises, and thus obtain all of the profits from the venture.
Plaintiff claimed that he was induced to enter into the venture by the defendant Bernstein's representation in January 1951 that by September 1952 he could definitely get a renewal lease from General Motors for $24,000 a year for a ten year term, that the parties would then be able to refinance the property, get their money out, and thereafter enjoy the ownership without investment in it; and that Bernstein knew at that time that General Motors would not sign a ten year lease. In January 1951 the extant lease for a five year term ending February 28, 1953, provided for a rental of $17,000 per year.
Plaintiff contended that Bernstein was an expert and that plaintiff, a layman, was entitled to rely upon his opinion, particularly in view of the fiduciary duty of one partner to another. The court below found as a fact: "The statements of defendant Bernstein with respect to the prospects for negotiation of a renewal lease with the tenant constituted a statement of his opinion and business judgment, and were so understood by the plaintiff, not as a representation of fact."
Plaintiff also complained that he was not shown the 1951 agreement of sale under which the parties purchased the property, which provided "Seller agrees to furnish a mortgage" for $100,000; and that the extent of plaintiff's investment and risk in the venture was altered and increased by (1) the fact the defendants induced him to sign a collateral bond for $100,000, which was demanded by the mortgagee; and (2) by the fact that although the agreement of sale provided for a mortgage for a term of 24 months (and would terminate at the time of the extant lease) this was reduced, at settlement, to a term of 21 months (at the insistence of the mortgagee). The court below found that plaintiff agreed to the change in the due date of the mortgage, that he took no substantial risk in signing the collateral bond and that he suffered no loss upon it.
Plaintiff's final reason to obtain all the profits was that the nature of the contemplated venture was materially changed when General Motors refused by September 1952 to sign a ten year renewal lease for a rental of $24,000 a year whereupon defendant Bernstein, as agent, on November 24, 1952 entered into a renewal lease with General Motors for a term of five years for a rental of $30,000 a year.
The court below found that no fraud was proved and dismissed the complaint. Plaintiff appealed.
David Berger, with him Manuel Fleisher, for appellant. C. Brewster Rhoads, with him Sidney L. Wickenhaver, and Montgomery, McCracken, Walker Rhoads, for appellees.
Nathan L. Edelstein, for appellee.
Decree affirmed on the opinion of President Judge BOK, at cost of appellant.