Leasco Corp. v. Taussig

Leasco Corporation (Leasco) (plaintiff) hired Peter Taussig (defendant) as vice president of its subsidiary, Louis Berger, Inc. (Berger). McCreary-Koretsky International, Inc. (MKI) was incorporated as a subsidiary of Berger to acquire McCreary-Koretsky Engineers, Inc. (MKE), a corporation engaged in civil engineering and consulting work. Taussig later offered to purchase MKI from Leasco. Taussig had access to financial data and other information about MKI. At the end of 1970, Taussig estimated that MKI’s 1971 earnings would be approximately $200,000. MKI’s January 1971 financial statement showed earnings of $49,000 for the fiscal year to date. In February 1971, Taussig agreed to purchase MKI for $625,000, plus Taussig’s release of Leasco from its guarantee on outstanding loans to MKI. The contract said that the sales contract with Leasco specifically stated that Leasco made no other representations or warranties with respect to MKI, other than those included in the contract. In March 1971, Taussig received MKI’s February financial statement, showing a net loss of $4,702 due to a design error and resulting reconstruction of one of MKI’s construction projects that had occurred in January. Taussig refused to accept Leasco’s tender of MKI stock or perform as required under the contract. Leasco sued Taussig for specific performance or damages. Taussig argued that the agreement was rescinded based on mutual mistake and misrepresentation of material fact. The district court ordered specific performance by Taussig for a reduced price, plus his release of Leasco of several bank-loan guarantees, and when Taussig did not perform, the court entered a judgment against him for that amount. Taussig appealed.