Hart v. Steele Products, Inc.

666 N.E.2d 1270 (1996)

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Nature of the Case

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Facts

Hart (P) decided to change careers from being a veterinarian by trade. P received information regarding Steel Products, Inc. (D). P made an offer to purchase the assets of D contingent on his satisfactory review of the financial statements and books of the company. Scales was the sole shareholder. Rochon, the general manager, provided balance sheets, income statements, and federal income tax returns for the years 1987, 1988, and 1989. 1990 financial statements and income tax return showed ordinary income for 1990 of $176,301.94. P was not given a copy of the 1990 federal tax return. P made another offer to purchase the assets of D. This offer was accepted, and the deal was closed on May 1, 1991. In April of 1993, P contacted Henderson to retrieve some information from the 1990 federal income tax return. Henderson asked if he wanted information from the original return or the amended return. Upon learning of the amended return, Paul went to Scales' house and obtained a copy of it. The amended return showed that for 1990, Steel Products had a loss of $4,344.76. P filed suit alleging that Ds committed fraud by representing that Steel Products had 1990 ordinary income of $176,301.94 when they knew it had sustained a loss in 1990 of $4,344.76. P sought reformation of the contract to reflect a reduced purchase price, and also sought an award of punitive damages. A judgment of $215,114.56 was entered in favor of P and against Scales; the contract for the sale of D's assets was ordered rescinded. This appeal resulted.