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Medigroup Inc. v. Schildknecht

decided: June 29, 1972.

MEDIGROUP, INC., PLAINTIFF-APPELLANT,
v.
PHILLIP SCHILDKNECHT AND NEIL P. GAVIN, DEFENDANTS-APPELLEES



Cummings and Sprecher, Circuit Judges, and Laramore, Senior Judge.*fn*

Author: Sprecher

SPRECHER, Circuit Judge.

This diversity action*fn1 is for damages for breach of warranty in connection with the sale of the stock of two corporations which owned and operated Parkview Manor, a nursing home in O'Fallon, Illinois.

During January, 1969, plaintiff's president negotiated with defendants for sale of the stock. Defendants furnished him the most recent balance sheets available, which listed each corporation's assets and liabilities as of November 30, 1968.

Plaintiff's offer of purchase contained the following language:

It is understood that in accepting this offer you make the following warranties:

That balance sheets for both corporations as of November 30, 1968 being given the undersigned are true and correct, and that as of the time of closing there will have been no changes except in the ordinary course of business.

Defendants accepted the offer in writing on February 15, 1969. The closing took place on April 30, 1969.

Plaintiff's claim is based on the alleged omission or understatement of five debts of the Parkview Manor corporations on the November 30, 1968, balance sheets. Four of the obligations remain unpaid; the allegations of the complaint relating to them were dismissed without prejudice by the district court at the close of plaintiff's case. The fifth obligation, described in part II of this opinion, was paid with three checks by Parkview Manor in December, 1968, and January, 1969. The allegation relating to the fifth debt was submitted to the jury, which returned a verdict in favor of defendants. Plaintiff appeals as to all debts.

I

The following are the four unpaid liabilities of Parkview Manor:

(1) $6,892.33 to Budina Const. Co. This amount is based on a retention owed to the contractor for construction of the nursing home. Budina's only documentation of the debt is an undated, handwritten notation by one of the defendants that he is having a note prepared. There is a reference to this obligation in the minutes of Parkview Manor's board of directors of April 29, 1969, which indicates the claim had not been paid because Budina had not repaired the roof satisfactorily. The only liability to Budina listed in the November 30, 1968, balance sheets is $1,000.

(2) $10,792.43 to A. A. Ohlendorf and Son. Ohlendorf holds a note from one of the Parkview Manor corporations, dated January 1, 1967, which promises payment of principal and 5 percent interest two years after demand. Ohlendorf believed payment was due on January 1, 1969, although it is not clear from the record when or if demand was made. The note was listed on the November 30, 1968, balance sheets at $5,000.

(3) $25,000 to Glenn Frazier. Frazier agreed with defendants in August, 1967, to design an addition to the nursing home. The $25,000 fee was to be paid on the day of the bid opening, which was April 29, 1969. There was testimony that Frazier did not start work on the project until January or February, 1969, and that the fee was to be paid only after state approval of the ...


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