James C. Alderson v. Spencer A. Graffam
Published: May 6, 2000 | Result Date: Oct. 12, 1999 | Filing Date: Jan. 1, 1900 |Case number: RCV37140 Verdict – $104,500
Judge
Court
San Bernardino Superior
Attorneys
Plaintiff
Defendant
Facts
FACTS ACCORDING TO THE PLAINTIFF: Alderson had been in the horse barn business for 30 years. He
decided to sell his business so long as he could remain employed.
Graffam bought the business for $311,000. As part of the sales agreement, Alderson was to be employed, full
time, as a commissioned salesman.
Shortly after the sale, Graffam kicked Alderson out and refused to pay Alderson the balance of the purchase
price.
Alderson then commenced litigation against Graffam alleging fraud in the inducement. Alderson sought
rescission. Graffam cross-complained against Alderson, alleging fraud. Graffam claimed that the Alderson
barn design was defective because it did not have sufficient lateral support.
Graffam tried, unsuccessfully to obtain a writ of attachment on the proceeds of the purchase price. After the
first day of arbitration, the business, located in Chino, burned to the ground. Fire investigators were unable to
determine whether the fire was caused by arson.
The arbitrator issued his first award on April 9, 1999 and found that Graffam had fraudulently induced
Alderson to sell his business. He found that Alderson fraudulently induced Graffam into buying the business.
The arbitrator found that "no damages are found as to either party. Neither party is found to be the prevailing
party in the proceedings. Plaintiff takes nothing from defendant and cross-complainant takes nothing from
cross-defendant. Each side to bear its own costs and fees."
In his initial award of April 9, 1999, even though the arbitrator granted Alderson's prayer for rescission, the
arbitrator failed to address any issue of restitution and the award was therefore incomplete.
Despite the incompleteness of the award, the arbitrator stated "The parties are strongly urged to resolve all
further issues without the need for additional arbitration." The parties could not resolve the "restitution" issue,
and returned to the arbitrator.
On June 10, 1999, the arbitrator issued his second award. He acknowledged that the building had been
destroyed by fire and it was impossible to put the parties back to their exact positions at the time of the sale.
The arbitrator awarded Alderson credits of $206,500 consisting of inventory, consulting fees, goodwill and the
covenant not to compete, leaving Alderson with a restitution balance of $104,500 to get the business back.
On July 30, 1999, the parties and counsel drove to Graffam's new place of business so that the parties could
perform the restitution. Graffam was to return to Alderson the business name, manufacturing fixtures and
equipment, business related documents, plans, specifications, designs, and all other technical data, including
the customer list.
Graffam was to change the name of the business.
Alderson was to return $104,500 to Graffam.
On July 30, 1999, Graffam attempted to provide Alderson with the remnants of the equipment and fixtures that
had been destroyed in the fire. Alderson could not accept this "junk" in exchange for $104,500.
Despite the destruction of this equipment, and the inability of Graffam to restore the things as they were before
the fire, the arbitrator made another finding that Graffam had fully complied with the restitution.
The arbitrator also allowed Graffam to retain nearly $400,000 in profits from the past year, the new
manufacturing business that Graffam had opened following the fire, as well as the proceeds from the fire
insurance policy.
Other Information
<A>An arbitration was held before Judge William Huss, retired, of IVAMS, resulting in an award of $104,500 and right to continue business. An action by Graffam against Alderson's attorneys is currently pending in San Bernardino.</A>
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