Vitale v. Coyne Realty, Inc. , 414 N.Y.S.2d 388 ( 1979 )

OPINION OF THE COURT

Per Curiam.

The members of the court are in general agreement with the disposition of the various issues on this appeal as set forth in the opinion of Justice Callahan. A majority of the court, however, believe that the method used to measure restitution due upon rescission of the sale of the restaurant business was improper. Indeed, were it not for the fact that the property has already changed hands and both the vendee, plaintiff Vitale, and the vendor, defendant Tawil, have stated they now elect rescission and restitution, we might well find rescission impossible (see Ungewitter v Toch, 31 AD2d 583, affd 26 NY2d 687). In view of their stipulation, however, we reverse and remit the matter to Trial Term for appropriate findings of fact and further proof if necessary.

Upon remand, the trial court should, as nearly as possible, attempt to place the parties in their original positions before the sale (see, generally, 12 CJS, Cancellation of Instruments, § 77 et seq.). Since the court was reviewing the transfer of the real estate and operation of a going business, certain considerations were appropriate.

First, the court should determine plaintiff’s total investment. We find that the amount (for down payment, legal fees and broker’s commission) when he purchased the restaurant was $56,576.17 (see 3 Black, Rescission and Cancellation [2d ed], § 688).

Second, the court should determine any change in the net worth of the business from the date of plaintiff’s purchase to the date of rescission. If the net worth was greater at rescission, that increment should be added to plaintiff’s investment and if it was less, it should be deducted from his investment. Third, the court should determine the gross income from the business during the period plaintiff operated it and subtract from that amount the expenses of operation, including a reasonable salary to plaintiff for the time he worked at the restaurant. The net profit of the business determined by this calculation should be subtracted from the sum of plaintiff’s original investment and any additional net worth or the difference if there was a loss in the net worth. If the business sustained a net loss the amount of that loss should be added to the original investment plus the net worth computations. The resulting sum represents the amount of the restitution in plaintiff’s favor and he is entitled to interest on this amount at such rate as the court shall find as a fact is reasonable for investments of this type during the period involved.

The amended judgments awarding damages against defendants Tawil, Dumond, Coyne and Coyne Realty, Inc. should be reversed and the complaints against said defendants dismissed; the order granting rescission against defendant Tawil should be reversed insofar as it determined the amount of restitution and the matter remitted to Trial Term for further proceedings in accordance with this opinion; and the judgment dismissing plaintiff’s complaint against defendant Van Lengen should be affirmed.